Japan stock market week to Feb 20, 2006

Tokyo saw another pullback in the week ended February 20, following seesaw movements. The Nikkei 225 fell 2.8%, to close at the 15,400 level, while the Topix index was down 2.8%. Foreign investors restricted their buying due to concerns about higher interest rates in global markets and a lack of new buying incentives, and this caused domestic investors to sit on the sidelines. The market received no encouragement from a report that Japan's seasonally-adjusted real Gross Domestic Product grew at an annualized rate of 5.5% in the October-December quarter of 2005, with balanced growth of consumer spending, capital expenditures and exports. The reported figure was above the consensus projection of 5% growth but positive data had been factored in by the market. Domestic demand-oriented issues such as construction and real estate suffered losses.

The pharmaceutical index declined 3.0%, slightly underperforming the market. Daiichi Sankyo edged down 0.2%, despite its announcement that it will continue to supply the active ingredient for the hyperlipidemia agent Pravachol (pravastatin) to licensee Bristol-Myers Squibb after the drug's exclusive marketing period in USA is terminated on April 20. B-MS has reached agreement with Watson Pharmaceuticals for the sale of pravastatin's generic versions in that market.

Takeda inched down 0.3%, even though it concluded an exclusive agreement with US firm Affymax to develop and commercialize in Japan the latter's Hematide for the treatment of anemia in chronic kidney disease and cancer patients (Marketletter February 20). Hematide is a synthetic peptide-based, new-generation erythropoiesis-stimulating agent and is designed to stimulate red blood cell production. Compared to therapeutic proteins, Hematide has the potential advantages of an uncomplicated chemical synthesis and a simple dosing schedule of once-monthly administration. Phase II clinical trials are underway in the USA and Europe, while Takeda will commence a Phase I study in Japan. Takeda will make Affymax a $17.0 million up-front payment, purchase $10.0 million of Affymax' stock and provide milestones totaling $75.0 million.