Japan stock market week to May 11, 2009

Tokyo extended a positive trend in the week ended May 11 (three trading days as May 5 and 6 were national holidays in Japan). The Nikkei 225  advanced 5.3%, to close at the 9,400 mark so clearing the  psychologically-important 9,000 line, while the Topix Index rose 6.3%.  The holiday-shortened review period saw a lack of new trading  incentives. However, the market overcame profit-taking on recently  well-performing stocks. Financial issues drew buying attention in light  of news that US results of "stress tests" of major banks came out  without major negative factors, signifying a calming of the financial  crisis. The pharmaceutical index was up 6.5%, slightly outperforming the  market.

Daiichi Sankyo rallied, with a 10.1% gain probably assisted by investor  recognition that the worst might be over for the company. The media  reported that the company's net deficit for the fiscal year ended March  2009 likely would be 340.0 billion yen ($3.47 billion), a larger net  deficit than the previous forecast of 316.0 billion yen, due to  weaker-than-forecast revenue of leading products and  larger-than-expected goodwill amortization costs associated with the  acquisition of Ranbaxy of India, reflecting further decline in the  latter's stock price. Turnover of the angiotensin receptor blocker  olmesartan (Olmetec in Japan and Europe, Benicar in the USA) appeared to  be below the guidance due to the yen's rise. The media estimates that  the company will see year-on-year growth in revenue and profits in the  fiscal year ending March 2010 thanks to reduced goodwill amortization  burden.

Shionogi leapt 9.7%, reflecting the expected recovery in the next fiscal  year benefiting from the absence of one-time expenses associated with  the acquisition of Sciele in October 2008. Results were in line with the  company's guidance. Revenue rose 6.2% to 227.5 billion yen thanks to a  15.1% increase in royalty revenue from the hyperlipidemia agent Crestor  (rosuvastatin) received from AstraZeneca and addition of Sciele  products. However, operating income was down 20.8% to 32.0 billion yen  because of an 18.3% hike in SG&A expenses including in-process R&D and  goodwill amortization costs related to Sciele. The company believes that  the next fiscal year's operating income will recover 87.4% to 60.0  billion yen due to the absence of acquisition costs.