Japan stock market week to Nov 27, 2006

Tokyo staged a modest rebound in the week to November 27 (four trading days because November 23 was a national holiday in Japan), in part due to the natural bounce-back of share prices from the recently steep correction. The Nikkei 225 gained 1.0% to close at the 15,800 level, while the Topix index was up 1.2%. At the beginning of the week,investors' willingness to participate positively was reduced due to the possibility that the government might terminate the provision of tax breaks for equity capital gains and dividend income around 2008. However, the market favored another report later in the week that the government plans to partially continue tax brakes on capital gains and dividend income to ease the negative impact on the market.

The pharmaceutical index went up 1.3%, slightly outperforming the market, likely reflecting a report that combined earnings of leading drug companies in the second half of the current fiscal year may firm up slightly. The Japanese pharmaceutical industry association compiled first-half earnings results of 23 drugmakers and said that the combined recurring income in the first half fell 2.2% to 663.0 billion yen ($5.7 billion) due to the negative impact of the drug reimbursement price cut and a hike in R&D expenses. However, the industry association finds that the combined recurring income for the full year is forecast to edge up 0.2% to 1,280.0 billion yen on a sales rise of 1.8%.

Eisai advanced 2.3%, reflecting that its UK subsidiary received a positive opinion for marketing approval of the anti-epileptic agent Inovelon (rufinamide) for adjunctive therapy in Lennox-Gastaut Syndrome from the Committee for Medicinal Products for Human Use (CHMP). Eisai submitted the Marketing Authorization Application in March 2005. Assuming an estimated 11,000 patients in 10 European countries, Eisai projects that Inovelon will achieve 3.0 billion yen revenues in Europe at peak. Eisai's share performance was also assisted by the announcement that it has established a new pharmaceutical marketing subsidiary in Portugal for the scheduled start of the activities in the fiscal year ending March 2008. The subsidiary plans to launch neurology products including the anti-epileptic drug Zonegran (zonisamide), Inovelon and non-opioid severe chronic pain agent Prialt.