Japan stock market week to May 15, 2006

Tokyo saw a substantial retreat in the week to May 15, with a five-day consecutive losing streak. The Nikkei 225 fell 4.7%, to close at 16,486.91, and dipped under the psychologically-important 16,500 mark. The Topix Index declined 4.2%. The pullback was caused by mounting concerns about the possibly negative impact of the recent strength of the yen to the operating performance of exports-led companies, such as electricals and autos. Investors were also worried about the possibility that the Bank of Japan could end its zero interest rate policy around June at earliest. The yen fell temporarily to lower than 110/US$ for the first time in nearly eight months. Meanwhile, companies which benefit from the yen's appreciation, such as electric utilities, shipping and airline issues drew temporary buying attention.

The pharmaceutical index was down only 1.5%, outperforming the market. Takeda rose 1.2%, reflecting its stronger-than-forecast results for the fiscal year ended March 2006 on growth of core products in global market and the positive impact of the yen's depreciation against the US dollar (see page 26). Turnover was up 7.9% year-on-year to 1,212.2 billion yen ($11.03 billion). Operating income was up 4.6% to 402.8 billion yen, above target. Recurring income rose 9.8% to 485.4 billion yen, higher than the target, thanks to expansion of the equity income from TAP Pharmaceuticals, a joint venture with Abbott Laboratories. Revenues in global market from the anti-diabetes agent pioglitazone (Actos) leapt 26.4% to 244.3 billion yen, including a 56.5% jump in Japan to 24.2 billion yen, a 22.9% increase in the USA to 202.2 billion yen and a 35.0% leap in Europe to 15.5 billion yen. Simultaneously with its earnings report, Takeda unveiled its new 2006-2010 mid-term plan (for the fiscal year ending March 2007-March 2011) targeting 1,400.0 billion yen sales of in-house ethical products, increasing R&D investment to 20% of the sales of in-house drugs and more than 7% growth per year on average of earnings per share.

Santen edged down 0.7%, even though it reported favorable results as expected for the fiscal year ended March 2006 on growth of key products in Japan and overseas. Turnover was up 6.2% to 98.4 billion yen. Operating income was up 10.6% to 21.0 billion yen, close to the plan. Net income leapt 18.1% to 13.2 billion yen, slightly above target. Revenues from the mainstay Cravit (levofloxacin), a prescription ophthalmic solution for the treatment of bacterial conjunctivitis, rose 3.1% to 13.0 billion yen, benefiting from Santen's excellent market position and continued solid demand.