Daiichi Sankyo May Forecast Biggest Loss By Japanese Drugmaker
Daiichi Sankyo has fallen 32 percent, the most among Japans largest drug stocks, since Chief Executive Officer Takashi Shoda bid for Ranbaxy in June to enter the market for lower-priced generic medicines. He paid 488.7 billion yen and has written down almost three-fourths of that since the acquisition.
“I fear the loss is only the beginning,” said Yuichi Chiguchi, who helps manage about $8.6 billion in assets, including pharmaceutical stocks, at DIAM Co. in Tokyo. “I dont see growth yet.”
Maho Tanabe, a spokeswoman for Daiichi Sankyo, declined to comment on earnings or forecasts for the year ending March 31 before their release set for 12:30 p.m. on Jan. 30 in Tokyo. It will be the first of Japans top-four drugmakers to report results for October to December.
The market for the lower-priced copies made by the likes of Ranbaxy is expanding at almost twice the pace as for branded originals. New York-based Pfizer Inc., the worlds largest drugmaker, offered to buy Wyeth this week for $68 billion to get access to new medications and offset intensifying generic competition.
Domestic Dependence
Daiichi Sankyo generated 22 percent of sales in the latest business year from Benicar, a pill against hypertension. Takeda Pharmaceutical Co. and Astellas Pharma Inc., Japans two largest drugmakers, also made purchases in the past two years to counter an expected sales decline when medicines lose patent protection.
Shoda, who led Sankyo Co. from 2003 and remained CEO after it bought Daiichi Pharmaceutical Co. in 2005, aimed to boost profits at the new company. Net income represented 11.1 percent of sales last year, the narrowest margin among Japans top-three drugmakers.
The possible loss for this year would be the companys first deficit since the Sankyo-Daiichi combination in September 2005. It would dwarf Eisai Co.s loss of 17 billion yen last year, the largest deficit on record for a Japanese drugmaker.
Ranbaxy was the largest acquisition by Daiichi Sankyo, and the priciest Indian takeover by a Japanese company. Shoda bought Ranbaxy to reduce Daiichi Sankyos dependence on its domestic market, which generated 68 percent of sales last year, making it vulnerable to government-imposed price cuts on prescription drugs.
Daiichi Sankyo rose 4.7 percent to 2,025 yen as of the 11 a.m. break today on the Tokyo Stock Exchange. Of 17 analysts tracked by Bloomberg who cover Daiichi Sankyo, 11 recommend buying the stock and 6 say “hold.”
Not Bullish
He cut his rating on Daiichi Sankyo to “equal weight” from “overweight” that day, after Ranbaxy posted a loss of 6.8 billion rupees ($139 million) for October to December, hurt by foreign-exchange moves and declining U.S. sales following an import ban. Daiichi Sankyo this month booked 354 billion yen in writedowns for the period related to Ranbaxy.
The Japanese companys stock slumped 35 percent since the takeover was announced on June 11 to yesterdays close. The U.S. Food and Drug Administration banned imports of more than 30 of Ranbaxys drugs in September on concern about manufacturing deficiencies, exacerbating the companys stock slump as equity markets worldwide declined amid a worsening credit crisis.
While Daiichi Sankyo paid 737 rupees a share for its 64 percent stake in Indias largest drug company, Ranbaxys stock had lost 66 percent of its value by the Dec. 31 close in Mumbai trading. It has fallen a further 21 percent this year.
For Related News and Information: Top Health-Care News: HTOP <GO> News on Daiichi Sankyo: 4568 JP <Equity> CN <GO> For most read Asian stories: MNI ASIA <GO> Stories on Asian companies earnings: TNI ERN ASIA <GO>