Aug. 1 (Bloomberg) -- Takeda Pharmaceutical Co. led sales declines among Japan’s major drugmakers as a stronger yen eroded overseas earnings.

Takeda, Asia’s biggest pharmaceutical company, posted a 4.5 percent drop in revenue to 379 billion yen ($4 billion) in the first quarter ended June 30. Osaka-based Takeda said the stronger yen wiped out 20.7 billon yen from sales.

Daiichi Sankyo Co.’s revenue, excluding contributions from an Indian unit, fell during the quarter, and sales at Eisai Co., maker of the Aricept Alzheimer’s medication, also declined. All three companies derive about half of sales outside Japan, making them vulnerable to fluctuations in the yen, the best performer against the dollar in the past year among 16 major currencies tracked by Bloomberg.

“Japanese drugmakers have expanded their business overseas, making it more difficult for them to have control over the impact of currency fluctuations,” said Nobuhisa Asano, an analyst at Daiwa Institute of Research Ltd., who covers the domestic health-care industry.

Drugmakers worldwide will generate $70 billion less in revenue this year than previously estimated as consumers cut spending and currency fluctuations hurt overseas sales, IMS Health Inc., a Nowalk, Conneticut-based research company, said on April 22.

Japan’s drugmakers are expanding abroad and making acquisitions to reduce reliance on their home market, where government-mandated price cuts for prescription medicines take place every two years.

Overseas Earnings

Takeda, maker of the world’s top-selling diabetes pill Actos, generated 48 percent of revenue overseas during the three months ended June 30. Daiichi Sankyo, Japan’s third-biggest pharmaceutical company, earned 48 percent abroad and Eisai, the fourth largest, 53 percent. Astellas Pharma Inc., Japan’s second-biggest drugmaker, is scheduled to report earnings Aug. 3.

“Currency fluctuations had a large impact during the quarter,” Hiroshi Takahara, Takeda’s general manager for finance and accounting, said on a conference call. Sales of Takeda’s top four products, including Actos and heartburn pill Prevacid, fell when converted to yen, he said.

The U.S. currency averaged 97.38 yen in the three months ended June 30 and the euro 132.69 yen, weakening from 104.59 yen and 163.48 yen a year earlier, according to Bloomberg data. The dollar currently trades around 95.7 yen and the euro 135.2 yen.

Lower Profit

Takeda’s operating profit, or sales minus the cost of goods sold and administrative expenses, fell 9.7 percent to 125.6 billion yen in the three months ended June 30. The company said it booked 166.3 billion yen in one-time costs in the same quarter of last year for the takeover of Millennium Pharmaceuticals Inc. and the splitting of a U.S. venture with Abbott Laboratories. The profit calculation excludes these costs.

The stronger yen erased 8 billon yen from Daiichi Sankyo’s revenue during the quarter ended June 30. The Japanese maker of the Benicar hypertension pill posted a net loss of 6.44 billion yen for the quarter because of its Indian unit Ranbaxy Laboratories Ltd., which recorded currency-related charges.

Ranbaxy on April 24 posted a net loss of 7.61 billion rupees ($157 million) for the quarter ended March 31 because of wrong-way bets on foreign-currency hedges as the rupee weakened against the dollar. The Indian currency then strengthened in the three months to June 30, the first appreciation in six quarters.

Daiichi Sankyo accounts for results of its 64 percent-owned unit with a quarter’s lag.

“It’s difficult to see how the currency will fluctuate in future” and affect earnings, Hitoshi Matsuda, a senior executive officer at Daiichi Sankyo, said at a briefing in Tokyo.

Eisai, maker of the world’s best-selling drug for Alzheimer’s disease, posted a 1.7 percent drop in profit for the quarter on because of smaller overseas sales. Net income fell to 16.3 billion yen from 16.6 billion yen a year earlier.

Takeda rose 2.1 percent to close at 3,830 yen on the Tokyo Stock Exchange, Daiichi Sankyo fell 2.1 percent to 1,720 yen, while Eisai advanced 1.5 percent to 3,370 yen. The benchmark Nikkei 225 Stock Average gained 1.9 percent. All three stocks are headed for a third year of declines.

To contact the reporter on this story: Kanoko Matsuyama in Tokyo at kmatsuyama2@bloomberg.net.

Last Updated: July 31, 2009 12:05 EDT