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THE AFTERNOON REPORT
February 28, 2005 -- 12:59 p.m. EST
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Amid complaints that the FDA isn't doing enough to ensure drug safety, a multiple-sclerosis drug it rushed to market last year was pulled from pharmacy shelves due to safety concerns.
More Drug Problems
By MARK GONGLOFF
THE WALL STREET JOURNAL ONLINE
Amid complaints that the Food & Drug Administration isn't doing enough to ensure that drugs sold in the U.S. are safe, a multiple-sclerosis drug it rushed to market last year was pulled from pharmacy shelves today due to safety concerns.
Biogen Idec and Irish drug maker Elan pulled their jointly produced drug Tysabri, saying that one patient died and another developed an often-fatal disease in combining Tysabri and Avonex, another Biogen MS drug. The companies said that patients using Tysabri alone or Avonex alone had no problems. And patients in the trial being treated for Crohn's disease or rheumatoid arthritis had no problems. But one MS patient using the drugs in combination developed and died from a rare disease of the central nervous system, and a second patient, still alive, may have contracted the disease.
Tysabri was expected to be a blockbuster for Biogen. When it was approved by the FDA last November, after tests showed it slashed the chances of an MS relapse, the company said its sales could match those of Avonex, which last year generated $1.4 billion in revenue, or nearly two-thirds of the company's total sales. Tysabri generated just $3.1 million in sales in the fourth quarter for Biogen and about twice that amount for Elan, but both companies had high hopes for the drug. A host of analysts said it was still too early to tell how much the drug's withdrawal would hurt both companies, but investors weren't waiting around to find out. Shares of Biogen plunged some 41% to their lowest level in more than a year. Shares of the smaller Elan were crushed, falling nearly 69%.
Meanwhile, the FDA got more egg on its face, even as it was still trying to wipe away the embarrassment of a host of recent drug-safety concerns. Last year's revelation that Vioxx, a best-selling arthritis-pain drug, raised risks of heart problems and strokes was the most glaring example. It led to calls for changes at the FDA, including the establishment of an independent drug-safety review board. The agency has taken some steps to respond to its critics, who say it still has far to go. Those complaints may get louder today.
Deadly Attack in Iraq
In what was the deadliest single attack of the nearly two-year-old Iraq war, a suicide bomber killed at least 115 Iraqis and wounded 132 more in Hillah, a town south of Baghdad. Most of the victims were national guard recruits, standing in line waiting for medical checkups. The attack came a day after the announcement of the capture in Syria of one of Saddam Hussein's half-brothers, believed to be a leader of the insurgency. It also came after arrests of other key insurgents and claims by the Iraqi government that it was close to capturing Jordanian terrorist Abu Musab al-Zarqawi. But observers warned that a decentralized insurgency could survive such losses, and it's certainly kept up the violence in recent days.
Consumer Incomes Drop, Spending Flat
What a difference Bill Gates makes. Thanks to Microsoft's one-time dividend payout of $32 billion in December, personal income in the U.S. jumped 3.7%, the biggest monthly gain on record. But the payback was hell; income fell 2.3% in January, the worst drop in 11 years, according to a Commerce Department report. Excluding the Microsoft effect, income rose a healthy 0.5%. Personal spending, though, was nearly unchanged, dipping by less than 0.1%, after a 0.8% jump in December. Consumer spending is the life-blood of the U.S. economy, making up more than two-thirds of gross domestic product. Some economists have been anxious about the future of consumer spending, pointing to ballooning energy prices, rising interest rates, high debt and low savings. But consumers have continued to spend, thanks in part to steady income growth. "Consumers clearly have the wherewithal to maintain the solid growth in spending that is likely to remain a key contributor to continued healthy economic growth," David Resler, chief economist at Nomura Securities, said in a note.
A healthy housing market has played a big role in keeping consumers happy in recent years, with soaring home equity helping to offset lower savings rates. Pessimistic observers have been waiting for the market to fall for years, but super-low rates have kept it humming. It got a bit of a scare today, however, when the Commerce Department, in a separate report, said sales of new homes fell 9.2% to an annualized rate of 1.106 million units last month after an upwardly revised 5.2% gain in December. The inventory of unsold homes surged to its highest level on record. Economists were quick to blame the dip on January's bad weather, but Mother Nature hasn't been much kinder this month. Still, most economists expected the market to bounce back, given the low level of mortgage rates and recent income gains. "The housing market remains on solid ground," Sherry Cooper, chief economist at BMO Nesbitt Burns, said in a note.
