Daiichi posts losses for third straight quarter

Daiichi posts losses for third straight quarter

New Delhi: Japan’s third largest drug maker, Daiichi Sankyo Co. Ltd, posted its third straight quarterly loss on Friday dragged by its Indian subsidiary Ranbaxy Laboratories Ltd’s performance in the first three months of 2009.

But Daiichi raised its forecast for the first half of fiscal 2010 following the Indian drug maker’s foreign exchange gains announced last week.

Daiichi incurred a net loss of 6.4 billion yen (Rs326.4 crore) in its first quarter ended 30 June, compared with a net profit of 25 billion yen in the same period last year. The company’s ordinary income was down 82.5% year-on-year as a result of lower valuation of derivatives and foreign exchange losses at Ranbaxy. Income other than capital gains is known as ordinary income.

Ranbaxy Laboratories, however, posted a net profit of Rs675.45 crore for the three months to June—its second quarter, as it follows the calendar year—after incurring losses for three straight quarters. A year ago, the drug maker had a profit of Rs23.73 crore.

Ranbaxy’s recovery will be seen in Daiichi’s second quarter results.

“Daiichi’s earnings incorporate Ranbaxy’s first quarter result, while in its second quarter, Ranbaxy has already recovered. Daiichi’s stance is very clear—whenever Ranbaxy’s result is announced, it will be incorporated in the earnings three months later. So, if we forget about Ranbaxy’s foreign exchange, Daiichi’s result is in line," said Hidemaru Yamaguchi, an analyst with investment bank Nikko Citigroup Ltd in Japan.

“Ranbaxy is in trouble in the US, that is known. But they have recovered in their second quarter and, so, Daiichi has revised its earnings forecast," Yamaguchi said.

Daiichi raised its first-half forecast for ordinary income to 37 billion yen from its earlier projection of 20 billion yen.

“With respect to non-operating revenues, the disarray on the foreign exchange market is winding down and foreign exchange losses/gains related to Ranbaxy Laboratories Ltd, our consolidated subsidiary, have become more favourable," Daiichi said in a statement.

Ranbaxy has been facing trouble in the US after the country’s drug regulator, the US Food and Drug Administration (FDA), issued warning letters to the firm’s factories at Paonta Sahib in Himachal Pradesh and Dewas in Madhya Pradesh, as well as an import alert on 30 drugs.

On 28 June, Mint reported that Ranbaxy had appointed a third-party consultant to assess and review issues raised by FDA at its Paonta Sahib plant after the regulator invoked its application integrity policy, which means FDA will stop reviewing all pending and new applications filed from that plant.

Ranbaxy, along with the consultant Quintiles Transnational Corp., has submitted a corrective action plan to FDA for its Paonta Sahib facility.

As for its Dewas plant, Atul Sobti, Ranbaxy’s chief operating officer, told Bloomberg news agency on Thursday: “We were told that they (FDA) have gone through the corrective action plan and are ready to get back to us. That could be any time now."

Ranbaxy shares rose 2.58% to close at Rs280.10 on the Bombay Stock Exchange on a day the benchmark Sensex index rose 1.83%.