Sunday, November 7, 2004

Lawsuits threaten Merck's finances, reputation


Hundreds sue over drug company's Vioxx pain reliever

By Theresa Agovino
The Associated Press

NEW YORK - Already wounded by the withdrawal of its Vioxx pain reliever from the market, Merck & Co. must now contend with hundreds of lawsuits over the drug's side effects - lawsuits that threaten to further damage the company's finances and reputation.

Wall Street analysts are concerned about Merck's potential legal liability. This week, Standard & Poor's Corp. warned that it might downgrade its ratings on Merck's debt because of the huge payouts the company might be forced to make.

Merck withdrew Vioxx from the market Sept. 30 because the drug doubled the risk of heart attacks and strokes in patients taking it longer than 18 months. Merck's stock plunged nearly 27 percent and the company lost $28 billion in shareholder value after the announcement - partly in response to the loss of revenue from Merck's second-best-selling drug, but also because of the lawsuits, said Richard Evans, an analyst at Stanford C. Bernstein Research. He estimates Merck's legal costs could reach $12 billion.

A new analysis by Merrill Lynch concludes Merck's liability could be as high as $17.6 billion over the next decade or so. The estimate is based on the possibility of nearly 51,000 successful lawsuits with jury awards or settlements of $100,000 to $300,000 for patients claiming heart attacks or strokes, plus another $1 billion to $2 billion for nuisance lawsuits. That would be slightly offset by Merck's liability insurance of $650 million.

If plaintiffs win, and prove their allegation that Merck put profits before patients' welfare, the company's reputation will also suffer.

"This has a credibility cost. Merck's brand and stature are tarnished by this," said David Moskowitz, an analyst at Friedman, Billings, Ramsey.

Plaintiffs' lawyers said there have been at least 700 Vioxx-related lawsuits filed against Merck so far..




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Lawsuits threaten Merck's finances, reputation