Nikkei up 1 pct, led by Eisai, Tokyo Electron

TOKYO, May 14 (Reuters) The Nikkei average rose 0.97 percent on Monday as Eisai Co. Ltd. jumped after a U.S. court upheld a patent protecting the company's key drug, and Tokyo Electron Ltd.

climbed thanks to strong earnings.

Exporters such as Toyota Motor Corp. regained ground following an advance in stocks in the United States, one of the biggest markets for Japanese goods.

But Nippon Telegraph and Telephone Corp. slid after Japan's top fixed-line operator missed forecasts with a 7 percent fall in annual profit, hit by heavy marketing costs, and it projected virtually no growth for this year.

Zenshiro Mizuno, senior managing director at Marusan Securities, said the Nikkei gathered steam as worries about the U.S. economy receded after U.S. price data eased inflation concerns and spurred a rise in stocks.

''As investors put their focus on shares of companies benefiting from global economic growth, the direction of the Nikkei hinges on movements of overseas markets,'' Mizuno said, citing steel and non-ferrous metals shares as most popular among retail investors.

The Nikkei, which is chasing a rally in U.S. and Asian stock markets, could test the year's high of above 18,300 set in February if it gets a boost from corporate earnings reports and Japan's GDP data due out Thursday, he said.

Japan's earnings season will reach its peak this week, with Eisai reporting on Tuesday and Sony Corp. and Hitachi Ltd. on Wednesday.

The Nikkei was up 169.43 points at 17,723.15 at 0425 GMT. The broad TOPIX index added 0.81 percent to 1,737.09.

Eisai surged 11.2 percent to 6,150 yen, becoming the largest contributor to the Nikkei's rise. A U.S. court on Friday upheld a patent protecting Eisai's key Aciphex drug to treat acid reflux, ruling that it had been infringed by generic drug companies seeking to sell cheaper versions of the medicine.

Tokyo Electron was another boost to the Nikkei, gaining 5.1 percent to 8,670 yen. The Japanese chip gear maker reported on Friday a near doubling of annual profits to record levels and forecast a bigger-than-expected income this year.

Exporters recovered, with Toyota adding 2.7 percent to 7,340 yen and Kyocera Corp. rising 1.8 percent to 11,800 yen.

Shares of generic drug makers Sawai Pharmaceutical Co. Ltd and Towa Pharmaceutical Co Ltd. also gained after the Nikkei business daily reported on Sunday the Japanese government is considering cutting insurance coverage for branded medicine when a similar generic version is available.

Shares of Sumitomo Mitsui Financial Group Inc. T>(SMFG) and other big banks advanced after the Nikkei daily reported they would likely boost their dividend payouts for the year to March 2008.

SMFG rose 0.9 percent to 1.11 million yen, Mitsubishi UFJ Financial Group Inc. added 0.8 percent to 1.35 million yen and Mizuho Financial Group Inc. climbed 1.3 percent to 781,000 yen.

REUTERS PYB