Daiichi Sankyo Withdraws Shipment Of Half The Company's Entire Influenza Vaccine Supply

TOKYO - Daiichi Sankyo Co. Ltd. will trash nearly half of its annual influenza vaccines after tests revealed batches were contaminated by avian reovirus. The company's joint venture with Kitasato Institute for vaccine production has had a rocky start since it began operations March 31, but vaccines play a small role in the company's overall domestic sales, so impact is expected to be negligible.

The company said Sept. 12 it would delay shipment of its influenza vaccine due to the discovery of avian reovirus in vaccine batches, and updated the status Sept. 22 to announce it would not ship 2.4 million doses out of a total 4.8 million doses for the upcoming flu season. The remaining supply is currently under evaluation and the results are expected in the near future.

Daiichi Sankyo will restart production to replace the unusable product, but the company acknowledged that it would be impossible to completely replace the lost supply, which could increase in volume depending on test results of the other half of its influenza supply.

Daiichi Sankyo's current batches of influenza vaccine will be tested by the Ministry of Health, Labor and Welfare, and the company expects final approval for distribution in November.

Problems with Daiichi Sankyo's production quality will likely raise concern at MHLW, which had selected Daiichi Sankyo as one of four companies to share a government grant totaling more than $1 billion to provide influenza vaccines for more than 130 million people by FY2013.

Kitasato Daiichi Sankyo Vaccine Co. received ¥29.9 billion, the largest grant among the group, which included Takeda Pharmaceutical Co. Ltd., Kaketsuken, and Osaka University's Research Foundation for Microbial Diseases. The government has, so far not very successfully, tried to stimulate Japan's vaccine industry, from production to usage (Also see "Stimulus Plans For Japan's Life Sciences Industries May Not Address Main Challenge - Bio Japan Conference" - Scrip, 7 Oct, 2010.).

The vaccine joint venture between Daiichi Sankyo and Kitasato Institute was signed in July 2010, intended to cover R&D and production for vaccines for the Japanese market, following up on a 2008 agreement to collaborate.

But the joint venture began operations during a tenuous period in Japan, and has had trouble taking off. The JV officially launched April 1, just two weeks after the massive earthquake, tsunami and nuclear crisis that forced the government to limit the nation's energy consumption (Also see "Business Continuity Vital In Japan For Companies Like Daiichi Sankyo On Slow Road To Recovery; Earthquake Impacts Organizational Moves" - Scrip, 6 Apr, 2011.).

The joint venture, located just north of Tokyo in Saitama Prefecture, was forced to halt production after experiencing power shortages mandated by the government. Just a few weeks after its official launch, the joint venture said it expected to have a shortage supply of its mumps vaccine, according to local media reports.

But any negative impact on the company's fledgling vaccines business will not likely affect the company's forecast as a whole. In FY2010, the company's first year for vaccines sales, the business contributed ¥17.8 billion to the company's ¥416 billion total domestic sales.

Jeffries analyst Naomi Kumagai said the influenza news will have no impact on Jeffries' earnings forecast for Daiichi Sankyo.

- Daniel Poppy ([email protected])