Japan stock market week to June 2, 2008

Tokyo rebounded in the week to June 2. The Nikkei 225 leapt 5.5%, to close at the 14,400 level - a new five-month high, while the Topix index climbed 6.0%. Supported by the yen's depreciation against the US dollar, export-oriented issues including autos and electronics drew buying attention. Financial stocks rose as well. However, trading volume was low because some investors retreated to the sidelines remaining cautious about the earnings prospects of Japanese companies in the current fiscal year and beyond. The pharmaceutical index was up 3.4%, but underperformed the market.

Takeda gained 4.7%, after it presented data at the annual meeting of the Japan Diabetes Society from a Phase III clinical study to evaluate the effect of Basen (voglibose) on preventing the onset of type 2 diabetes mellitus in patients of impaired glucose tolerance (IGT) who have higher than normal blood (or plasma) glucose concentration. The data represent the first evidence in Japanese patients of the preventive effects of type 2 diabetes treatment when being added to dietary and/or exercise therapy. Basen showed a 40.5% decrease in the onset of type 2 diabetes, which is the primary endpoint, with a statistically-significant difference against placebo. Basen also showed a 53.9% increase in the secondary endpoint of achieving normalization of oral glucose tolerance test with statistically-significant difference against placebo. Takeda's share performance was also aided by the news that it had formed a strategic platform alliance with US RNAi therapeutics specialist Alnylam Pharmaceuticals in the fields of oncology and metabolic disease with the option to broaden additional therapeutic areas (Marketletter June 2). Alnylam obtains options for 50-50 development and commercialization of Takeda RNAi therapeutic programs in the USA, while the Japanese company gains access to Alnylam's RNAi technology and intellectual property. The alliance includes $150.0 million in upfront and near-term technology transfer payments and future milestones.

Tsumura advanced 3.2%, reflecting its moderate earnings growth for the fiscal year ended March 2008. Turnover was up 3.9% to 94.8 billion yen ($906.7 million) and operating income increased 2.0% to 15.8 billion yen. Sales of Chinese herbal medicines for prescription use rose 6.2% to 76.8 billion yen reflecting an expansion in demand from hospitals. However, earnings grew moderately due to a hike in costs with higher prices of principal raw materials. The company forecasts that the next fiscal year's operating income will grow 7.5% to 17.0 billion yen on continued expansion of its prescription medicines, overcoming the likely increase in raw material prices and National Health Insurance drug reimbursement price cuts.