Takeda Reports High Profits But Forecasts Future Slump

Looking at its other headline figures, Takeda's net sales were up 5.3% to ¥1.375 trillion in FY 2007/08, while its operating income fell by -7.7% to ¥423.1 billion. All of these key indicators were down on its forecasts published in February, at which time it was expecting net sales of ¥1.4 trillion, an operating income of ¥485 billion, and a net income of ¥395 billion. The company's operating income was hit in particular by costs associated with acquiring to the rights to clinical candidates from Amgen (U.S.) in a number of therapeutic areas. This was also reflected in the fact that Takeda's R&D expenditure soared by 42.7% to ¥275.8 billion, which corresponded to 20.1% of its net sales.

Turning to individual divisions, Takeda's pharmaceutical sales grew by 5.8% to ¥1.272 trillion, of which ¥529.7 billion (+2.9%) was derived from its domestic ethical drugs and ¥680.6 billion (+8.2%) from its overseas ethical drugs. The subdued growth rate in the domestic market could be partly attributed to generics-friendly policies that have been implemented by the Japanese government.

Nevertheless, sales of key drugs in Japan continued to increase, notably Blopress (+6.1%), Takepron (+11.8%) and Actos (+23.6%). Actos also performed particularly well in the U.S. market, where its sales were up 17.7% to US$2,786 million—helped of course by the adverse publicity suffered by GlaxoSmithKline's (GSK; U.K.) Avandia.

Outlook and Implications

Looking towards FY 2008/09, although Takeda is forecasting strong growth in terms of net sales (+14.2% to ¥1,570 billion), the outlook is less rosy for its other key indicators. The company is forecasting its operating income to plummet by 43.3% to ¥240 billion, with its net income to crash by 55% to ¥160 billion. These steep declines are largely attributable to costs associated with the company's recent US$8.8-billion acquisition of Millennium Pharmaceuticals (see Japan: 10 April 2008: Takeda Opens War Chest with US$8.8-bil. Millennium Acquisition).

Although the acquisition provides a massive boost to the company's drug development ambitions—notably in the field of oncology—the jury is still out as to whether the price tag was too high.