Japan stock market week to March 19, 2007

Tokyo gave up the previous week's strength and fell in the week ended March 19. The Nikkei 225 lost 1.6% following mixed movements, although the 17,000 mark was maintained at the close, while the Topix index dropped 2.7%. The market suffered a sharp daily setback mid-week, triggered by a tumble of New York markets with US concerns about increasing failures of subprime housing loans, but later staged a modest recovery following the rebound of US markets. Investors bought-back on the recent weakness of export-led stocks and domestic economy-based issues such as steel and machinery.

The pharmaceutical index declined 2.2%, slightly underperforming the market. Eisai was off 2.8%, even though the media reported that its consolidated net income in the financial year ending March 2008 will likely grow 7% to 75.0 billion yen ($637.5 million) compared with the estimated 70.0 billion yen for the current year, on the continued expansion of Aricept (donepezil) for the treatment of Alzheimer's disease, which has been helped by the approval last year (Marketletter October 16, 2006) of an additional indication for severe status of the disease. Turnover is likely to grow 6% to 710.0 billion yen. Costs and expenses will rise due to an increase in marketing and R&D expenses, while the absence of the drug reimbursement price cut will serve as a positive factor. The share performance did not reflect either a media report that Eisai plans to proceed the lifecycle management of D2E7 (adalimumab, Humira), in-licensed from Abbott Laboratories. The Japanese New Drug Application of D2E7 for the treatment of rheumatoid arthritis is on file. Eisai plans to submit the drug's additional indication for psoriasis in the fiscal year ending March 2008 (it is in Phase II/III at present).

Takeda lost 2.7% after it notified US doctors - together with the Food and Drug Administration - that clinical trial data indicated a higher incidence of fractures in female patients using the company's antidiabetes agent Actos (pioglitazone) than those taking placebo or other antidiabetes drugs. The fracture incidence was 1.9 fractures per 100 female patient-years in the Actos-treated group and 1.1 per 100 patient-years in the comparator-treated cohort. In February, GlaxoSmithKline reported a similar fracture incidence for Avandia (rosiglitazone), a competitor to Actos. Takeda's share action was not helped by the decision in the previous week to acquire US firm Paradigm Therapeutics (Marketletter March 19). The US company will become a subsidiary of Takeda Europe Holdings and will be named as Takeda Cambridge. Paradigm has an expertise in target identification and validation based on genetic engineering and has developed new drug discovery targets and compounds in various areas, including pain, central nervous system disorders and cancer. The merger will replace and build upon the two companies' 2005 central nervous system area alliance. Nippon Shinyaku fell 1.2% after it terminated the licensing agreement with Teva of Israel, on the Japanese firm's anti-cancer agent HMN-214. The drug was out-licensed to US group IVAX in September 2004 at the Phase I clinical study and the firm was acquired by Teva in January 2006 (Marketletters passim).