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Japan-Update

Hisamitsu's interim operating profit seen down 3%

Rise of generics, research costs dampen drugmaker's earnings

Hisamitsu's over-the-counter pain-relieving patches.

TOKYO -- Hisamitsu Pharmaceutical's operating profit probably shrank 3% to 12.5 billion yen ($111 million) in the March-August period, as it faced generic versions of its products and higher-than-expected research costs.

Sales probably fell 1% to about 74 billion yen, as sales of its prescription Mohrus pain-relieving patches were hit by the rise of generic versions. The patches, which generate more than 30% of Hisamitsu's group sales, are believed to have suffered a nearly 10% drop in sales, despite recovering from the government's prescription limit on such products last year. A menopause treatment drug sold by Hisamitsu's U.S. subsidiary Noven Pharmaceuticals also struggled.

Rising drug research and development costs also dug into profit. Costs ballooned as the company's drug for schizophrenia, HP-3070, entered the third and final stage of clinical tests. Hisamitsu expects a major boost to earnings if it can commercialize the drug, which would be the world's first patch-based treatment of the mental illness. It is shooting to get regulatory approval next fiscal year.

Meanwhile, sales were solid for over-the-counter Salonpas pain relieving patches. The product is popular among Chinese tourists visiting Japan. Demand from younger consumers in Japan also grew, thanks to television commercials starring popular celebrities. In the U.S., sales of Hisamitsu's Salonpas brand products probably grew about 10%, due in part to solid sales of high-value-added versions with stronger adhesives and higher drug concentration.

Results for the March-August half are due out Oct. 10. Hisamitsu is expected to maintain its guidance for the fiscal year ending February 2018. It expects sales to rise 1% to 147 billion yen and operating profit to fall 8% to 24.1 billion yen.

For the full year, the Salonpas product line is set to support overall sales with 17% growth, but advertising and R&D costs are likely to weigh on earnings.

(Nikkei)

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