Japan’s Taisho saw sales and profits decline in the first nine months of the current fiscal year, as its over-the-counter pharmaceuticals business continued to be held back by weaker demand and price cuts ate into prescription drug growth.

Operating income fell 14% to 36 billion yen ($303m) on turnover down 2.6% to 204 billion yen, but still came in a little higher than Taisho’s projections, mainly because the downturn at its OTC unit was not as bad as expected. But Taisho has not hiked its full-year projections as a result, because it is expecting further pressure on its prescription drugs business this quarter ahead of Japan’s next drug reimbursement price cut, due in April.

Sales of OTC drugs and nutritional products were down 5.7% to 131 billion yen. Revenues from the mainstay OTC nutrient drink Lipovitan D declined 2.4% to 54.7 billion yen, while cold remedy Pabron fell 7.6% to 18.3 billion yen. Taisho said this product picked up in the third quarter, however, helped by a higher-than-expected demand during the 2005 flu season.

Earlier this month, the rumour mill linked Taisho to a possible acquisition of the OTC business of number one Japanese drugmaker Astellas in order to boost its own activities in this area.

Taisho’s prescription drugs put in a 2.3% hike in revenues to 62 billion yen, driven by antibiotic Clarith (clarithromycin) which rose 4.4% to 19.7 billion yen on the back of expanded use in respiratory infections. But this was counterbalanced by an 18% decline royalty income from licensee Abbott Laboratories, which sold the drug as Biaxin in the USA, caused by the loss of patent protection on the drug in mid-2005.

Taisho’s other antibiotic products, Pentcillin (pentcillin) and Ozex (tosufloxacin) gained ground on the back of increased detailing efforts by Taisho Toyama Pharmaceutical, Taisho’s joint venture with Toyama Pharmaceutical. Pentcillin rose 4% to 5 billion yen, while Ozex came in at 2.4 billion yen, up 8%.

Taisho is now looking to a new quinolone antibiotic, garenoxacin (T-3811), to inject some youthful vitality into its ageing antibiotics franchise. Garenoxacin was originated by Toyama and will be co-promoted by Taisho Toyama Pharmaceutical and Astellas.

Finally, sales of arteriosclerosis treatment Palux (alprostadil) were flat at 9.4 billion yen, despite the onset of generic competition.

Taisho is maintaining its projection that total fiscal year sales will drop 3.7% to 269 billion yen and operating income will fall a little under 19% to 45 billion yen.