Japan stock market week to March 10, 2008

Tokyo continued to tumble in the week to March 10. The Nikkei 225 dropped 3.5% to close at the 12,500 level, the lowest finish in two and a half years, while the Topix index fell 3.7%. Tokyo's pullback was driven by increasing concerns that the US economy may enter a phase of recession in the wake of worse-than-anticipated US jobs data in February. Moreover, a further hike in oil prices and continued strength of the yen against the dollar caused Tokyo to retreat. Export-oriented stocks and large-capitalization issues such as steels suffered losses. The pharmaceutical index was down 1.9% but outperformed the market. The Ministry of Health, Labor and Welfare unveiled that the drug reimbursement price cut, effective April, will be an industry average of 5.2% (see page 17). Because the extent of the price reduction had been known, the news did not have a significant impact on the drug sector.

Eisai was off 1.6%, even though it held an annual information meeting to update the progress of its ongoing mid-term plan and address prospects for existing and new products from MGI Pharma, the $3.9-billion acquisition of which Eisai completed January (Marketletter February 4). The company expects that the buy will result in long-term growth of turnover and profits, although earnings in the current fiscal year will suffer from one-time costs associated with the transaction, including in-process R&D and goodwill amortization. Eisai looks for growth from MGI's Aloxi (palonosetron) for the prevention of chemotherapy-induced nausea and vomiting, as well as post-operative nausea and vomiting (approved in February). The share performance was not aided either by a report that it had submitted a supplemental New Drug Application for the proton pump inhibitor anti-ulcer drug rabeprazole (Aciphex in the USA, Pariet in Japan) for the short-term treatment of gastroesophageal reflux disease in patients aged 12-16 to the US Food and Drug Administration. The drug was designated a priority review product.

Astellas ended down 3.0%, without finding support from the transfer of its global R&D headquarters to the USA by establishing a new subsidiary, Astellas Pharma Global Development, in Illinois, effective April (Marketletter March 10). The management system will also be revised by setting up a global management committee in order to build an optimal system to realize faster decision making. The move aims to strengthen overall competitiveness worldwide because the company will face patent expiry of its core product Prograf (tacrolimus), an immunosuppressant, in the USA this year and in Europe in 2009.