NO BIG FOREIGN DRUG BUYS BY JAPANESE FIRMS

Many factors are working against corporate expansion by Japan-ese pharmaceutical companies overseas, according to Philip Rowe of Capital Research International.

Japanese pharmaceutical companies differ greatly from their western counterparts in margin levels and absolute levels of profitability, he told the Marketletter in Tokyo, where he is based. In particular, he commented, the low margins of Japanese firms make them less able to afford the risk and expense of aggressive overseas expansion.

As an example, Mr Rowe pointed to Merck & Co's earnings and margins, which dwarf those of the Japanese pharmaceutical industry. For the current year, Merck's projected $1.2 billion net earnings exceed the aggregate earnings of Japan's top 18 listed pharmaceutical companies, which together are expected to earn $1.69 billion. Merck's 23% net margin is more than double the average net margin of its Japanese counterparts.