Japan stock market week to Nov 3, 2008

Tokyo rebounded in the week ended November 3 (four trading days because November 3 was a national holiday in Japan). The Nikkei 225 leapt 19.7%, regaining the 8,500 level at the close, while the Topix index advanced 16.2%. To some extent, the market's recovery appeared to be a technical bounceback. However, investor sentiment was brightened by certain measures taken by the Japanese government to cope with the financial crisis and economic downturn. It announced an economic stimulus package worth 26,900.0 billion yen ($271.9 billion) and the Bank of Japan decided to trim the interest rate by 0.2 percentage points. Meanwhile, many players remained cautious about Japanese first-half earnings reports which are due in the next few weeks, anticipating that export-oriented companies may revise down their full-year projections due to the recently-strong yen and weaker demand overseas. The pharmaceutical index was up 11.0%, underperforming the market.

Daiichi Sankyo was up 13.8% on encouraging earnings. The company reported a year-on-year decrease in revenue and earnings for the first half of the fiscal year ending March 2009 due to the impact of the yen's appreciation and an increase in costs and expenses. The results, however, were above plan. First-half turnover was down 8.4% to 406.3 billion yen and operating income fell 34.4% to 61.6 billion yen. Despite better-than-forecast figures, the company has lowered its full-year earnings guidance (maintaining sales forecast unchanged) assuming a stronger-than-previously-projected rate for the yen against the euro and a hike in SG&A expenses, including amortization for the acquisition of German biotechnology firm U3 pharma (Marketletter May 26). Global turnover of the angiotensin receptor blocker olmesartan (Benicar in the USA and Olmetec in Europe and Japan) in the first half increased 8.2% to 104.6 billion yen, while global revenue from levofloxacin (Cravit in Japan, Levaquin in the USA) fell 6.8% to 49.3 billion yen.

Astellas advanced 10.5% following its launch in Japan of Graceptor (tacrolimus hydrate), a modified-release formulation of Prograf, for the treatment of suppression of organ rejection and suppression of graft rejection and graft versus host disease in bone marrow transplantation. The company expects that once-daily Gracept will improve compliance with this more convenient dosing option and may help long-term outcomes in transplantation. The drug has been sold overseas under the brand name of Advagraf.