Takeda Brings Down Full-Year Turnover Expectation Following Lacklustre H1; Ranbaxy Contribution Bolsters Daiichi Sankyo Sales Growth

Japanese drug heavyweights Takeda and Daiichi Sankyo today announced their financial results for the second quarter (Q2) of fiscal year (FY) 2009/10, ended 30 September 2009, with a mixed performance. Daiichi Sankyo's sales went up by 20.2% y/y to ¥243.4 billion (US$2.7 billion), among which a large proportion of the growth was contributed by its generic subsidiary Ranbaxy's (India) ¥36.4 billion. Excluding Ranbaxy sales, Daiichi Sankyo's turnover during this period accounted for ¥207 billion, representing a much flatter 2.2% increase. In terms of Takeda, Japan's largest drug maker, the revenue slip seen in previous quarters continued during the three months through September, which was attributed by the company mainly to unfavourable currency fluctuation, global economic gloominess as well as the challenging domestic market fuelled by the government's cost-controlling efforts.

In terms of profitability, Takeda has maintained a sound picture with an operating margin of 31%. Thanks to the reduction of cost of sales as well as double-digit slashes in SG&A and R&D expenses, the company's operating income and net income showed positive moves compared with the same quarter in previous years. Comparably, Daiichi Sankyo's operating margin was only 9.9% although on a positive note, its operating profit and net profit soared by 11.6% and 182.7% y/y respectively in this period leaving the multi-billion-dollar loss witnessed in FY 2008/09 well behind.

It is not surprising to see Takeda's second-quarter revenue slump given the fact that all its mainstay products, namely Actos, Takepron, Blopress and Leuplin, suffered sales declines during this period. The marketing of these drugs encountered an unfavourable marketing environment and currency change in both their domestic and overseas markets. In Daiichi Sankyo's innovative drug stable, the group of olmesartan products continued to rack in robust sales of ¥59.4 billion with 10.2% y/y rise. Sales in Japan and the U.S. market took up the majority of the drug's revenue while Sevikar (olmesartan/amlodipine) also started to bring in revenue from the EU markets during the second quarter. A significant relief came earlier this year as U.S. generic firm Mylan's attempt to genericise the drug was rebuffed by the unfavourable court ruling, which upheld Daiichi Sankyo's patent of olmesartan (see United States - Japan - India: 3 August 2009: U.S. Court Decision Goes Against Mylan in Generic Olmesartan Medoxomil Patent-Infringement Case). The second quarter continued to see the y/y decrease of Mevalotin and Cravit products' turnover, which was observed in previous quarters. On a positive side, the company's new blockbuster hopeful Effient (Efient; prasugrel), a blood-thinning product it jointly develops and markets with Eli Lilly (U.S.), is poised to bolster a new revenue stream, following its encouraging approvals in Europe, the United States and Australia.

Outlook and Implications

By contrast, Daiichi Sankyo is more optimistic about its full-year outlook by maintaining the previous forecast, which set the expectations of sales, operating profit and net profit at ¥960 billion, ¥96 billion and ¥40 billion respectively. In the forthcoming quarters, the performance profile of its portfolio is likely to remain as the first six months of FY 2009/10, which saw olmesartan lead the growth while Effient keeps growing to make up for the lost revenue from Mevalotin and Cravit's decline. In terms of its product pipeline, the positive results of CS-8958 are promising for a successful regulatory and commercialisation development on global markets.