Japan stock market week to May 1, 2006

Tokyo saw a marginal rally in the week ended May 1, with prices generally moving in a narrow range. The Nikkei 225 edged up 0.06%, to close at the 16,900 level, while the Topix Index increased 0.4%. Many investors retreated to the sidelines due to the approaching Golden Week holidays and the scheduled fully-fledged release of earnings reports after these. Select electronics and auto stocks, which reported favorable earnings in the review week, drew buying attention. However, the yen's appreciation against the US dollar toward the end of the week and uncertainty of crude oil price trends caused the players to become cautious about the direction of the market. On the positive side, the market is likely to benefit from the inflow of new investment trust funds in the near future.

The pharmaceutical index dipped 0.6%, underperforming the market. Chugai leapt 10.0%, as it announced that its anti-human interleukin-6 receptor monoclonal antibody Actemra (tocilizumab) had been filed in Japan for the indication of rheumatoid arthritis and systemic-onset juvenile idiopathic arthritis. Chugai reported a year-on-year decline in turnover and earnings for the first quarter of the fiscal year ending December 2006, due to a steep drop in sales of the anti-influenza virus agent Tamiflu (oseltamivir) and an increase in R&D expenses. However, results were slightly better than the company's projection. Total turnover fell 8.7% year-on-year to 77.2 billion yen $685.3 million) but sales excluding Tamiflu were 61.9 billion yen, up 0.3%. Operating income was down 39.9% to 14.1 billion yen, although it achieved 60.0% of the half-year target. Sales of the ordinary use Tamiflu dropped 57.0% to 9.9 billion yen, while 5.4 billion yen for the government's stockpiling was recorded against zero a year ago.

Kyowa Hakko remained almost unchanged, overcoming the reported year-on-year fall in revenues and earnings for the financial year ended March 2006, due to sluggish performance of pharmaceuticals and biochemicals. Consolidated turnover was down 1.5% to 353.4 billion yen, below the planned 360.0 billion yen. Operating income was down 23.8% to 25.5 billion yen, falling short of the forecast 26.0 billion yen.