Sigma Pharmaceuticals Ltd has downgraded its profit forecast for the full year by around 31 percent as it strives to convince Aspen Pharmacare to up its takeover bid worth $A649.73 million ($US573 million).

Sigma now projects to post net profits of around $53 million to $57 million the fiscal year ending on January 2011, down from the previous forecast worth $80 million.

Reported revenues are projected to be between $43 million to $47 million.

Investors were eagerly waiting for an update on Sigma's outlook after the company issued warning that it would likely fail in meeting its $80 million revenue target due to the high level of competition in the generic drug industry in Australia, wherein Sigma is market leader.

In a market report update, Sigma Pharmaceuticals stated its performance in most divisions had been good, but its generic arm was not performing up to par and the drug industry is still unstable.

Sigma also stated that one-off expenses regarding "corporate activities", including the takeover offer of Aspen, would impact the annual revenues as well.

"Sigma's performance in the first five months of the financial year has been sound in most areas of the business," Sigma said in a statement to the ASX (Australian Securities Exchange).

"The Consumer, Manufacturing, Medical and Retail businesses have all performed broadly in line with expectations. The Wholesaling business has enjoyed sales growth of 9.3 per cent year on year.

Operating costs remain in line with expectations but corporate costs will soar, due to changes in executive management and the consideration of Aspen's bid. "

It has been a difficult year for Sigma Pharmaceuticals, as it posted a $389 million net loss for the previous fiscal year, and after that three of its tops executives resigned.

Sigma is now negotiating with Aspen to raise its offer who valued the firm at $648 million for 55 cents per share. Aspen can now justify a premium price for Sigma, despite the cut on profits forecast.

At exactly 1030 AEST, shares at Sigma had decreased to 48 cents, a drop of 1.03 per cent, compared to the benchmark index down by 0.49 per cent.