New Delhi: Daiichi Sankyo Co. Ltd will not pay bonuses to executives for the fiscal year to March on the back of losses it suffered owing to its acquisition of Ranbaxy Laboratories Ltd, India’s largest pharma firm by revenue.
“I regret to announce that company executives will forgo bonuses for the year,” Takashi Shoda, chief executive officer of Japan’s largest drug maker, said during a conference call on Wednesday.
The company had announced on Tuesday that it will pay a dividend of 60 yen to a share for the fiscal, down from 80 yen a share paid out after the previous fiscal year.
Daiichi Sankyo posted a net loss of 335.8 billion yen (Rs17.15 trillion) for the year to 31 March, compared with a profit of 97.6 billion yen in the previous fiscal year due to its one-time write-down of goodwill of 351.3 billion yen that relates to its investment in Ranbaxy. Daiichi completed the acquisition of 64% stake in Ranbaxy in November by paying almost $5 billion.
“We saw no surprises in guidance but we think investors were upset by the dividend cut,” wrote Hidemaru Yamaguchi, pharma analyst at Nikko Citi, Japan.
Shoda also said: “...facing the FDA issues (US Food and Drug Administration), we have come to the conclusion that we will strengthen our management involvement in Ranbaxy.” He declined to elaborate.
In September, the FDA issued warning letters and an import alert for 30 drugs to two of Ranbaxy’s manufacturing plants in India—Paonta Sahib in Himachal Pradesh (including its Batamandi facility) and Dewas in Madhya Pradesh.
In February, the FDA invoked its application integrity policy (AIP) on Ranbaxy’s Paonta Sahib facilities, halting review of all applications from there. Further, in May, Ranbaxy recalled its nitrofurantoin capsules in the US in its efforts to resolve the AIP issue. Ranbaxy has posted losses for three straight quarters due to foreign exchange losses and the unresolved FDA issues that have led to declining sales in the US.
“Daiichi takes the AIP very seriously and is working hard to resolve the situation. We will make every effort possible to resolve the FDA-related issues,” Shoda said.
Meanwhile, Daiichi expects to leverage its acquisition of Ranbaxy through research and marketing collaborations. While it launched its innovative drug Efient (Prasugrel) in collaboration with Eli Lilly and Co. in the UK, it may utilize Ranbaxy for the launch in India.
“In India we have Ranbaxy. So they will represent the Daiichi Sankyo part for Prasugrel. We are currently exploring the options,” Shoda said.
In March, Ranbaxy announced it would launch Daiichi’s anti-hypertensive drug Olvance in India.