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Companies

Salonpas maker Hisamitsu's earnings squeezed by generics

Drug company seen reporting 12% decline in first-quarter profit

Hisamitsu's pain-relieving patches garner strong sales in the U.S. and remain popular with Chinese visitors to Japan. 

TOKYO -- Hisamitsu Pharmaceutical's operating profit for the March-May quarter likely slid 12% on the year to about 4.5 billion yen ($40.9 million) as some pain-relieving patches struggled against generic competitors.

Sales likely slipped 3% to about 35 billion yen for the Japanese company, which reports first-quarter results on July 6.

Investors appear to be looking down the drugmaker's pipeline, however. An experimental patch to treat schizophrenia had successful clinical trials in January. If approved, it would be the first treatment of its kind in the world. The Tokyo-listed company's shares have gained more than 40% this year.

The March-May quarter brought some earnings setbacks.

Pain- and swelling-reducing Mohrus Tape, which brings in more than 30% of revenue, suffered a drop in sales volume owing to the spread of generics. Cuts to government-set drug prices in Japan also appear to have taken a toll. U.S. subsidiary Noven Pharmaceuticals turned in a lukewarm performance as well.

Meanwhile, advertising fees swelled after Hisamitsu inked a sponsorship deal in February for the 2020 Tokyo Olympics. But the company trimmed research and development costs, thanks to successes in clinical trials for the schizophrenia patch.

The Salonpas line of over-the-counter pain-relieving patches remains popular with Chinese visitors to Japan, and gained a bigger following among younger Japanese thanks in part to celebrity appearances on TV commercials.

Overseas performance was healthy as well. As the U.S. struggles with an opioid abuse crisis, middle-aged and elderly people there are buying more pain-relieving patches, which pose little risk of dependency and are less likely to cause stomach problems.

In China, newly established units in Jiangsu Province and Hong Kong helped keep sales strong. Sales for the Salonpas series overall likely grew about 20%.

Hisamitsu likely will maintain its earnings forecast for the year through February 2019 when it releases March-May results.The company sees annual sales inching up to 148.5 billion yen and operating profit sliding 9% to 24 billion yen.

"Both over-the-counter and prescription products can be expected to contribute to earnings in the medium to long term," said Tatsunori Kawai at Japanese brokerage Kabu.com securities, describing Hisamitsu as a  "particularly dependable buy even among defensive stocks."

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