Japan stock market week to Aug 28, 2006

Tokyo saw a modest retreat in the two weeks ended August 28. The Nikkei 225 edged down 0.6%, to close at the 15,700 level, while the Topix index ended off 0.1%. The market recovered the 16,000 mark at the close on August 16, for the first time since May 19, with the improvement of the market's supply and demand relationship thanks to resumed interests of international investors in Japanese equities. Additionally, players in general expected the possible upward revision of the current financial year's earnings forecast by many corporations given that April-June quarter earnings reports were favorable. However, the market weakened afterwards, with directionless moves due to a lack of new buying incentives.

The pharmaceutical index dropped 0.9%, slightly underperforming the market. Hisamitsu plummeted 14.0% on the news that a Phase III clinical study in the USA of HKT-500, its anti-inflammatory patch containing ketoprofen, failed to prove the compound's statistically-significant difference compared with placebo in anti-inflammatory efficacy. The company has been positioning HKT-500 as a core strategic product to lead its planned advance into the US market.

Toyama plunged 12.2% after it reported that Schering-Plough, the licensee for its synthetic antibacterial agent T-3811 (garenoxacin), revoked the New Drug Application filed with the US Food and Drug Administration. The reason was that S-P could not find a sub-licensing partner for the drug following the conclusion of its marketing alliance with Germany's Bayer, under which the US firm is not permitted to market Bayer's competitive product, ciprofloxacin. The report, however, is not likely to affect negatively T-3811's expected launch in around 2008 in Japan and Europe. The drug was filed in Japan and Europe in May 2006. Taisho Toyama Pharmaceutical and Astellas will co-promote it in Japan, while distribution and marketing is to be conducted by Astellas.