JAPAN FIRST TO MARKET

Research evidence excerpt

JAPAN FIRST TO MARKET

Asia Pacific Equity Research

Japan First to Market 10 July 2026

Top Stories

Pharmaceuticals: Earnings Outlook (Apr-Jun) (Seiji Wakao, Ph.D.)

Stock picks heading into a phase of sector reevaluation

Looking at pharmaceutical sector share price trends since Jan-Mar results, we note that the sector has been relatively weak

due to the concentration of funds in semiconductor and AI-related stocks. In addition, some companies announced guidance

that fell short of market expectations, while others have run out of short-term positive news flow, resulting in varying levels of

performance even within the sector. However, excluding the impact of patent expirations for individual products, we expect Apr-

Jun results to confirm strong fundamentals for the sector, which is not affected much by macroeconomic factors. There are also

several pipeline-related catalysts for the second half of the year, which we expect will trigger a reassessment of the sector. We

recommend companies with strong fundamentals and significant share price catalysts. Our picks among large-cap stocks are

Otsuka Holdings followed by Chugai Pharmaceutical, and among small and mid-cap stocks, Santen Pharmaceutical and

Sumitomo Pharma.

Food: Earnings Outlook (Apr-Jun) (Satoshi Fujiwara)

Poised to fight back against earlier rise in costs; expect environment to improve from 2H FY2026 to

FY2027

Food sector earnings are likely to be sluggish in the short term due to rising costs for packaging and other materials amid the

conflict in the Middle East (including Iran). However, we expect several companies to revise prices, starting with Yamazaki

Baking in July, and look for progress in offsetting higher costs from 2H FY2026. We need to watch the yen’s depreciation, but if