Japan stock market week to Dec 4, 2006

Tokyo extended its previous week's rally in the reporting period to December 4. The Nikkei 225 gained 2.6%, recovering the 16,000 mark at the close, while the Topix index advanced 3.5%. The continued solid market performance reflected investors' favorable reaction to a report released mid-week showing that Japan's seasonally-adjusted industrial production in October increased 1.6% from the previous month, in contrast to a consensus estimate of a 0.6% decrease. Looking at the data, players were relieved that previous concerns that corporate earnings in the second half may not be strong because companies had issued conservative outlooks when they reported the first half results. Domestic demand-oriented issues including banks, retailing and construction met buying interests.

The pharmaceutical index inched up 0.9%, underperforming the market. Dainippon Sumitomo advanced 4.8%, despite its decision to discontinue a Phase II clinical study in Japan of AG-5216 for the treatment of depression and anxiety disorders and revise its domestic development plan including the optimal dose. AG-5216 was out-licensed to Swiss drug major Novartis, which had been undertaking Phase II clinical trials in the USA for the treatment of generalized anxiety disorder. The decision came following the review of clinical data by both companies.

Hisamitsu was up 2.1% after it reached agreement with Nippon Shinyaku to terminate the co-development of HFT-290 (fentanyl citrate), a tape for the palliative care of cancer patients at Phase III evaluation, originated by the former, and NS-126 (steroid) for allergic rhinitis and asthma on file by the latter. The decision is based on their plan to concentrate R&D resources on therapeutic areas of strength. Hisamitsu will continue developing HFT-290 independently. Nippon Shinyaku will be provided with global rights to HFT-290 and will develop it by itself with the cooperation of Hisamitsu. Nippon Shinyaku fell 2.5%.