Consolidated Financial Results

In the six months from April 1 to September 30, 2011, Daiichi Sankyo and its consolidated subsidiaries ("the Group") posted net sales of ¥456.0 billion, a year-on-year decrease of 8.6%. In addition to the steady growth in products including the antihypertensive agent olmesartan, other factors making a contribution towards sales were two newly launched products: Memary®, an N-methyl-D-aspartate (NMDA) receptor antagonist for the treatment of Alzheimer’s Disease, and NEXIUM®, a proton pump inhibitor for the treatment for gastric ulcer, duodenal ulcer, reflux esophagitis, etc. However, net sales fell by ¥42.8 billion, due to factors including; ¥19.0 billion negative effect of foreign exchange owing to the strong yen, sales decline following the return of domestic marketing rights in certain products, and decrease in net sales of Ranbaxy Laboratories Ltd. ("Ranbaxy ").

Operating income decreased 31.0% to ¥62.2 billion. Although cost cutting was achieved as a result of group-wide revision of profit structures and SG&A and R&D expenses overseas decreased due to the stronger yen, the decrease in gross profit accompanied by the drop in sales had a big impact, with operating income declining ¥27.9 billion.

Ordinary income decreased 28.4% to ¥66.3 billion. In non-operating income, although there was a decline in gains on valuation of derivatives at Ranbaxy, there was a contribution from foreign exchange gain. This resulted in an ordinary income decline of ¥26.3 billion, which was a narrower decline compared with operating income.

Net income declined by ¥15.1 billion (29.0% year on year) to ¥37.0 billion.

In the six months ended September 30, 2011, in addition to the previously mentioned Memary® and NEXIUM®, the Group also launched in Japan the direct oral factor Xa inhibitor Lixiana® for the prevention of venous thromboembolism in patients undergoing major orthopedic surgery. In the U.S., the Group commenced co-promotion of Zelboraf™, a personalized treatment for metastatic melanoma, which was launched in the U.S. by the Roche Group. In addition, the Group obtained approval in China for silodosin, a treatment of dysuria (brand name in Japan Urief®).

Furthermore, for the factories of Daiichi Sankyo Propharma Co., Ltd. that were damaged by the March 11 Great East Japan Earthquake, Hiratsuka factory restarted its manufacturing operations in April, and so did Onahama factory in late August.

Reportable Segments

■ Daiichi Sankyo Group

The Daiichi Sankyo Group posted net sales of ¥377.8 billion, a year-on-year decline of 5.6%.

● Japan

Net sales in Japan decreased 7.4% year on year to ¥240.7 billion.
Sales of prescription drugs declined 5.0% to ¥206.3 billion. While the Group achieved the growth of key products including anti-inflammatory analgesic Loxonin® Tape and antihypertensive agent Rezaltas®, as well as the launch of Memary® and NEXIUM® among other factors, overall sales were influenced by the return of domestic marketing rights of certain products to their licensers.
Sales from royalty income and exports to overseas fell 48.7% year on year to ¥10.3 billion due to the decline in sales from exports of levofloxacin, a synthetic antibacterial agent, following the expiration of marketing exclusivities in various countries, and the stronger yen.
Net sales of healthcare (OTC) products totaled ¥22.4 billion, gaining 6.7% year on year. This was due to higher sales of anti-inflammatory analgesic Loxonin S, a prescription-to-OTC switch formulation.

● North America

Net sales in North America declined 5.1% year on year to ¥91.0 billion. In addition to the growth from the antiplatelet agent Effient® and others, Zelboraf ™ related income in Plexxikon Inc., which was acquired during the current period, also benefited sales. However, net sales fell due to impact of the strong yen, the decline in sales of anemia treatment Venofer®, and other factors.

● Europe

Net sales in Europe increased 3.6% year on year to ¥32.5 billion due to the expansion of sales of antihypertensive agents Olmetec®, Sevikar®, Sevikar HCT® and others.

● Other regions

In other regions, net sales rose 4.8% year on year to ¥13.6 billion, thanks mainly to net sales increases in South Korea, Venezuela and Brazil.

■　Ranbaxy Group

Net sales of the Ranbaxy Group fell 20.6% year on year to ¥78.2 billion, primarily due to impact of the strong yen and significantly lower U.S. sales of the antiviral drug valacyclovir, which significantly contributed to the results in the first six months of FY2010, despite the contribution from donepezil, a treatment for Alzheimer’s Disease, in the U.S.

■ Full Year

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Financial Indicators

■ Full Year

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