Japan stock market week to March 5, 2007

Tokyo tumbled in the week ended March 5, amid the plunge of global equity markets. The Nikkei 225 dropped 8.6% to close at below the psychologically-important 17,000 level, while the Topix index fell 8.5%. The market opened weak due to profit-taking on recent strength and suffered a daily 2.8% loss on February 28 in the wake of the downswing of global stocks triggered by a slump in China. The daily drop continued throughout the review week because no significant sign of the bottoming was seen in worldwide markets. Moreover, the yen's surge against the US dollar exacerbated Tokyo's setback. Investors were concerned that the higher yen would hurt earnings of exports-led companies and the Japanese economy.

The pharmaceutical index lost 3.7%, outperforming the market. Dainippon Sumitomo plummeted 7.5%, without responding to its mid-term strategic plan for the period of the fiscal year ending March 2008 through March 2010 (see page 7) targeting final-year turnover of 295.0 billion yen ($2.22 billion), up 13.5% compared to the current fiscal year, and operating income of 50.0 billion yen, up 19.0% from the current fiscal year. Contributing factors for the planned growth are higher sales of existing core products including the anti-hypertensive agent Amlodin (amlodipine) and the gastroprokinetic drug Gasmotin (mosapride citrate) and new drugs. Of new compounds which will likely be launched in the next three years, the company expects a high sales potential for irbesartan, an angiotensin receptor blocker antihypertensive drug originated by Sanofi-Aventis and co-developed with Shionogi (on file).

Eisai slid 5.2%, notwithstanding a positive presentation at its annual information meetings. The company says that the operating performance estimated for the financial year ending March 2007, which represents the first year of its mid-term "Dramatic Leap Plan" ending in the fiscal year to March 2012, would be favorble. In the mid-term plan, the company is looking for an average growth of 9% in turnover to 1,000.0 billion yen (against an estimated 668.0 billion yen in the current fiscal year) and 13% growth in operating income to 200.0 billion yen (versus 107.0 billion yen). R&D is in progress as scheduled for the three core products: the anticancer drug E739 (eribulin); E2007 (perampanel) for the treatment of Parkinson's disease; and E5564 (eritolan) for severe sepsis. The company expects to achieve sales of $1.5 billion at peak for each of the three compounds.