Japan stock market week to Jan 23

Tokyo saw a sharp pullback in the week to January 23. The Nikkei 225 fell 5.6%, to close below the 16,000 mark, while the Topix index dropped 4.9%. Massive selling hit the market on the news on the first trading day that the Tokyo District Public Prosecutor's Office and the Securities and Exchange Surveillance Commission searched Livedoor, an internet service company, due to its subsidiary's alleged violation of the Securities and Exchange Law. Prosecutors claim that the company and its affiliates disseminated unfounded information regarding corporate acquisitions and reported inflated operating results in order to raise its stock prices. The selling spread to not only Internet companies but also a broad range of sectors. The Nikkei 225 suffered the combined losses of 926.85 points in the first two days. With the concern that the volume of trading may exceed the capacity of the Tokyo Stock Exchange, rading was suspended on January 18 temporarily before the official close. The incident cooled-off the recently rapid pace of Tokyo's rally. The pharmaceutical index declined 2.1% but outperformed the market. Chugai went down 6.4%, even though it reported a favorable flash report of fiscal year ended December 2005 earnings. Sales increased 11.0% year-on-year to 327.2 billion yen, higher than the forecast of 315.0 billion yen ($2.74 billion). Operating income surged 53.7% to 79.2 billion yen, above the target of 70.0 billion yen. Leading the growth in sales and earnings were the expansion of core products and the control of the growth of sales, general and administrative expenses. Turnover of Epogin (epoetin beta) for the treatment of anemia in end-stage renal disease increased 4.1% to 71.8 billion yen. Sales of anti-influenza agent Tamiflu (oseltamivir) leapt to 35.2 billion yen from 8.6 billion yen a year ago, exceeding the plan of 25.6 billion yen and reflecting the proliferation of flu in February and March 2005, as well as an earlier than usual start of the current season.

Eisai was down 4.9%, reflecting the fact that the Tokyo District Court had dismissed Eisai's law suit against Taiyo Yakuhin, a generic drug manufacturer, regarding Eisai's antiulcer drug Selbex (teprenone). Previously, Eisai filed suit against Taiyo Yakuhin and 11 other companies selling generic version of Selbex on the grounds of a possibility to cause confusion with Selbex in clinical usage because of the similarities of a package and a capsule design of Selbex and generics. Eisai's action was based on the Japanese Unfair Competition Prevention Law. Eisai did not agree with the court ruling and plans to file an appeal against the ruling.

Takeda edged up 0.1%, reacting to its announcement that antidiabetes drug, SYR-322 (dipeptidyl peptidase IV inhibitor) discovered by its US new drug discovery research subsidiary Takeda San Diego (established by the US firm acquiring Syrixx) has entered Phase III clinical trials which are to be conducted in global markets. Takeda also announced that it has begun Phase II studies in Japan of ATL-962, a treatment for obesity and related ailments (see page 21). The drug, which was discovered by the UK's Alizyme, is an inhibitor of gastrointestinal lipases and is designed to cause weight loss by reducing the digestion and the absorption of fat from the diet.