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Takeda Reports High Profits But Forecasts Future Slump
9 May 08
Despite reporting its highest-ever net income of ¥355.5 billion (US$3.45 billion), the implications of Takeda's recent US$8.8-billion acquisition of U.S. biotech Millennium Pharmaceuticals have overshadowed its FY 2007/08 annual results, with the company forecasting a 55% drop in profits in FY 2008/09.
Global Insight Perspective | | Significance | Although Takeda has reported its highest ever full-year net income of ¥355.5 billion (US$3.45 billion), the company failed deliver on its key forecasts from February. | Implications | During the fourth quarter of FY 2007/08, Takeda incurred higher-than-expected costs, notably through a deal to acquire clinical candidates from U.S. biotech Amgen, and the company's R&D expenditure has soared. | Outlook | For the future, Takeda will be weighed down heavily by its US$8.8 billion acquisition of Millennium Pharmaceuticals, which has led to the company forecasting a big slump in its FY 2008/09 profits. |
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. Takeda: Selected Results, FY 2007/08 | | | ¥ bil. | % Change Y/Y | Net Sales | 1,374.8 | 5.3 | Pharmaceuticals | 1,272.1 | 5.8 | Domestic Ethical Drugs | 529.7 | 2.9 | Overseas Ethical Drugs | 680.6 | 8.2 | Cost of Sales | 278.6 | 0 | Sales, General, and Administrative (SGA) Expenses | 673.0 | 18.7 | R&D Expenditure | 275.8 | 42.7 | R&D as % of Sales | 20.1 | N/A | Operating Income | 423.1 | -7.7 | Operating Margin (%) * | 30.8 | N/A | Net Income | 355.5 | 5.9 | Source: Takeda, Global Insight
* Based on Global Insight calculations |
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. Takeda: Domestic Sales, FY 2007/08 | | | ¥ bil. | % Change Y/Y | Blopress | 137.1 | 6.1 | Leuplin | 66.4 | 3.3 | Takepron | 64.8 | 11.8 | Basen | 52.8 | -5.2 | Actos | 41.6 | 23.6 | Enbrel | 18.8 | 65.3 | Benet | 16.5 | 1.9 | Isovorin | 12.5 | -10.5 | Seltouch | 12.3 | -2.9 | Glovenin | 8.8 | 2.3 | Pansporin | 8.4 | -22.9 | Dasen | 7.7 | -5.2 | Rheumatrex | 7.7 | 11.6 | Firstcin | 6.4 | -7.5 | Leucovorin tablet 25 | 5.3 | -20.8 | Source: Takeda |
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. Takeda will face a further financial burden through a recent agreement to purchase Amgen's Japanese subsidiary, while the company has also agreed to pay Abbott (U.S.) US$1.5 billion over five years on revenues from the blockbuster acid reflux drug Prevacid (lanzoprazole; see Japan: 20 March 2008: Abbott Confirms Dissolution of TAP).
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