- FDA panel rejects Arena's diet drug. An FDA advisory panel dealt Arena Pharmaceuticals (ARNA) a heavy blow, rejecting its proposed obesity drug, lorcaserin, on concerns the drug didn't work well and carried potential safety problems. The FDA will make a final decision on the drug on Oct. 22, and will likely follow the panel's recommendation. To make matters worse, Arena may face investor lawsuits for failing to disclose the drug caused cancer in rats, information which was only revealed in briefing documents prepared by the FDA this week. Pharmaceutical firms have been drawn to the potential blockbuster profits of weight-loss drugs, but have struggled to get FDA clearance; earlier this week, an advisory panel split 8-8 on whether to approve a diet drug from Abbott Laboratories (ABT), and Vivus' (VVUS) drug was rejected by the panel in July. Shares of rival Orexigen (OREX), which also has a diet drug under review, rose 38% yesterday; shares of Arena dropped 42% in after-hours trading.
- J&J moves to buy out Crucell. Johnson & Johnson (JNJ) announced it's in advanced talks to buy the shares of Crucell (CRXL) it doesn't already own for around €1.75B ($2.3B) in cash, or €24.75/share. The offer is a 58% premium to Crucell's closing price yesterday in Amsterdam. Full control of the Dutch company, in which J&J currently holds an 18% stake, would strengthen J&J's ability to discover, make and sell vaccines, while Crucell would benefit from J&J's experience in developing and marketing pharmaceutical products. Premarket: CRXL +54% (7:00 ET).
- Couche-Tard goes hostile. Alimentation Couche-Tard (OTCPK:ANCUF) is making a hostile $38.50/share bid for Casey's General Stores (CASY), after its buyout offer of the same amount was rejected last week. To win over investors, Couche-Tard issued an open letter to Casey's shareholders reminding them that 7-Eleven, which has held discussions with Casey's, hasn't made a formal offer and may not come through. Couche-Tard also said it's willing to raise its price. Casey's will hold its annual meeting next week, and Couche-Tard has nominated eight directors to replace Casey's board.
- Tech firms near settlements. Some of the biggest technology firms in the U.S. are in advanced talks with the Department of Justice to avoid an antitrust suit over whether the companies colluded on wages and agreed not to steal employees from one another. The talks are still fluid, sources said, but there's a strong incentive for both sides to settle before the case goes to trial, as the Justice Department may have a hard time proving its case while tech firms are wary of even chancing a government win, which could expose them to a wave of lawsuits from private investors. The companies include such heavyweights as Google (GOOG), Apple (AAPL), Adobe (ADBE), Intuit (INTU) and Disney's (DIS) Pixar.
- Novell in talks to sell itself. Novell (NOVL) is reportedly in advanced talks to sell its Linux operating system business to VMware (VMW) and to sell some or all of its remaining assets, including its NetWare network operating system, to private equity firm Attachmate. Though negotiations are in a late stage, they are being slowed by several factors, including disagreement between Novell and VMware on the valuation of the Linux business and determining how to divide Novell's sales force and patents.
- Warren to set up consumer protection agency. Elizabeth Warren has accepted the job of setting up the Consumer Financial Protection Bureau, declaring the time for financial "tricks and traps" is over. Warren will set up the agency but not run it once it's established; this workaround allowed Obama to sidestep the congressional confirmation process, as Republicans could have tried to block Warren's nomination.
- RBS to start Chinese securities firm. Royal Bank of Scotland (RBS) has reportedly reached a deal to start a Chinese securities firm, after signing a memorandum of understanding with a local partner and filing for approval from the China Securities Regulatory Commission. The deal isn't final and RBS' partner couldn't be identified. However, sources say it's likely the deal will go forward, allowing RBS to manage domestic equity sales in China and boost its returns.
- Mixed news from RIM. Research In Motion (RIMM) beat earnings expectations yesterday (see details below), but the news wasn't all good. Despite growth in quarterly profit and revenue, the company added fewer new subscribers than it had expected, a sign of the tough competition BlackBerry faces from Apple (AAPL) and devices based on Google's (GOOG) Android operating software. Co-CEO Jim Balsillie said subscriber growth was also hurt by concerns local service might be disrupted in places like India and the United Arab Emirates over security issues. RIM is hoping to see stronger sales and subscriber gains in Q3, when its new Torch model rolls out in more markets, but analysts warn initial sales of the device have been weak.
- U.S. poverty climbs to 15-year high. The recession pushed more families below the poverty line in 2009, raising the U.S. poverty rate to 14.3% from 13.2%, according to a Census Bureau report released yesterday. The fact that the country's poverty rate is now at a 15-year high, and unemployment near a 26-year high, will likely intensify the ongoing debate among lawmakers about the effectiveness of increased spending to reduce unemployment.
- Countrywide case to go to trial. The SEC received court approval to take former Countrywide CEO Angelo Mozilo and two other former Countrywide executives to trial. The SEC has accused Mozilo and the other two executives of failing to disclose the true state of Countrywide's deteriorating mortgage portfolio, and the case is one of the highest profile enforcement actions to come out of the recent financial crisis.
- BOJ under growing pressure to act. The Bank of Japan, a notoriously conservative central bank, took the unusual step yesterday of allowing the estimated $21B generated by the government's intervention in currency markets to remain in the banking system. Usually, the money generated by an intervention is taken out by a central bank through daily money market operations; the decision to leave the money untouched essentially gives Japan's economy another boost. However, pressure is increasing on the bank to take further action and bolder steps to reinvigorate Japanese growth.
Earnings: Thursday After Close
- Oracle (ORCL): FQ1 EPS of $0.42 beats by $0.05. Revenue of $7.6B (+49.9%) vs. $7.3B. Shares +2.6% AH. (PR)
- Research In Motion (RIMM): Q2 EPS of $1.46 beats by $0.11. Revenue of $4.6B (+31.1%) vs. $4.5B. Shares +6.7% AH. (PR, earnings call transcript)
- In Asia, Japan +1.2% to 9626. Hong Kong +1.3% to 21971. China -0.1% to 2599. India +0.9% to 19595.
- In Europe, at midday, London +0.9%. Paris +1.0%. Frankfurt +0.8%.
- Futures: Dow +0.7%. S&P +0.6%. Nasdaq +0.5%. Crude +0.8% to $75.17. Gold +0.6% to $1281.50.
Friday's Economic Calendar
- 8:30 Consumer Price Index
8:30 Real Earnings
9:30 Fed's Tarullo: 'Regulating the Shadow Banking System'
9:55 Reuters/UofM Consumer Sentiment
Seeking Alpha's Market Currents team contributed to this post.
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