While you were sleeping: Merck buys Schering-Plough, stocks fall

Tuesday 10th March 2009

Merck & Co. will acquire rival drugmaker Schering-Plough Corp. for US$41.1 billion, gaining drugs in late-stage development as competition for its biggest-selling product looms.

New Jersey-based Merck's Singulair asthma treatment will have to compete with generic rivals from 2012. The transaction is the latest in a line of mega-mergers between drug companies running out of room to cut costs as medicines come off patent. In January, Pfizer Inc. agreed to buy Wyeth for $62 billion.

Roche Holding is in talks to acquire the 44% of Genentech it doesn't already own for US$95 a share, valuing the deal at US$46.7 billion, Reuters reported, citing people familiar with the situation.

Merck fell 7.9% to US$20.95, leading the Dow Jones Industrial Average lower. Stocks on Wall Street fell as a chorus of respected investors painted a gloomy picture of the economic outlook.

Warren Buffett, chairman of investment group Berkshire Hathaway, told CNBC that the US economy "has fallen off a cliff" and the risk now is that efforts to revive growth will stoke inflation. Buffett's comments follow a World Bank report that predicted the entire global economy will contract this year for the first time since WWII as worldwide trade falls.

The Dow dropped 1.2% to 6546.89 and the Standard & Poor's 500 Index fell 1% to 676.53. The Nasdaq Composite fell almost 2% to 1268.64 as Hewlett-Packard declined 5.3% to US$25.48. Bank of America jumped 17% to US$3.67 and General Motors climbed 16% to US$1.69.

The S&P 500 may slide to 600 or lower this year as the global recession worsens, Nouriel Roubini, a New York University professor, said in an interview with Bloomberg.

The yen weakened against the US dollar and the euro after Japan reported its first current-account deficit in 13 years amid a slump in exports. The deficit was 172.8 billion yen in January, according to the Ministry of Finance.

The yen fell to 98.8 per dollar from 98.25. It was at 124.5 per euro from 124.34. The euro declined to $1.26 per dollar from $1.2653.

The pound fell below $1.38 for the first time in two months, recently trading at $1.378 after the British government took a majority stake in Lloyds Banking Group Plc.

Lloyds climbed 4.1%, helping lift the FTSE 100 Index up 0.3% to 3542.4. Insurer Aviva led the FTSE higher, climbing 8.4%. Oil company BP rose 5.7% as the price of crude oil gained.

The Dow Jones Stoxx 600 index slipped about 1% to 157.97. HSBC Holdings fell 10% amid concerns about dwindling US revenue. The DAX 30 climbed 0.7% to 3692.03, led by a 10% gain for Postbank and a 3% increase for Adidas.

France's CAC 40 slipped 0.6% to 2519.29, paced by a 5.7% decline for AXA and a 4.3% drop for Societe Generale.

Copper snapped its gains, falling from a three-month high after the World Bank's report on the global outlook stoked concern demand for metals will wane.

Copper for three-month delivery fell 2.9% to US$3,614 a ton on the London Metal Exchange.

Gold futures for April delivery fell 2.6% to US$918 on the New York Mercantile.

Crude oil for April delivery was little changed at US$45.94 a barrel on the New York Mercantile Exchange after earlier rising as high as US$47.03 a barrel on the prospects of OPEC production cuts.

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