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Japan drugmakers post growth overseas, as price revisions scuttle local sales

Japanese pharmaceutical companies booked year-on-year rise in overseas revenues for fiscal year 2018, as local drug sales continued to drop following a revision in pricing rules.

Nine of the country's top 10 drugmakers, based on market cap, reported an increase in overseas sales, and a fall in domestic revenues, as changes implemented by Japan's National Health Insurance, or NHI, continued to impact earnings.

In April 2016, Japan's NHI unveiled changes in pricing policy for "huge-selling" drugs — those with annual sales of over ¥100 billion. The changes sought to expand the market for those medicines by subjecting their prices to discounts and annual reviews.

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But despite NHI drug price revisions, Chugai's domestic sales drove its revenue growth, with the company netting a profit of ¥72.71 billion for the year ended Dec. 31, 2017. The company made ¥388.4 billion in domestic sales, primarily due to its mainstay products in oncology as well as bone and joint diseases. Increased exports of lung cancer drug Alecensa to its Swiss parent Roche Holding AG helped drive its overseas sales to ¥94 billion.

For Japan's biggest drugmaker Takeda, sales in the overseas market drove its profit. U.S. prescription drug revenue grew to ¥598.3 billion, offsetting its return of ¥31.6 billion in certain distribution products to Pfizer Inc., which caused domestic revenue to drop to ¥501.4 billion.

Meanwhile, for Astellas, growth in the Americas failed to compensate for a sales drop in Japan. The Tokyo-based drugmaker's domestic earnings fell to ¥383.4 billion due to a transfer of long-listed products and newly introduced generic versions of Micardis, its treatment for hypertension, in 2017. Additionally, the transfer of its global dermatology business in April 2016 hurt sales in Europe, the Middle East and Africa. Sales in the Americas and in Asia and Oceania grew.

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Most companies see revenue growing for fiscal year 2019, with overseas income — by way of sales or payments from partners — expected to counteract price revisions in Japan.

However, Daiichi Sankyo said revenue for the year ending March 31, 2019, will decrease on the back of patent expiry for its hypertension drug Olmesartan and the NHI's drug price reform.

Takeda also expects revenue to decline due to divestitures and foreign exchange rates. The company said the outlook excludes the financial impact its upcoming £46 billion acquisition of Dublin-based Shire PLC.

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As of May 31, US$1 was equivalent to ¥108.76.