The news at a glance
Merck: Snapping up a smaller rival; Wall Street: Firms fined for cheating; Drugmakers: A setback in the Supreme Court; Investment banking: Merrill blindsided by losses; International banking: Lloyds gets government help
Merck: Snapping up a smaller rivalU.S. drugmaking giant Merck this week agreed to acquire smaller rival Schering-Plough for $41.1 billion, said Aude Lagorce in Marketwatch.com. Merck is looking “to expand its presence in emerging markets and bolster its pipeline of potential new medicines.” The two companies already jointly market the anti-cholesterol drugs Zetia and Vytorin, whose sales have plunged “on concerns about their effectiveness.” Merck said that with the addition of drugs under study at Schering-Plough, the company would have 18 treatments in the late stages of testing, up from nine.
It’s now official—2009 is the year of big pharmaceutical mergers, said Shannon Pettypiece in Bloomberg.com. The Merck-Schering tie-up comes less than two months after Pfizer, the world’s biggest drugmaker, bought Wyeth for $68 billion. The two big deals “may intensify pressure on other companies, including Bristol-Myers Squibb, to combine research as big-selling products lose patent protection.” The dynamics of the drug business make more mega-mergers inevitable, analysts say, because drug revenues have leveled off and the companies have taken cost-cutting as far as it can go.
Wall Street: Firms fined for cheatingFourteen of Wall Street’s biggest stock-trading firms agreed last week to pay $70 million to settle charges of cheating their customers, said Diana Henriques in The New York Times. The companies involved did not admit or deny wrongdoing, but regulators said the firms traded ahead of customers to get a more advantageous price, or “timed their own trades to seize profits.” The firms involved in the settlement include such “well-known Wall Street names” as E-Trade, Goldman Sachs, and TD Ameritrade.
Drugmakers: A setback in the Supreme CourtThe U.S. Supreme Court ruled 6–3 last week that prescription warning labels do not shield companies from lawsuits if their product causes harm, said Warren Richey in The Christian Science Monitor. The case involved a professional guitarist who lost her right arm after it was improperly injected with the Wyeth anti-nausea drug Phenergan. At the time, Wyeth was aware that 20 other Phenergan patients had lost limbs after the drug was improperly administered. The ruling suggests that the court is tilting “toward consumer protection and away from business interests.”
Investment banking: Merrill blindsided by lossesUnauthorized trading by employees cost Merrill Lynch hundreds of millions of dollars last year, said Louise Story and Eric Dash in The New York Times. But shareholders of Bank of America, which bought Merrill last year, “did not learn of that gaping hole until after they approved of the merger of the two companies” in December—and after Merrill paid out $3.6 billion in employee bonuses. The losses illustrate the challenge that Bank of America Chairman Kenneth Lewis faces in reining in Merrill’s freewheeling trading culture.
International banking: Lloyds gets government helpLloyds Bank, its balance sheet groaning under the weight of nonpaying mortgages and other toxic debt, agreed to accept British government aid in return for a stake in the company of up to 65 percent, said George Parker in the Financial Times. The British government said it would insure up to $365 billion in assets held by Lloyds. The bank ran into trouble following its government-assisted takeover of Scottish mortgage bank HBOS.