Lebanese Prime Minister Resigns
Lebanon's prime minister resigned today, the latest repercussion of the assassination of former Prime Minister Rafik Hariri earlier this month. Mr. Hariri had become a vocal opponent of the Lebanese government and of Syria's occupation of Lebanese land. His assassination led to widespread protests throughout the country and an international outcry for Syria to withdraw its troops from Lebanon. It also put pressure on the Syrian-friendly government.
Stocks Dip
After three straight positive trading days, U.S. stocks slid this morning, weighed down by mixed economic news and stubbornly high oil prices. The Dow lost about 73 points, with about 779 million shares trading on the Big Board. General Motors shares fell hard after a downgrade by Banc of America Securities analysts. The S&P 500 fell about 9 points. Shares of Federated Department Stores rose nearly 2% on the news it was buying May, while May shares fell nearly 2%. Most drug makers were having a bad day, feeling the pain of Biogen and Elan, but Chiron and Teva Pharmaceuticals, which make competing MS drugs, thrived. And shares of Mylan Laboratories rose nearly 3% on the news that it was walking away from its $4 billion offer to buy King Pharmaceuticals, whose shares plunged nearly 7%. The Nasdaq fell about 18 points. Crude-oil futures climbed again to nearly $52 a barrel on the New York Mercantile Exchange, with a Nor'easter threatening to blast much of the eastern U.S. with cold and snow. The U.S. dollar weakened against the Japanese yen and the euro. Treasury bond prices edged lower, sending interest rates higher. Major European markets rose, as did most major Asian markets.
Ebbers Takes the Stand
Former WorldCom CEO Bernard Ebbers took the stand in his own defense today. Federal prosecutors allege that he orchestrated $11 billion in accounting fraud, the biggest in U.S. corporate history, to keep WorldCom's stock afloat. Mr. Ebbers denies the charges. Sounding a bit as if he'd been coached by Donald Rumsfeld, Mr. Ebbers today testified: "I know what I don't know. I don't, to this day, know technology. I don't know finance and accounting.'' He said his schooling in those subjects consisted of an introductory economics class in college, and he said he wasn't a good student. Former WorldCom CFO Scott Sullivan, who has pleaded guilty to fraud charges, had testified that Mr. Ebbers instructed him to cook the books at the company. Mr. Ebbers's defense alleges that all of the fraud was orchestrated and executed by Mr. Sullivan, and Mr. Ebbers today described Mr. Sullivan as a wiz with numbers. The decision to put Mr. Ebbers on the stand may be seen as a sign of desperation; or it could be that his attorneys are confident that the charismatic Mr. Ebbers will be able to convince the jury of his innocence. He is certain to face intense cross-examination later this week.
Supreme Court to Hear Class-Action Venue Case
Just days after President Bush signed a law requiring that many class-action lawsuits be filed in federal court, the Supreme Court agreed to take a case that could challenge part of the basis for that law. The new law's supporters say it will keep unscrupulous lawyers from shopping for favorable jurisdictions in which to file frivolous lawsuits. Its detractors say it will shield companies from having to pay the consequences for faulty or harmful products or services. The case to be heard by the Supreme Court doesn't involve class-action suits, but it does involve the question of whether a company doing business in a state can be considered a "citizen" of that state. The suit, brought by tenants claiming they were harmed by toxic mold, was brought in Virginia against their Texas-based landlord. The Fourth Circuit Court of Appeals ruled that a lawsuit in Virginia state court was proper because the defendant corporation had enough ties to the state to be considered a "citizen" of it. If the Supreme Court upholds that decision, it could challenge part of the basis for the new class-action law, which claims that it's unfair to sue a company in a state where it's not a citizen.
http://online.wsj.com/afternoonreport__________________________________
TODAY'S MARKETS
Stocks skidded Monday on a sharp selloff in Elan and Biogen over their drug withdrawal. Some drug-stock competitors surged on the news. GM sank 4.4% after an analyst downgrade.
http://online.wsj.com/article/0,,SB1109592...tml?mod=djemTARBush's campaign to revamp Social Security is just the boldest stroke in a much broader effort: To rewrite the government's social contract with citizens that was born of Roosevelt's New Deal and expanded by Johnson's Great Society.
http://online.wsj.com/article/0,,SB1109552...tml?mod=djemTARThe giant bomb blast that killed Lebanon's former prime minister in Beirut shattered more than the city's calm. It also unleashed a deep-seated anger over Lebanon's occupation by a foreign power: Syria.
http://online.wsj.com/article/0,,SB1109549...tml?mod=djemTARFederated will acquire May in a deal valued at about $11 billion. The boards of both retailers have approved the agreement.
http://online.wsj.com/article/0,,SB1109545...tml?mod=djemTAR