Daiichi Sankyo to write down $5.3 bn Ranbaxy stake buy

Daiichi Sankyo to write down $5.3 bn Ranbaxy stake buy
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First Published: Tue, Jan 06 2009. 01 00 AM IST

Bad timing? The Daiichi headquarters in Tokyo. Ranbaxy shares have dropped 66% since the Tokyo-based company bought into it in October. Haruyoshi Yamaguchi / Bloomberg
Bad timing? The Daiichi headquarters in Tokyo. Ranbaxy shares have dropped 66% since the Tokyo-based company bought into it in October. Haruyoshi Yamaguchi / Bloomberg
Updated: Tue, Jan 06 2009. 01 00 AM IST
Tokyo: Japan’s third largest drug maker, Daiichi Sankyo Co. Ltd, will write down its 488.7 billion yen ($5.3 billion, or Rs25,562 crore) purchase of a stake in Ranbaxy Laboratories Ltd this week, possibly leading to the company’s first annual loss.
Bad timing? The Daiichi headquarters in Tokyo. Ranbaxy shares have dropped 66% since the Tokyo-based company bought into it in October. Haruyoshi Yamaguchi / Bloomberg
Shares of India’s largest drug company have lost 66% of their value since Tokyo-based Daiichi Sankyo paid Rs737 a share in October.
The purchase was the biggest in India by a Japanese company, and write-downs may lead Daiichi Sankyo to reverse its full-year forecast to a loss from a 65 billion yen profit. The write-down may exceed 300 billion yen, the Nikkei newspaper reported on Monday, without saying where it got the information.
“We will report the writedowns based on the closing price of Ranbaxy on 31 December,” Daiichi Sankyo spokesman Satoru Ogawa said by telephone on Monday.
Daiichi Sankyo was unchanged at 2,100 yen as of the 11am close on the Tokyo Stock Exchange. The stock fell 39% last year, the second biggest drop among 33 companies in the pharmaceutical group of Japan’s Topix index.
Daiichi Sankyo, which sells the hypertension drug Benicar, agreed in June to buy Ranbaxy to enter the market for generic drugs, where sales are growing almost twice as fast as demand for branded medicines.
Chief executive officer Takashi Shoda, 60, stuck to his offer price for Ranbaxy even after the stock fell last year, as markets declined worldwide and the company faced a US import ban.
The US Food and Drug Administration (FDA) on 16 September blocked imports of medicines made in two Indian factories of Ranbaxy. The regulator said there was no evidence that Ranbaxy’s drugs were harmful.
FDA also probed whether Ranbaxy, based in Gurgaon, near New Delhi, destroyed reports it was required to keep, falsified data and failed to meet quality control specifications in manufacturing the generic drugs it sells.
The Indian company has denied the allegations and agreed to produce all the documents.
The write-downs will be booked in the October-December quarter and will be published early this week, Ogawa said. The company will report the effect on earnings for the year ending 31 March on 30 January, Ogawa said.
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First Published: Tue, Jan 06 2009. 01 00 AM IST