Formula plant shocking
Agency chief also acknowledges to House panel they were slow to respond
The Abbott Nutrition plant in Michigan that was shut down in February, sparking a widespread baby formula shortage crisis, had a leaking roof, water pooled on the floor and cracks in key production equipment that allowed bacteria to get in and persist, Dr. Robert Califf, the head of the Food and Drug Administration, told a House panel Wednesday.
He detailed “egregiously unsanitary” conditions in the Sturgis, Michigan, plant to lawmakers during a hearing, but he also acknowledged his agency was too slow in response.
“Frankly, the inspection results were shocking,” Califf said. “We had no confidence in the integrity of the quality program at the facility,” noting the agency worked with Justice Department officials to dictate steps the company needed to take to turn the facility around.
That effort is expected to result in the facility reopening June4, Jonathon Hamilton, an Abbott spokesperson, said, with some formula expected to begin rolling out June 20. Officials hope new shipments will reach store shelves within six to eight weeks, although resumption of full production at the plant will take longer.
Abbott has replaced the leaking roof at the plant as well as the floor, Califf said.
Members of the House Energy and Commerce Subcommittee on Oversight and Investigations pushed back against the agency's assertions that it was difficult to recognize in real time the extent of the contamination and the resulting nationwide breakdown in supplies. The Abbott plant had produced one-quarter of the nation's infant formula, including formulas tailored for people with specialized nutritional needs.
“There was a life-and-death crisis in front of the FDA, but they failed to see the severity of the situations,” said Rep. Cathy McMorris Rodgers, R-Wash. “We must solve the immediate issue and also ensure that we are taking action so this situation never happens again.”
In opening remarks, Christopher Calamari, an Abbott Nutrition senior vice president, said little about conditions at the Michigan factory but said he was “deeply, deeply sorry” about the shortages. He said the company was coordinating 50 flights per week from its formula plant in Ireland to a dozen U.S. airports to help bolster supplies.
“We are committed to ensuring that this never happens again,” Calamari said, noting that the company will add redundancy to its operations.
He later said the company is verifying that every step is in place to ensure the quality checks are working throughout the 700,000-squarefoot facility in a sustainable way.
The agency discovered a battery of problems at the plant in the fall. At the same time, reports began emerging of babies who had been hospitalized with a rare bacteria. Cronobacter sakazakii, which can be deadly to infants, was found in four babies who had consumed formula from the plant, according to the Centers for Disease Control and Prevention.
Testimony during the hearing made it clear that the FDA took months to try to match the bacteria that sickened the first baby to bacteria that was later found throughout the plant.
Cronobacter strains related to two of the babies did not match samples of the bacteria later taken at the plant, although Califf said the agency considers those results “inconclusive” given shortcomings with genome sequencing.
The illnesses set the recall in motion. The plant shutdown began Feb. 17 and led to shortages that have left parents struggling, driving hundreds of miles to find baby formula and, at times, improvising to feed hungry infants.
Stocks up as Fed minutes show thinking on rates
Stocks ended broadly higher on Wall Street on Wednesday after minutes from the Federal Reserve's most recent meeting signaled the central bank intends to move “expeditiously” to raise interest rates back to more neutral levels in its fight to tame inflation..
The S&P 500 rose 37.25 points to 3,978.73. The Dow gained 191.66 points to 32,120.28. The Nasdaq rose
170.29 points to 11,434.74.
Small-company stocks rose far more than the rest of the market, a sign of bullishness on the economy. The Russell 2000 gained 34.34 points, or 2%, to 1,799.16.
The yield on the 10-year Treasury, which helps set mortgage rates, slipped to 2.75% from 2.76% late Tuesday.
Retailers had some of the strongest gains after getting beaten down in recent days over concerns that soaring inflation was eating into their profits. Nordstrom reported higher sales and raised its profit forecast. It's stock jumped 14%. Technology stocks also helped lift the market. Microsoft rose 1.1%.
Several companies made strong gains after reporting solid financial results and giving investors strong forecasts, despite grappling with persistently rising inflation.
TurboTax software maker Intuit rose 8.2% after raising its profit and revenue forecasts for the year. Caleres, the owner of Famous Footwear, surged 29.9% after also raising its profit forecasts for the year.
Homebuilder Toll Brothers rose 8% after reporting strong profits just a day after that sector stumbled amid a disappointing government report on newly built home sales.
Wendy's jumped 9.8% after Trian Fund Management, which already owns 19% of the company, said it was considering buying the rest of the company.
Musk's revised Twitter bid requires more cash
Elon Musk is dropping plans to partially fund his purchase of Twitter Inc. with a margin loan tied to his Tesla Inc. stake and increasing the size of the deal's equity component to $33.5 billion.
Musk will provide an additional $6.25 billion in equity financing for the $44 billion buyout, according to a regulatory filing Wednesday. That's enough to eliminate the margin loan of the same size, which had already been reduced earlier this month.
The new structure could reduce the risk of the deal for both Musk and his lenders, particularly given the recent slide in Tesla's stock price. The electric carmaker has sunk about 40% since Musk first announced his stake in Twitter in early April. An extended slump raised the prospect that he wouldn't have enough unpledged shares to cover the margin loan.
Musk, Tesla's co-founder, is still on the hook for coming up with the full $33.5 billion equity component. But he can turn to others for help.
Musk is seeking additional financing commitments, including having discussions with Twitter co-founder Jack Dorsey and other investors about rolling their equity into the private company, according to the latest filing. He already announced earlier this month that he secured $7.1 billion of equity commitments from investors including billionaire Larry Ellison, Sequoia Capital and Binance.
Bloomberg reported earlier this month that Musk had received commitments for another $1 billion in equity since that initial round, and his advisers were soliciting interest from potential investors for as much as $6 billion in preferred equity financing.