Daiichi Sankyo Company Limited Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Daiichi Sankyo Company Limited Case Solution

Objectives of the report

Following are the objectives of this report:

To analyze the accounting related information on the investor via share price.
To discuss and analyze the actual market reaction.

Overview of industry and company

In the past years, the Japanese Pharmaceutical market had shown small growth rates. Due to complex regulation and pricing, it has been difficult for the companies to introduce new products. Another reason for stationary market is that since 2007; the government adopted the promotion of generic drugs to minimize the health related expenditure. During the last decade, the volume of generic share doubled, which is still rising.Due to COVID-19, different pharmaceutical companies around the world attempted to develop vaccination to cure the viral disease. The Japanese government did not try to test the drug domestically because of budget plan 2020. Institute of medical science, University of Tokyo with the collaboration of Daiichi Sankyo Company limited, produced an mRNA vaccine. In February 2021; the Japanese government approved the vaccine of COVID 19.

The top competitors of Daichi Sankyo are Bristol-Myers squibb, Bayer and Herringbone Wilhelmina. Among all, Daichi Sankyo has the greatest revenue, i.e. estimated to be around 981 billion.

Daichiki Sankyo is a global pharmaceutical company,which has its corporate origin in Japan. It was established on September 28^th, 2005. It started with the capital of 50 billion yen and currently has 16,000 employees. The company provides different products and services inmore than 20 countries. The company’s main goal is to develop new medicines through new methods of discovery and delivery. Various drugs were created and numerous diseases were cured due to the drugs that were manufactured by the company with the help of an advanced technology. The company works on three core values: new inventions to help people in living a healthy life, follow rules and regulation to maintain integrity in the company and everyone is accountable for his individualistic action. The company focuses on cooperation and collaboration between the regions in order to enhance the business activities. The company has an environment where employees can experience different cultures. The company also focuses on disaster recovery and the promotion of culture. The company also contributes to maintaining sustainable society and carries out voluntary social funding activities.(Daiichi Sankyo company limited, 2020)

Announcement and its expected impact

On April 27^th, 2020 Daichiki Sankyo announced share split and partial amendments, and foretasted the annual dividend per share for the year ending 2021. The purpose of splitting share was to boost the liquidity by decreasing the unit price of investment and to further expand the base of investor.

The main purpose of splitting stock is to make share price striking. As Daichi Sankyo introduced 3 for 1 split; it should result in the decrease of stock price immediately. After that small investors would perceive the stock as affordable and would prefer to buy that stock in bulk, which would result in an increase in the share price.

Analysis of actual market reaction and calculation of residuals

As it is clearly seen from the exhibit 1, right after the announcement of stock split; the demand for the company’s stock increased drastically, which resulted in the increase of the company’s share price.

For the year 2020, the company’s profit increased by 21%. And it is also said that the company was implementing 3-1 split policy. The consolidated revenue increased from ¥929.72 billion to ¥981.79 billion. The company said that it forecasts profit to the company’s owners at ¥56.00 for full fiscal year 2021 or an expected 56.6% drop.

Due to the split of shares; Daiichi Sankyo predicted the annual dividend per share of ¥13.5 for the fiscal year ending March 31^st, 2021.

The overall increase of the revenue is due to the slitting of shares, which has resulted in an increase in its sales. The people wanted to hold more shares than they did prior, because the price was low. In addition, the company was already making profit in the previous years; therefore the investor didn’t hesitate to invest in that project.

Conclusion

Daichi Sankyo is one of the leading pharmaceutical industry around the globe. Its main goal is to discover new medicines and new ways of manufacturing these medicines. In April 2020, the company came up with an idea to splitting its shares by three to one, in order to boost the liquidity of shares. Splitting of shares led to an increase in the numbers of shares issued. This approach helped the company in increasing its capital. The company makes a great revenue in the fiscal year 2021 as discussed above........................

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