Japan stock market week toJan 14, 2008

Tokyo suffered a further setback in the week to January 14 (four trading days only because January 14 was a national holiday in Japan). The Nikkei 225 dropped 2.7% to close at the 14,100 level, the lowest close since end of November 2005, while the Topix index lost 1.1%. The market opened higher due to buying-back on weakness of financial, steel and shipping stocks but later lost upward momentum. Some investors found that Japanese stocks carried attractive price/earnings ratios due to their recent declines, but most of the players sat on sidelines due to concerns about the direction of the Japanese economy, possible recession in the USA and anticipated sub-prime loan-related losses of US financial companies. The pharmaceutical index rose 2.8%, significantly outperforming the market.

Toyama leapt 16.7%, on a report that it had commenced a Phase II clinical study in Japan of T-705 for the treatment of influenza, including H5N1 avian flu type. The compound has been designated as a priority review product by the Ministry of Health, Labor and Welfare. It has a different mode of action than Chugai's Tamiflu (oseltamivir) and is believed to inhibit RNA polymerase, an enzyme related to viral replication. T-705 is in a Phase I clinical trial in the USA.

Taisho advanced 4.2% after it signed a definite agreement (which replaces the previous letter of intent) with Pfizer regarding out-licensing of the Japanese firm's TS-032, a schizophrenia drug candidate currently in preclinical testing (Marketletter January 14). Based on the accord, Taisho will grant exclusive development and commercialization rights outside Japan for the compound to Pfizer and is to receive an initial payment of $22.0 million. Taisho will receive milestones and royalties payments later. TS-032 is a mGluR (metabotropic glutamate receptor) agonist which may provide a treatment option for central nervous system disorders. MGluR is expected to play a role in the transmission of glutamate and other substances in the brain.