The five leading Japanese drug makers suffered heavy losses during the first nine months ended December 31, 2008 on account of continued government policies to reduce medical costs, including a reduction in drug price standards and the promotion of generic medicines. The worldwide recessionary conditions also put restrictions on growth of pharma entities. Further, merger and acquisitions by these companies and higher R&D expenditure inflated the cost during first nine months of 2008-09.
As per a Pharmabiz study, the net profit of five Japanese companies namely Astellas Pharma, Eisai Co, Daiichi Sankyo Co, Takeda Pharma and Mitsubishi Tanabe Pharma declined by 80 per cent to US$1,231 million from $6,147 million in the corresponding period last year. In terms of Japanese currency, the profit declined by 83.9 per cent to 111,132 million Yen from 690,150 million Yen. The study did not include Chugai Pharmaceutical Co, (sales of $3,618 million for full year ended December 2008) as its year ending is December.
The aggregate net sales of five companies improved by 27.6 per cent to $38,883 million during the first nine months of the current year from $30,469 million in the similar period of last year mainly due to acquisition and consolidation of activities. In Japanese currency, the same were moved up only by 2.7 per cent to 3,513,364 million Yen from 3,420,182 million Yen in the.
Pharmabiz has taken constant exchange rate for comparison as at the end of December 2008 and 2007. The exchange rate for the US Dollar versus Japanese Yen was 90.38 Yen for one dollar as at the end of December 2008 and the same was 112.35 Yen as at the end of December 2007. The exchange rate as at the end of March 2008 was 99.29 Yen for one dollar. This change impacted the top line as well as bottom line in our analysis.
Takeda Pharm, ranking at highest level in Japan with sales of $13.9 billion during 2007-08, hit by the acquisition and consolidation cost as the company acquired US based Millennium Pharmaceuticals Ltd and Amgen K K in Japan, a subsidiary of Amgen Inc. Further, it incurred a cost of in-licensing rights for 13 candidates, including one of the oncology fields from Amgen. These factors put additional burden on bottom line. Takeda's net profit declined sharply 36.8 per cent to $1,866 million from $2,952 million. Takeda's R&D expenditure went up by 175 per cent to $4,178 million from $1,516 million. The appreciation of Yen against Dollar also impacted the working.
The consolidated net sales of Takeda Pharma, including TAP Pharma, increased by 38.9 per cent to $13,311 million during the first nine months ended December 2008 from $9,586 million in the same period of last year. Its US sales increased by 96 per cent to $5,001 million from $2,551 million and that in Japan increased by 30 per cent to $7085 million from $5,446 million. Its blockbuster product, Blopress, for treating hypertension, clocked sales of $1,205 during the first nine months ended December 2008 as against $950 million in the last period.
Astellas Pharma, the second largest pharma company in Japan with sales of $9.8 billion, has achieved better performance during the first nine months ended December 2008 with higher net sales and net profits. Its net sales increased by 23.2 per cent to $8,400 million from $ 6,817 million in the similar period last year. The net profit went up by 17.5 per cent to $ 1,687 million from $ 1,436 million. Its Yen based sales declined by 0.8 per cent to 758,984 million Yen and net profit declined by 5.5 per cent to 152,389 million Yen.
Daiichi Sankyo Co, which has recently acquired majority sake in Ranbaxy Laboratories in India, has suffered heavy setback and it incurred a net loss of $3,296 million as against net profit of $859 million in the first nine months of 2007-08. Daiichi has shown one time loss of 354 billion Yen ($3.92 billion) for acquisition of Ranbaxy during nine months period ended December 2008. Further, appreciation of Yen against US Dollar, investment in R&D, de-merged of non-pharmaceutical business put additional burden on overall working.
Though the performance of Esai Co was not up to the mark in terms of Japanese Yen, the company managed to strengthen its bottom line in Dollar terms due to appreciation of Yen. The company's Yen based net sales increased by 7 per cent to 598.7 billion Yen from 559.6 billion Yen, but its net profit declined by 12 per cent to 55.9 billion Yen from 63.5 billion Yen. However, its Dollar based net sales and net profit went up by 32.9 per cent and 9.6 per cent to $6,626 million and $ 619 million respectively.
Mitsubishi Tanabe Pharma, a company after merger between Mitsubishi Pharma Corporation and Tanabe Seiyaku Co on October 1, 2007, has achieved sales growth of 24.9 per cent to $ 3,600 million from $ 2,882 million in the similar period last year. Its net profit also moved up to $355 million from $335 million. However, its Yen based net profit declined to 32,100 million from 37,600 million.
Thus, the overall profitability of leading 5 Japanese companies is under pressure and considering the current economic conditions in the world market, stiff competition, volatile foreign exchange movements, cost cutting measures adopted by several governments and expiration of patents will add further tension in the coming months and companies will have to face challenging situation in the fiscal year 2008-09.
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