Japanese Pharma Profits Drop 38 Percent Due To Foreign Acquisitions, Yen Appreciation
This article was originally published in PharmAsia News
Executive Summary
TOKYO - Dragged by brisk research and development outlays and business acquisition costs, 14 leading Japanese drug makers reported an aggregate income shrinkage of 38 percent in the half-year business period ended Sept. 30, the Japan Pharmaceutical Manufacturers Association reported Nov. 17
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TOKYO - Dragged by brisk research and development outlays and business acquisition costs, 14 leading Japanese drug makers reported an aggregate income shrinkage of 38 percent in the half-year business period ended Sept. 30, the Japan Pharmaceutical Manufacturers Association reported Nov. 17. Their total sales rose 4.7 percent to ¥3.41 trillion ($366 billion), while operating income fell 32.4 percent to ¥541 billion; and net income was down 38.2 percent to ¥342 billion, JPMA said. R&D expenditures jumped 56.1 percent to ¥750 billion, which reflected acquisitions of foreign pharma companies by Takeda, Astellas, Eisai and others, which meant that they included those businesses as their consolidated or group firms - the accounting practice that bolsters their R&D accounts. The yen's sharp appreciation, weaker than expected demand for its key products, and negative contributions from its acquired companies have forced Takeda to lower its fiscal 2008 profit forecasts. It will be the first time in 17 years, since the year ended in March 1992 that Takeda would incur operating income contraction (Also see "Takeda Copes With FDA Delays, Yen Appreciation and Acquisition Drags in 2008" - Scrip, 6 Nov, 2008.). Domestic aggregate sales for the 14 Japanese drug makers totaled ¥2.061 trillion, up a meager 1.3 percent from the year-ago period, in part reflecting the effect of National Health Insurance-listed drug price cuts in April averaging 5.2 percent (Also see "Japan’s MHLW Steps Up Efforts To Reduce Drug Approval Lag Time" - Scrip, 6 Apr, 2008.). Overseas sales rose 10.3 percent to ¥1.348 trillion, which was driven by the firms' acquisitions of foreign companies and expansion of sales of their products. Overseas sales should have registered a much higher growth had it not been for the sharp rise of the yen against the U.S. dollar and the euro, a Pharmaceutical and Medical Devices Agency official said. In the recent period, marketing and administrative expenditures rose 24.9 percent to ¥1.881 trillion, which resulted from increased advertising and other promotional spending related to foreign acquisitions. The already recording-setting mergers and acquisitions by Japanese companies is expected to continue as companies of the second-largest economy in the world are expected to take advantage of the global credit crisis, according to industry insiders. Together, Japanese firms so far this year have made acquisitions worth a combined $47.1 billion, well over the previous record covering all of 2006 (PharmAsia News, Sept. 29, 2008). For the business year ending March 2009, the 14 companies forecast sales to grow 4.9 percent to ¥6.830 trillion, with net income down 19.6 percent to ¥719 billion. The 14 companies are Tokyo Stock Exchange tier one companies with sales exceeding ¥100 billion, including Takeda, Daiichi Sankyo, Astellas and Eisai. - Toshio Aritake ([email protected]) |