Japan stock market week to Jan 5, 2009

Tokyo extended an advance in the three reporting weeks ended January 5. The Nikkei 225 was up 4.4%, recovering the 9,000 mark at the close for  the first time in two months, while the Topix index rose 3.4%. Over the  whole of 2008, Tokyo posted a year-on-year 42.1% plunge, while the  pharmaceutical sector outperformed the market with a 20.5% decline,  signifying its defensive nature. During this review period, stocks moved  in a relatively narrow range as a result of calmness in currency  exchanges and a dearth of players due to the holiday season. Investors  continued to worry that major Japanese companies might revise downward  their full-year earnings guidance on the reporting of third-quarter  results at end-January. However, some believe such anxieties have  already been priced in. On the positive side, investors expected that  the economic stimulus package to be presented by the new US  administration could help improve the American economy. The  pharmaceutical index ended up 4.3%, performing in line with the market.

Daiichi Sankyo was one of the strongest performers in the review period,  with an advance of 12.4% reacting to the Committee for Medicinal  Products for Human Use (CHMP) of the European Medicines Agency (EMEA)  issuing a positive opinion recommending approval of prasugrel (expected  brand name Effient) for the reduction of atherothrombotic events in  patients with acute coronary syndromes undergoing percutaneous coronary  intervention (see page 24). The company's share action overcame a media  report that it will likely record about a 300.0 billion yen ($3.21  billion) loss on a consolidated basis in the third quarter of the  current fiscal year due to the write-down of goodwill on its investment  in India's Ranbaxy Laboratories, which Daiichi Sankyo acquired in  November 2008 (see also page 6). Ranbaxy's shares have plunged more than  50% on the purchase price. After the close of the review period, the  company issued a press release saying that it plans to record an  extraordinary goodwill write-down loss on a consolidated basis of 354.0  billion yen in the third quarter.

Chugai rose 9.8% after it announced, together with Taisho, that  eldecalcitol, an active vitamin D3 derivative originated by Chugai and  co-developed by the two companies, significantly reduced the incidence  of new vertebral fractures in osteoporosis. The finding came from Phase  III clinical trials for a period of three years, involving 1,087  patients to compare once-daily oral eldecalcitol with alfacalcidol  (active vitamin D3 prodrug originated by Chugai, brand name Alfarol).  The companies plan to submit regulatory filings in 2009.