Based on a DCF method we set our target price at ¥2,600. We use a risk premium of 6%, a 2% risk-free rate (in line with our Japanese pharma coverage), and a terminal growth rate of -0.5% in light of the generics business.

Risks include 1) failure to offset the looming patent cliff for major drugs (Relumina, Rifixima), 2) annual drug price revisions, especially for generics, and 3) success or failure for clinical trials on new drugs.