Japan stock market week to Jan 1, 2007

Tokyo saw a strong advance in the three weeks to January 1 (the latter was a national holiday in Japan). The Nikkei 225 rose 4.2%, to close at 17,225.83, while the Topix index was up 3.3%. In late December, the Bank of Japan's Tanken quarterly survey lifted investor sentiment. The diffusion index of large manufacturers' present business status, a core part of the survey, inched up to plus 25 in December from plus 24 in September, in line with the consensus forecast. Investors recognized that capital spending and business confidence are being strengthened. The solid market performance also reflected continued investor expectation for the upward revision of the current fiscal year's operating performance by major companies.

The pharmaceutical index ended up 5.0%, outperforming the market. Kyowa Hakko closed 7.7% higher because its wholly-owned subsidiary BioWa had concluded a licensing and collaboration agreement with US firm MedImmune to develop and commercialize inflammatory disease therapies targeting the interleukin-5 receptor. Both companies will initially focus on developing BIW-8405, a monoclonal antibody which is in Phase I clinical trials in asthma patients. BIW-8405 has been developed utilizing BioWa's POTELLIGENT technology for the development of antibody-dependent cellular cytotoxicity enhanced antibodies. BioWa will have exclusive marketing rights in Japan and certain Asian countries, while MedImmune will have likewise for the USA, Europe and all other countries.

Astellas was up 5.5%, due to a report that it had re-submitted the New Drug Application to the US Food and Drug Administration for the approval of RSD1235, vernakalant HCl, for the acute conversion of atrial fibrillation co-developed with Cardiome Pharma of the USA (see page 28). The re-submission was made with the inclusion of an additional 150 patients in the safety dataset from the ongoing ACT 2 and ACT 4 studies. Based on the amended co-development agreement in July 2006, Astellas will pay Cardisome a $10.0 million milestone.