Daiichi Sankyo has posted a healthy rise in annual earnings but says that its plans for expansion outside Japan and increased R&D costs will hit profits hard next year.

Net income rose 24.3% to 97.66 billion yen ($947.5 million) for the fiscal year ended March 31, while operating profit was up 15.0% to 156.83 billion yen, due to decreased production as well as sales, general and administration, costs. The rises were helped by the fact that the previous year’s figures included extraordinary losses of 98.6 billion yen, mainly due to costs related to “business integration and reorganisation”, when a significant number of staff took early retirement.

Sales slipped 5.3% to 880.12 billion yen but the antihypertensive Benicar/Olmetec (olmesartan) rose 22.0% to 195.6 billion yen, despite a 5.3% decline in US sales. The antibiotic levofloxacin, sold in Japan as Cravit, was up 4.4% to 108.7 billion yen, although However, sales of pravastatin, the cholesterol-lowerer which is sold in Japan as Mevalotin, fell 18.3% to 76.5 billion yen. Export sales of the latter collapsed 73.4% to just 5.0 billion yen, following the loss of patent protection for the drug in the USA by licensee Bristol-Myers Squibb.

However it was Daiichi Sankyo’s guidance for the forthcoming financial year ending April 1, 2009, that raised eyebrows. The firm said that operating profits will fall by 16.2% to 130.0 billion yen, as a result of Japanese government price cuts on its drugs but also expansion into the USA, most notably with the potential launch of prasugrel.

Prasugrel, which will be sold as Effient, is Daiichi Sankyo’s much-touted investigational oral antiplatelet. The firm and partner Eli Lilly filed the drug with US regulators in January for the treatment of patients with acute coronary syndrome who are managed with percutaneous coronary intervention, including coronary stenting. The US Food and Drug Administration is due to decide on the drug’s fate by the end of June and Daiichi Sankyo is hoping prasugrel can challenge Plavix (clopidogrel), Sanofi-Aventis and B-MS’ blockbuster.

However data from the companies’ TRITON-TIMI trial has demonstrated that prasugrel-treated patients experienced a statistically significant increase in non-coronary artery bypass grafting bleeding compared to clopidogrel-treated patients, including higher rates of life-threatening bleeding. This bleeding problem has led some analysts to believe that the FDA will insist on additional trials before the green light is given.

Meantime Daiichi Sankyo noted that it has established a subsidiary in Istanbul, Turkey which will initially focus on selling Evista (raloxifene), the Lilly osteoporosis drug the firm co-markets. It has also signed a co-promotion agreement with Glaxo Smith Kline for olmesartan in India.