Daiichi Sankyo announces valuation loss for Ranbaxy acquisition of 359 billion yen

05 January 2009

Daiichi Sankyo Company Limited today announced that it plans to record a valuation loss and one-time write-down of goodwill on its investment in group subsidiary Ranbaxy Laboratories Limited for the fiscal third-quarter ended 31 December 2008.

On a non-consolidated basis, Daiichi Sankyo plans to record a non-cash valuation loss of 359.5 billion yen on its shares in Ranbaxy in its fiscal third-quarter to reflect a more than 50 per cent decline in the market value of these securities versus the purchase price. The shares have declined nearly 66 per cent according to some reports.

Daiichi Sankyo has now 63.92 per cent of the equity share capital of Ranbaxy, comprising 268.7 million shares

On a consolidated basis, Daiichi Sankyo estimates a non-cash loss of 354.0 billion yen related to the write-down of goodwill associated with its investment in Ranbaxy in line with the valuation loss on Ranbaxy shares accounted for on a non-consolidated basis.

Daiichi Sankyo sees no impact on its forecasts for non-consolidated net sales, operating income or ordinary income for the fiscal third-quarter as a result of these anticipated extraordinary losses. The Company also sees no impact on cash flow. However, these items will have a significant negative impact on the Company's consolidated financial results forecasts for net income for the nine-month period ended 31 December 2008 and for fiscal year 2008 ending 31 March 2009.
 
 Ranbaxy Laboratories has also reported to have missed its December 2008 deadline to launch an anti-migraine drug as the USFDA has yet to give its approval. Ranbaxy had announced the launch in January 2008 after it reached an out-of-court settlement with GlaxoSmithKine (GSK), which allowed it to launch the generic version of Imitrex, worth $1 billion in sales, in the US. Problems with USFDA continue to plague the company.

Accounting basis of estimation
Daiichi Sankyo has based its estimates for the one-time write-down of goodwill on its investment in Ranbaxy to fully reflect the impact of the current unprecedented turmoil in global equities markets. The company has taken this step to meet the strictest accounting standards to ensure it remains on the firmest financial footing.