Japan stock market week to May 8, 2006

Tokyo saw an extended rise in the week to May 8 (two trading days because May 3 through 5 were national holidays in Japan). The Nikkei 225 was up 2.2%, recovering the 17,200 level at the close for the first time since April 21, while the Topix Index rose 2.2%. Although the review week was short due to the extensive Golden Week holidays, investors were active in purchasing domestic economy-oriented issues, including banks, real estates and insurance stocks based on the expectation of sustained firmness of the Japanese economy. In contrast, export-led technology issues and autos were generally weak, with selling pressure due to the sharp upturn of the yen against the US dollar.

The pharmaceutical index edged up 0.3% but underperformed the market. Kissei advanced 2.1%, overcoming its downward revision of its consolidated earnings forecast for the fiscal year ending March 2006. The recurring income estimate was lowered to 2.7 billion yen ($24.3 million), down 54% year-on-year, from the previous 3.2 billion yen. The net income forecast was reduced to 2.1 billion yen (down 57% year-on-year) from the previous 2.2 billion yen. The company says the reasons for the revision are the less-than-expected profits from older products due to generic competition and the generally lower demand for prescription drugs prior to the drug reimbursement price cut on April 1. Another reason is heavy pre-marketing expenses associated with Urief (silodosin), oral treatment of dysuria related to benign prostatic hypertrophy. Urief was price listed at the end of April and was awarded a 10% medical usefulness premium.

Daiichi Sankyo closed up 0.2%, after a pharmaceutical journal commented that its subsidiary Daiichi Asbio Pharma expects an improvement in profit in the intermediate term, thanks to the launch of new compounds in Japan and overseas. It recorded an operating loss in the fiscal year ended March 2005 due to heavy R&D expenses. The company plans to market faropenem medoxomil, a penem antibiotic out-licensed to US firm Replidyne, in the USA in the first quarter of 2007. Biopten (tetrahydrobioterin), a treatment for cardiac insufficiency out-licensed to BioMarin, is on file in the USA with the fast track review status for an expected launch in 2007. In Japan, the company plans to file memantine HCl, a treatment for mild to moderate Alzheimer's disease originated by Merz, Germany, in spring 2009.