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UPDATE 2-Daiichi Sankyo sees profit fall on higher costs
May 12, 2010 / 4:50 AM / in 7 years

UPDATE 2-Daiichi Sankyo sees profit fall on higher costs

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* Sees 10/11 recurring profit Y85 bln vs Y104.8 bln consensus

* Profit fall f'cast reflects higher R&D, marketing costs

* Q4 recurring profit Y12.47 bln vs loss Y38.02 bln

* Shares up 2.1 pct after results, outperforming market

* Announces promotion of Nakayama as new president (Adds fund manager comments)

By Yumiko Nishitani

TOKYO, May 12 (Reuters) - Daiichi Sankyo (4568.T) swung back to a profit in the latest quarter but forecast a surprise 18 percent drop this year as Japan's No.3 drugmaker ramps up spending to develop and market new drugs.

Daiichi also cited the likely absence of a major gain due to currency rates at its Indian generic drug arm Ranbaxy Laboratories RANB.BO, which helped boost profit in the business year ended March 31.

Shares of Daichi, which ranks behind Takeda Pharmaceutical (4502.T) and Astellas Pharma (4503.T) among Japanese drugmakers, rose 1.8 percent after the results but are still down 15 percent this year amid a tough outlook for the industry.

Daichi announced the promotion of Executive Vice President Joji Nakayama to president to replace Takashi Shoda, who will become chairman, and five new candidates for its board, including three external directors.

Minoru Matsuno, president of Value Search Asset Management, said the stock was supported by its plans to keep its dividend at 60 yen this year, for a relatively high yield of 3.6 percent.

But drugmakers and other defensive shares were generally not in favour, which would limit any gains by Daiichi, he said.

"The market is trying to take advantage of an economic recovery at the moment, and in such a market drug stocks tend not to be able to play a lead role," Matsuno said. "Daiichi Sankyo is expecting a profit fall and has a high PE ratio, so I don't expect the stock to have much upward room. "

For the quarter ended on March 31, Daiichi swung back to a recurring profit of 12.47 billion yen from a loss of 38.02 billion yen in the same period a year ago.

For the year to March 2011, Daiichi forecast recurring profit to fall 18 percent to 85 billion yen, short of the consensus of a 104.8 billion yen profit in a poll of 16 analysts by Thomson Reuters I/B/E/S.

Daiichi's new flagship drug, the blood-thinner Effient, has so far had disappointing results, but growth at Ranbaxy has given Daiichi an advantage over its rivals, which are focused on branded drugs that face patent expiries.

Ranbaxy reported its fourth straight quarterly profit on Tuesday and kept its forecast for strong growth in 2010 from new products. Daiichi's results reflect Ranbaxy's earnings with the timelag of a quarter. [ID:nSGE64A0IB]

Takeda and Astellas are due to report earnings after the close of trade on Wednesday. (Additional reporting by Sachi Izumi; Editing by Michael Watson)

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