Japan stock market week to Oct 16, 2006

Tokyo saw a continued advance in the week ended October 16, helped by investors' recognition that it has been lagging behind the strength of global markets. The Nikkei 225 ended 1.6% higher to close at the 16,600 mark, the highest since May 11, while the Topix index gained 0.7%. At the beginning of the review week investors took a wait-and-see stance, due to uncertainties about North Korea's nuclear test program, but they resumed buying of international blue chips later in the week looking at the depreciation of the yen against the US dollar and the consequent expectation that high-technology, export-oriented companies may raise their full-year earnings projections at the time of reporting first-half results.

The pharmaceutical index moved up 1.0% but slightly underperformed the market. Nippon Shinyaku rose 1.1%, reflecting its announcement of an upward revision of forecast earnings for the first half of the fiscal year ending March 2007 thanks to better than initially projected turnover of prescription drugs and foodstuff and lower-than-planned expenses because of cost containment efforts. First-half turnover is now forecast to be up 1% to 26.8 billion yen ($225.2 million), or 250.0 million yen more than the original forecast. Operating income is forecast at 1.5 billion yen, or 400.0 million yen higher than the initial projection, representing a year-on-year 34% fall, more moderate than the originally estimated 52% plunge.

Eisai edged up 0.5%, after it announced that it has received a court decision in response to summary judgment motions for Aciphex (rabeprazole sodium) for the treatment duodenal ulcers and gastroesophageal reflux disease. The Southern District Court of New York provided the summary judgment regarding the validity of the drug's composition-of-matter patent in its ruling, while the court reserved ruling on the enforceability arguments until after the trial. Eisai's share activity was also assisted by a report that its US research subsidiary, Eisai Medical Research, and marketing partner Pfizer, had received approval from the Food and Drug Administration of a supplemental New Drug Application for Aricept (donepezil) in the treatment of severe Alzheimer's disease (see page 20). Based on the approval, Aricept becomes the first and only prescription drug to treat the full spectrum of mild, moderate and severe AD conditions.