The news at a glance
Wachovia: First-quarter loss stuns investors; Takeovers: Japanese buy biotech firm; Pharmaceuticals: A boost for Novartis’ bone drug; Trade: House stalls Colombia trade deal; Credit crisis: International action unlikely
Wachovia: First-quarter loss stuns investors
Wachovia, the fourth largest U.S. commercial bank, startled investors this week with a first-quarter loss of $393 million, said Eric Dash in The New York Times. The bank blamed “mounting housing losses,” coupled with an ill-timed acquisition of a big California mortgage lender. Wachovia bank said it would slash its quarterly dividend 41 percent, to 37.5 cents a share, and raise $7 billion in fresh capital by selling new common and preferred shares. “I know these actions are not without costs,” said Wachovia CEO Kennedy Thompson, “and I wish they were not necessary.”
Wachovia’s troubles “can be traced back to a single, mistaken deal: the purchase of Golden West Financial in 2006,” said David Weidner in MarketWatch.com. Analysts questioned the wisdom of the deal at the time, pointing out that Golden West specialized in adjustable-rate mortgages, which are defaulting in record numbers as they reset to rates that borrowers can’t afford. “Wachovia is now paying the price for its confidence” in Golden West’s ability to manage its exposure to high-risk mortgages.
Takeovers: Japanese buy biotech firm
U.S. biotech standout Millennium Pharmaceuticals last week accepted an $8.8 billion takeover bid from Japan’s Takeda Pharmaceutical. The deal “marks the second major U.S. biotech acquisition by a Japanese drug maker in the last few months.” Japan’s Eisai paid $3.9 billion for MGI Pharma in December. With its purchase, Takeda gains access to Millennium’s successful Velcade, a treatment for multiple myeloma that racked up
$800 million in sales last year.
Pharmaceuticals: A boost for Novartis’ bone drug
Novartis announced this week that an annual injection of its Reclast anti-osteoporosis drug is more effective than a rival’s once-a-day pill, said Anita Greil in The Wall Street Journal. Novartis said that Reclast outperformed Sanofi-Aventis’ Actonel in rebuilding bone mass in patients taking steroids. “Steroids are widely used to treat inflammatory conditions but can cause bone loss and osteoporosis.” Because drugs such as Reclast and Actonel “are poorly absorbed when taken with food,” researchers believe that injectable osteoporosis drugs have greater long-term potential.
Trade: House stalls Colombia trade deal
The House of Representatives last week “defied the White House and voted to indefinitely delay action on a free trade deal with Colombia,” said BBCnews.com. Bush had sent the agreement to Congress earlier in the week, asking that it be approved using the House’s “fast-track” rule, which requires a vote within 90 days. “The House voted instead to eliminate that rule and suspend action.” Democrats say they won’t approve the deal “until they are satisfied Colombia has done enough to stop violence against union organizers.”
Credit crisis: International action unlikely
A three-day meeting of the world’s senior economic officials ended this week with one thing clear, said Michael M. Phillips and Greg Ip in The Wall Street Journal: “There probably won’t be a joint international effort to quell the turmoil now gripping global financial markets.” Officials of the International Monetary Fund and the World Bank, meeting in Washington, called for greater international cooperation. But officials did not devise a plan for a coordinated response. The announcement came amid signs that the housing slowdown was spreading from the U.S. to Europe.