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Dainippon Sumitomo's Q1 Profits Down 29.5% Y/Y on Boston Biomed Acquisition, Announces World-First Schizophrenia Patch
Published: 7/27/2012
Dainippon Sumitomo has announced results for the first quarter of fiscal year 2012/13, with profits down by 29.5% year-on-year on April's acquisition of Boston Biomedical. Meanwhile, the Japanese company has announced the start of Phase II trials for a world-first transdermal patch treatment for schizophrenia, being developed in conjunction with Nitto Denko (Japan).
IHS Global Insight Perspective | |
Significance | Dainippon Sumitomo has released results for the first quarter of fiscal year 2012/13 ended 30 June 2012, with net sales of JPY89.08 billion (USD1.13 billion), down 6% year-on-year (y/y), and net profits reaching JPY5.69 billion, down 29.5% y/y. |
Implications | Net sales were down in all regions except Japan, but performed particularly badly in the North America and Other Regions segments; the firm attributes the net-profits fall to costs related to the April acquisition of Boston Biomedical (United States). |
Outlook | The firm has also announced the start of Phase II trials in co-operation with Nitto Denko Corp. (Japan) on a transdermal patch formulation of the atypical antipsychotic Lonasen (blonanserin)—a treatment for schizophrenia which Dainippon released as an oral version in 2008. |
Dainippon Sumitomo Financial Results, Q1 FY2012/13 | ||
Q1 FY2012 (JPY Bil.) | % Change (Y/Y) | |
Net Sales | 89.1 | -6.0 |
Cost of Sales | 25.2 | -2.2 |
Gross Profit | 63.9 | -7.4 |
SG&A Expenses | 53.0 | -5.8 |
Of which, R&D Costs | 14.1 | 3.1 |
Operating Income | 10.9 | -14.9 |
Net Profit | 5.7 | -29.5 |
Source: Dainippon Sumitomo | ||
Dainippon Sumitomo (Japan) is struggling due to the effects of price cuts in Japan and government cost-containment measures around the world, and the difficulty and expense of drug development, in addition to assimilating the cost of acquiring Boston Biomedical (United States) in April this year. Its results for the first quarter of fiscal year (FY) 2012/13, ending 30 June, show that net sales amounted to JPY89.08 billion (USD1.13 billion), a 6% year-on-year (y/y) decrease, and net profits, at JPY 5.69 billion, were down 29.5% y/y.
In business segment terms, sales in Japan remained stable (at JPY44.64 billion, up 0.2% y/y) due to the growth of strategic and new products, but profits were down 2.7% y/y to JPY17.59 billion due to drug price revisions. In North America, Dainippon's subsidiary Sunovion Pharmaceuticals saw sales down by 7.9% y/y to JPY29.03 billion due to the Japanese yen's appreciation, and on declining sales of Omnaris (ciclesonide) and Xopenex (levalbuterol), due to patent expiry. Net profits showed an increase, however, of 18.7% y/y to JPY4.39 billion, attributed to reduced selling, general and administrative (SG&A) and personnel expenses. In China, decreased sales of antibiotic Meropen (meropenem; sold as Mepem in China) caused overall sales revenues to fall by 11.2% y/y to JPY1.66 billion, with profits also falling by 24.1% to JPY624 million. Finally, the Other Regions segment saw sales fall by 51.5% to JPY3.10 billion, with profits also down 51.5% to JPY1.37 billion, attributed to falling exports of Meropen.
Dainippon also announced today (27 July) what it describes as a world-first in schizophrenia treatment, the development of a transdermal patch formulation of atypical antipsychotic Lonasen (blonanserin). The new formulation is being developed in conjunction with Nitto Denko Corp. (Japan), which is contributing the transdermal technology, and the two firms are set to start Phase II trials examining optimal dosing conditions. Lonasen was first released in oral form by Dainippon in 2008.
Outlook and Implications
Dainippon's April 2012 acquisition of Boston Biomedical is expected to benefit the firm in terms of research pipeline in cancer, and the firm is focused on expansion of strategic products such as hypertension treatment Avapro, atypical antipsychotic Lonasen and on new products such as biguanide oral hypoglycaemic drug Metgluco. In the US, the firm is focused on promoting antipsychotic Latuda (lurasidone hydrochloride). Net sales are expected to improve in the second quarter, helped by falling SG&A costs, and despite the effects of the yen's appreciation in the US, which lead Dainippon to issue an upwards revision to its forecasts for the full year, with net income expected to reach JPY8.62 billion on sales of JPY350.3 billion.
The transdermal formulation for Lonasen will provide another treatment option for patients who have difficulty with oral administration, and will enable the medication status to be verified visually. Lonasen in oral form earned JPY2.7 billion in sales in the first quarter of FY2012. Dainippon is also focusing on developing Latuda as a treatment for bipolar disorder, with trials ongoing in the US.
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