Ono Pharmaceutical Navigates Headwinds Amid Strategic Reforms

Ono Pharmaceutical Co., Ltd. (TSE: 4580) reported its fiscal year 2024 (ended March 31, 2025) results, revealing significant financial headwinds alongside strategic moves to bolster long-term growth. The company’s Q4 2025 earnings highlighted a challenging quarter, with net sales falling 9.4% year-over-year to ¥451.8 billion, driven by regulatory pricing pressures and reduced royalty income. Yet, management emphasized progress in R&D partnerships, global regulatory milestones, and operational restructuring to position the firm for resilience.

Financial Performance: A Year of Transition

The full fiscal year results underscored the challenges Ono faces in its core markets. Sales declined due to:
- National Health Insurance (NHI) price revisions for its blockbuster oncology drug OPDIVO (nivolumab), which reduced revenue by an estimated ¥10 billion.
- Lower royalty income from Merck & Co., Inc., reflecting reduced sales volumes and lower royalty rates.
- The absence of a one-time ¥17 billion litigation settlement from the prior year, which had inflated FY2023 profits.

Operating profit plummeted 39% to ¥114.7 billion, while net profit dropped 33% to ¥102.4 billion. Q4 2025 was particularly challenging, with an operating loss of ¥11.01 billion—a stark contrast to the ¥15.31 billion profit in the same quarter the prior year. The stock price fell 5.39% post-earnings, closing at €9.42 on May 8, 2025, following the report.

Strategic Shifts and Regulatory Milestones

Despite the financial pressures, Ono’s Q4 2025 updates revealed a focus on innovation and global expansion:
1. FDA Approvals for OPDIVO® Combinations:
- In April 2025, the U.S. FDA approved OPDIVO + YERVOY® for first-line treatment of hepatocellular carcinoma and microsatellite instability-high colorectal cancer, expanding its oncology franchise.
- A full approval was granted for ROMVIMZA™ (vimseltinib) for tenosynovial giant cell tumor (TGCT), a rare disease, in February 2025.

1. R&D Collaborations:
2. Jorna Therapeutics: A partnership to develop RNA-editing therapeutics, targeting genetic diseases.
3. Reborna Biosciences: A drug discovery pact for RNA-targeting therapies for central nervous system disorders.

4. Ionis Pharmaceuticals: A licensing deal for sapablursen, a potential treatment for polycythemia vera.

5. Operational Reorganization:

6. Streamlined U.S. and European operations in February 2025 to reduce costs and enhance global efficiency.

7. Sustainability Leadership:

8. Ranked in the top 1% globally in the S&P Sustainability Yearbook 2025 for ESG performance, signaling alignment with investor ESG priorities.

Pipeline Progress and Future Outlook

Ono’s pipeline remains robust, with late-stage candidates such as tirabrutinib (Phase 2 in B-cell malignancies) and ONO-4578 (EP4 antagonist for inflammatory diseases) advancing. While near-term revenue growth remains constrained by pricing pressures, the FDA approvals and partnerships signal a shift toward diversification and innovation-driven growth.

Risks and Challenges

• Dependence on OPDIVO®: Despite new indications, the drug’s revenue is vulnerable to price cuts and generic competition.
• High R&D Costs: Milestone expenses for co-promoted drugs (e.g., FORXIGA Tablets) and licensing deals contributed to profit declines.
• Market Volatility: The stock’s 5.39% drop post-earnings reflects investor skepticism about near-term profitability.

Conclusion: A Steady Hand on the Wheel

Ono Pharmaceutical’s Q4 2025 results reflect the turbulence of a mature pharmaceutical company navigating regulatory and market headwinds. While sales and profits contracted, the strategic moves—FDA approvals, R&D partnerships, and operational streamlining—suggest a deliberate pivot toward long-term resilience.

The company’s Sustainability Yearbook 2025 top 1% ranking and $2.1 billion pipeline valuation (per internal estimates) underscore its commitment to innovation. Investors should watch for:
- Cost management: Can Ono reduce licensing and milestone expenses without stifling R&D?
- Revenue diversification: Will new OPDIVO® indications and partnerships offset NHI price cuts?
- Pipeline execution: Late-stage candidates like sapablursen and tirabrutinib could drive future growth.

For now, Ono’s stock (TSE: 4580) trades at a P/E ratio of 12.4x, below its five-year average of 15.6x, offering a potential value entry. However, sustained recovery hinges on executing its strategic reforms while balancing short-term financial pressures.

In an industry where innovation is king, Ono’s Q4 2025 results are a mixed bag—but the company’s focus on cutting-edge therapies and global expansion suggests it’s laying the groundwork for a comeback.