Japan stock market week to June 19, 2006

Tokyo saw a marginal advance in the week ended June 19. The Nikkei 225 edged up 0.2%, to close at the 14,800 level, while the Topix Index rose 1.1%. On the first trading day of the review week, the market plunged to post a seven-month low but rallied mid-week, helped by the recovery of New York markets and active bargain-hunting by foreign and domestic investors for recently-weakened stocks. Large capitalization issues, such as steels, high technology and auto stocks, were bought. Investors anticipated that the recently-prevalent flight of funds from equities in the global market might have ended. The market was encouraged by a report that the Japanese government has maintained its positive assessment of the country's economy for the fourth straight month in its June monthly report released by the Cabinet Office.

The pharmaceutical index fell 2.5%, underperforming the market. Ono Pharmaceutical dipped 0.2%, even though Merck & Co had announced positive findings of Phase III clinical studies of the antidiabetes drug sitagliptin (Januvia) with a new mechanism of DPP (Dipeptidyl peptidase)-IV inhibition (Marketletter June 19). Banyu is conducting Phase II studies of the drug in Japan and Ono is to join Banyu from Phase III trials in Japan (development code Ono-54351, MK-0431). Merck reported that the drug is moderately effective at reducing blood sugar levels both as a stand-alone treatment and in concomitant usage with other anti-diabetes drugs. The drug is not associated with hypoglycemia. In the 24-week trials, twice as many patients achieved the target of driving A1C levels to less than 7%, compared to a placebo.

Dainippon Sumitomo lost 3.3%, without reacting to the announcement that it will launch in late-June AmBisome, its sterile, non-pyrogenic lyphosized product containing amphotericin B intercalated into a liposomal membrane formulation for injection. AmBisome, in-licensed from Gilead Sciences of the USA, is a treatment for systemic fungal infections and empirical therapy for presumed fungal infection in febrile neutropenic patients. AmBisome is expected to mitigate side effects of amphotericin B while maintaining the efficacy.