Daiichi Sankyo Q1 operating profit down 29%; ups net forecast

Daiichi Sankyo Q1 operating profit down 29%; ups net forecast

Tokyo: Daiichi Sankyo Co, Japan’s No.3 drugmaker, reported a 29% fall in quarterly operating profit on Friday due to weaker sales in its Indian unit and higher research and development costs, and left its annual forecasts largely unchanged.

Daiichi is expecting high promotional expenses for new drugs and research and development costs to limit profits this year as it, like other drugmakers globally, works to develop strong successors to mainstay drugs that have lost or are set to lose patent protection.

The firm, nearly 30% owned by foreign investors, booked an April-June operating profit of ¥43.48 billion ($560 million), beating a consensus estimate of ¥33.4 billion from three analysts polled by Thomson Reuters I/B/E/S.

Daiichi saw a jump in profit in the first quarter last year, helped by cost cuts and higher sales at its Indian arm Ranbaxy Laboratories, which accounted for a fifth of its sales in its last fiscal year.

But in its January-March quarter this year, net profit at Ranbaxy, whose earnings are reflected in Daiichi’s results with a time lag of a quarter, fell 68% to Rs300 crore.

Lower expected sales from Ranbaxy, increased costs from rolling out new drugs like its Alzheimer’s drug Memary in Japan, and higher R&D costs, such for the clinical trials of blood thinner edoxaban, are set to weigh on profits this year.

The company, which ranks behind Takeda Pharmaceutical and Astellas Pharma in Japan, kept its operating profit forecast for the business year to March 2012 at ¥90 billion, down 26% from the previous year.

It raised its annual net profit forecast to ¥50 billion from ¥45 billion, however, citing lower tax expenses at Ranbaxy and gains from sales of underused real estate assets.

Shares of Daiichi have fallen about 10% since the start of the calendar year, underperforming around a 3% drop in the benchmark Nikkei average.

After the announcement, which came during market hours, the stock was little changed, trading down 1% at ¥1,590.