Japan stock market week to Nov 24, 2008

Tokyo continued to lose ground in the week to November 24 (four trading days only because November 24 was a national holiday). The Nikkei 225 plunged 7.2%, falling below 8,000 at the close, while the Topix index dropped 5.6%, influenced by weak New York markets and the continued upturn of the yen. Players were concerned that the troubles of the US auto industry could worsen that country's economic outlook. There were also concerns about Japanese companies' earnings prospects for the current fiscal year, anticipating that their guidance might not fully reflect the impact of the recent decline of equity markets and the tough economic environment, although turmoil in financial markets has calmed to some extent. The pharmaceutical index was off 4.1%, outperforming the market. Investors sold financials and export-oriented companies on the ground of global recession, although some participants bought recently underperformed issues.

Daiichi Sankyo dropped 8.0%, due to the investors' expectation that the company's current fiscal year operating performance will be negatively affected by likely massive evaluation losses associated with recent plunge in the stock price of India's Ranbaxy, which Daiichi Sankyo acquired in early November (Marketletters passim). The stock was not assisted by the previous week's report that the company entered an agreement with US firm ArQule (see page 6), regarding co-development of ARQ197, an orally-administered, small-molecule inhibitor of the c-Met receptor tyrosine kinase for the treatment of cancer. The two companies also agreed that they will advance the application of ArQule's kinase inhibitor discovery platform to develop a new generation of selective anti-cancer kinase inhibitors. Daiichi Sankyo will pay ArQule $75.0 million in cash upfront.

Eisai was down 6.8%, despite a report that its US subsidiary had received approval from the US Food and Drug Administration for Banzel (rufinamide), an adjunctive treatment for seizures associated with Lennox-Gastaut syndrome in all patients aged four years or more. Banzel was in-licensed from Novartis. The pivotal study showed a 42.5% median reduction in frequency of drop attacks compared with a 1.4% median increase for placebo-treated patients. Eisai's share action was not aided by its completion of research alliance agreements that have been signed with TorreyPines Therapeutics of the USA since 2002 for the discovery of genes related to late-onset Alzheimer's disease. Following the completion, the companies signed a new agreement in which Eisai will purchase research data and assets gained from research activities conducted by TorreyPines. Eisai intends to utilize the alliance to create a next-generation treatment for Alzheimer's disease.