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Japan Stocks

*The H1 reporting Japanese company is Eisai Co Ltd (ESALY), whose Nov. 1 results weren't reported here. I worked hard to understand the mistranslated English version of ESALY's conference call to make sense of the outlook. There are two key takeaways. First Eisai is a partner of other drug firms like Merck, Biogen, Purdue etc in R&D and it gains return on equity and free cash flow from their reimbursements. Secondly, it is a leader in providing drugs for Asian markets, notably China. This week the ribbon will be cut on a plant in Suzhou (China) which when fully operational will have as much production capacity as its main Japanese plant in Kawashima.

Focusing on these big picture matters helps overcome the total confusion about its phase II trials of BAN2401, and BACE1, for treating Alzheimer's disease, a problem in aging Japan and elsewhere. The results of the trial targeting beta amyloid proteins which began in 2014 are inconclusive except for people with a genetic factor ApoE4 which the trial (with Biogen) appears to help, slowing the decline in neurological acuity. The vast majority of Alzheimer's sufferers are not ApoE4 carriers. My own view is that every little bit helps but after this reports came out last month, ESALY stock lost 5.7%. There are other proteins at work in Alzheimer's and nabbing one may open the door to others, I think.

In other areas like cancer, hepatitis B, and circadian rhythm disorders, in-house research is paying off. Thanks to cross-licensing, ESALY in H1 achieved its first double-digit return on equity in 5 years. It also earned ¥45.4 bn in free cash flow, covering its debt and ¥150 dividend several times over. This is a very solid return. 

*Abhimanyu Sisodia writes from India about Nintendo, a stock he dotes upon which has fallen badly since we bought it at our India reporter's urging (and skepticism from Chris Loew in Japan). As our youngest reporter, Abhi dominates the youth electronics space. He writes:

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