* Nikkei's downside supported by relief in China-U.S. trade talks - analyst
* Santen Pharma jumps on share buyback
* Pharmaceutical sector gains attention on individual news
By Ayai Tomisawa
TOKYO, Feb 21 (Reuters) - Japan's Nikkei retreated on Thursday as investors took a breather after a 3-day rally even as broader market losses were contained by optimism around U.S.-China trade talks.
The Nikkei share average dropped 0.4 percent to 21,350.19 in midmorning trade, after scaling more than a 2-month high of 21,494.85 on the previous day. The benchmark had risen 2.5 percent over the past three days.
"The Nikkei was nearing an important psychological resistance level of 21,500 so profit-taking makes sense," said Yutaka Miura, a senior technical analyst at Mizuho Securities. "Trade talks between the U.S. and China are giving relief to the market so the downside should be supported for a while."
On Tuesday, U.S. President Donald Trump said trade discussions with China were going well and suggested he was open to extending the deadline to complete the negotiations, saying March 1 was not a "magical" date.
Index-heavy exporters lost ground, with Daikin Industries shedding 1.6 percent, Fanuc sliding 0.8 percent and Nitto Denko declining 1.9 percent.
Elsewhere, company-specific news drove up activity in the pharmaceutical sector.
Santen Pharmaceutical jumped 5.6 percent after the company said it would buy back 8.14 million of its own shares, or 2 percent of shares outstanding, worth up to 14 billion yen.
Mitsubishi Tanabe Pharma Corp shed 3.4 percent after the company said Novartis Pharma has filed request for arbitration against the drugmaker linked to royalties for jointly-developed FTY720, a treatment for multiple sclerosis.
Biopharma company AnGes Inc remained untraded with a glut of buy orders after the Nikkei business daily reported that health ministry experts issued preliminary approvals for Collategene, a regenerative treatment for damaged arteries, a drug that AnGes has worked on since its founding in 1999. (here)
The firm would become the first Japanese company to receive approval for a treatment that regenerates blood vessels, the Nikkei said.
The stock is indicated to jump 16 percent to a daily-limit high of 735 yen.
The broader Topix declined 0.3 percent to 1,609.52. Declining issues outnumbered advancing ones 1,194 to 808. (Editing by Shri Navaratnam)