Ono Pharmaceutical Co., Ltd. (OPHLF)

How it makes money

Revenue has three parts: sales of its own drugs in Japan, sales of its own and licensed drugs overseas — boosted by the 2024 acquisition of U.S. biotech Deciphera — and royalty income earned when partners sell drugs Ono discovered, chiefly Opdivo through Bristol-Myers Squibb and, to a lesser extent, Keytruda-related payments from Merck. Domestic sales have been shrinking under generic competition while overseas sales and royalties are growing and now drive most of the company's profit growth.

Ono's moat is its patent-protected drug pipeline, most visibly Opdivo, which it discovered and still collects royalties on years after launch. But patents are a wasting asset: the company's own Opdivo patents begin expiring around 2028 in the U.S., 2030 in Europe and 2031 in Japan, after which biosimilar competition can erode that royalty stream.

Prescription drug demand is largely need-based and holds up through economic downturns, which is typical of pharmaceutical companies generally. The bigger swing factor for Ono is not the economic cycle but the patent clock on Opdivo and its domestic products, which sets a known date after which a major income source starts to decline regardless of the economy.

Key risks

• Opdivo patent cliff — Opdivo patents begin expiring around 2028 in the U.S., 2030 in Europe and 2031 in Japan, after which biosimilar entrants are expected to gradually erode the royalty income Ono earns from Bristol-Myers Squibb.
• Domestic sales pressured by generics — Sales of Ono's own products in Japan have been declining as competition and generic entry erode revenue from drugs past their exclusivity period.
• Royalty income concentrated in two partners — Roughly 29% of total revenue came from royalty payments by just two partners, Bristol-Myers Squibb and Merck, so a change in either company's sales or royalty terms would materially affect Ono's results.

Top customers account for 29% of revenue

In the fiscal year ended March 2026, royalty income from Bristol-Myers Squibb on Opdivo (¥122.3 billion) and from Merck on Keytruda-related payments (¥29.5 billion) together were roughly 29% of Ono's ¥515.8 billion in total revenue, concentrating a large slice of income in two royalty-paying partners.