Any ideas why formatted text from DB, when echo-ed out in php loses its formatting, i.e. no new lines? Thanks!

Use nl2br().
New lines are ignored by browser. That's why you see all text without line breaks. nl2br() converts new lines to <br /> tags that are displayed as new lines in browsers.
If you want to display your text in <textarea>, you don't need to convert all new lines to <br />. Anyway, if you do it... you will see "<br />"s as text in new lines places.
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