Japan stock market week to July 31, 2006

Tokyo saw a rally in the week to July 31. The Nikkei 225 advanced 4.5%, recovering the 15,000 level by the close, while the Topix index rose 3.8%. Players were encouraged by favorable first-quarter earnings reported mid-week for key technology companies, particularly consumer electronics which posted earlier than anticipated earnings recovery. Results of select drug companies were also solid. Additionally, the rally was supported by a report that Japan's industrial production in June rose 1.9% from the previous month to 105.7 on brisk exports.

The pharmaceutical index edged up 1.0%, underperforming the market. Tanabe leapt 6.1%, as it reported favorable results for the first quarter of the fiscal year ending March 2007, reflecting solid growth of some core products in Japan and overseas and a year-on-year decline in R&D expenses. Turnover increased 3.5% to 45.4 billion yen ($395.0 million). Operating income rose 2.7% to 9.9 billion yen and achieved 73.3% of the interim term forecast. Recurring income climbed 12.2% to 11.0 billion yen, thanks to the recording of foreign exchange profits worth 660.0 million yen (against a foreign exchange loss of 102.0 million yen a year ago) and higher interest income. Tanabe's share performance also reacted to its launch of methotrexate tablets 2mg for the treatment of rheumatoid arthritis which does not respond to conventional therapies such as nonsteroidal anti-inflammatory drugs. The firm expects that the launch of this product will help accelerate the use of its anti-human tumor necrosis factor-alpha monoclonal antibody agent, Remicade (infliximab).

Santen gained 5.1%, reflecting its unveiling of a positive mid-term strategic plan for the period of the fiscal March 2007 through March 2011. The company forecasts that turnover will grow 3% or more to 115.0 billion yen in the final year of the plan (compared with 98.4 billion yen in the financial year ended March 2006) and operating income will grow more than 8% to 32.0 billion yen (21.0 billion yen). Santen aims to attain the top position in the global market for ophthalmic products and treatments for rheumatoid arthritis.