FBI Inquiry into American Home Products Sparks Market Concerns

Strategic Insights -

A preliminary FBI inquiry into American Home Products (AHP), the fifth-largest U.S. drug maker, has triggered market concerns after reports emerged that the company may have lied to regulators or withheld information about the potentially fatal side effects of their diet drugs, Pondimin and Redux. The investigation comes as AHP faces civil lawsuits from millions of dieters who claim the company knew about the heart and lung problems caused by the drugs. Meanwhile, other companies, such as Sprint PCS, reported gains after announcing positive news.

Key Takeaways:

  • American Home Products (AHP) shares closed 5 percent lower on reports of an FBI inquiry into the company's diet drug sales.
  • The FBI is seeking to determine whether AHP officials lied to regulators or withheld information about the potentially fatal side effects of Pondimin and Redux.
  • AHP is facing civil lawsuits from millions of dieters who claim the company knew about the heart and lung problems caused by the drugs.
  • Sprint PCS shares gained 6 percent after announcing it expects to meet third-quarter new-customer projections, adding 2.2 million customers in the past three quarters.
  • Cummins Engine shares lost 7 percent after a sharp downward revision in August heavy-duty truck orders estimates, with a 30 percent dip year-over-year and an almost 20 percent sequential drop.
  • Oil stocks, including Chevron and Atlantic Richfield, continue to climb due to rising crude prices, with American Petroleum Institute's inventory report showing a larger-than-expected drop in oil stocks.
  • Drypers shares jumped 45 percent after announcing an expanded marketing agreement with Wal-Mart Stores to supply private-label diapers.

Statistics:

  • AHP shares closed 5 percent lower on Thursday.
  • The FBI inquiry is focused on AHP's diet drug sales, with officials investigating whether the company lied to regulators or withheld information.
  • Sprint PCS added 2.2 million customers in the past three quarters.
  • Cummins Engine estimates a 30 percent dip year-over-year and an almost 20 percent sequential drop in August heavy-duty truck orders.
  • Oil stocks, such as Chevron and Atlantic Richfield, have risen due to rising crude prices, with a larger-than-expected drop in oil stocks reported by the American Petroleum Institute.
  • Drypers shares jumped 45 percent on the news of the expanded marketing agreement with Wal-Mart Stores.

Sources:

  • "FBI Looking into American Home Products Diet Drug Cases: Officials" by Bloomberg News
  • "Sprint PCS Sees Strong Subscriptions Growth" by Reuters
  • "Cummins Engine Slumps as August Heavy Duty Orders Soar Lower Than Expected" by Zacks Investment Research
  • "Chevron Climbs 3.5% After Inventories Report" by The Wall Street Journal
  • "Drypers to Supply Wal-Mart Stores with Private-Label Diapers" by Bloomberg News