- The Washington Times - Friday, August 26, 2005

Pharmaceutical giant Merck & Co. Inc. said yesterday it may settle some of the thousands of lawsuits filed over its Vioxx painkiller after learning the number hit 4,951 this week.

It’s the first time the Whitehouse Station, N.J., drug manufacturer has said it will consider settling some cases instead of defending all of them in court.

The company said it would consider only those cases that involve plaintiffs who have died or were injured after taking Vioxx continuously for 18 months or longer.

Merck pulled the arthritis painkiller from the market last Sept. 30 after a company study linked the drug with increased risk of heart attacks or strokes for patients who took the drug 18 months or longer.

“The company has always said that every case presents a different set of facts. We will make a reasonable decision in how to proceed in defending each case,” said Kent Jarrell, spokesman for Merck’s Vioxx defense team.

None of the cases coming soon meets the criteria for a settlement, Mr. Jarrell said, adding that the defense team has no estimates on how many cases could be settled.

The company has no plans to enter into a global settlement, he said.

Shares of Merck closed at $27.66 on the New York Stock Exchange yesterday, down 40 cents from $28.06 on Aug. 19, when the company lost the first suit to go to trial.

In that verdict, Merck was forced to pay $253 million in punitive and other damages to the widow of a Texas man, Robert Ernst, who died in 2001 after taking Vioxx for eight months.

Merck plans to appeal the award, in which the punitive-damages payout is expected to shrink because Texas law has a $2 million cap on those awards.

The next Vioxx case starts Sept. 12 in Atlantic City, N.J. Merck’s defense team is seeking a 45-day delay, arguing in court documents the media attention of the Texas verdict has created an “unfair prejudice” against the company.

Another state case in Texas starts in October, and a federal case in New Orleans will start Nov. 28. Three other federal trials are slated for February, March and April.

Several industry analysts said after the Texas verdict that the company would have to settle some of its cases.

“We believe the company will have to put up some wins over the next three to six months, otherwise, we believe they may be forced to settle,” said Jami Rubin, an analyst with New York investment bank Morgan Stanley.

Analysts have estimated Merck’s legal liability over Vioxx could reach upward of $12 billion, “which implies ultimate settlement payouts in the $15 billion to $16 billion range,” said Ms. Rubin, rating the stock as “equal weight.”

Ms. Rubin does not own any Merck stock, but Morgan Stanley does business with the company.

The lawsuits will probably hurt Merck’s financial status, said Zach Wagner, analyst with St. Louis investment firm Edward Jones. Merck has set aside $675 million to fight the suits, but analysts have said the company may need more to pay for future verdicts.

“We do not expect Merck to grow over the next five years,” he said, citing Merck’s loss of sales from patent expirations, a “relatively thin” new drug pipeline and the Vioxx suits.

Mr. Wagner, who urged investors to sell their Merck stock, does not own stock of any company he covers, and Edward Jones has no banking relationship with Merck.

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