MRK Merck and Co Inc

   (FROM THE WALL STREET JOURNAL 1/16/16) 
   By Peter Loftus 

The painkiller Vioxx continues to pain Merck & Co. finances, more than 11 years after the company yanked the drug from the market because it increased users' risk of heart attacks and strokes.

Merck said on Friday it agreed to pay $830 million to resolve a class-action lawsuit brought by shareholders who alleged the drugmaker and its executives made false and misleading statements about the safety of Vioxx between its introduction in 1999 and its market withdrawal in 2004.

The shareholders alleged they paid inflated prices for Merck shares because of the company's conduct. Merck's market capitalization plunged more than $37 billion in the month after the company stopped selling Vioxx.

The latest pact brings Merck's total payouts to settle Vioxx-safety-related litigation to at least $6 billion. This excludes Merck's own legal-defense costs. Some Vioxx-related litigation is pending.

Merck, which is based in Kenilworth, N.J., said on Friday the settlement of the shareholders' lawsuit doesn't constitute an admission of liability or wrongdoing by the company or individual executives named as defendants in the case. It will pay the $830 million to people seeking damages for share purchases made between May 1999 and October 2004.

Merck Chief Executive Kenneth Frazier, who previously served as the company's general counsel, was initially named as one of the individual defendants in the lawsuit, but he was dismissed as a defendant in 2011.

Shareholders including individuals and labor-union benefit funds filed Vioxx-related securities lawsuits against Merck and certain former and current executives beginning in 2003; the suits were consolidated into one case overseen by a federal judge in New Jersey in 2005 and formally certified as a class action in 2013.

The shareholders alleged that Merck was aware of Vioxx's cardiovascular safety risks from studies before the drug reached the market, and then tried to minimize the risks as they began to emerge publicly while the drug was on the market.

Merck denied the allegations in court documents. The case was kept alive in 2010 when the U.S. Supreme Court ruled unanimously that investors didn't wait too long to file the Vioxx securities lawsuits, as Merck had contested.

An attorney for the shareholders declined to comment on the settlement.

Some shareholder lawsuits aren't part of the settlement, though a Merck spokeswoman said they may opt in.

In addition to the $830 million, Merck will pay plaintiff attorneys' fees and expenses. Merck said it would book a charge of $680 million for the fourth quarter of 2015 to cover its cash payment for the settlement, with insurance covering the rest. Its shares fell 1% to $51.14 at 4 p.m. in New York trading on Friday.

The bulk of Merck's Vioxx-related costs came from its 2007 agreement to pay $4.85 billion to settle thousands of product-liability lawsuits alleging that patients' use of Vioxx caused heart attacks and strokes, and that Merck failed to properly warn people of the risks. Merck didn't admit liability in that settlement.

In addition, Merck agreed in 2011 to pay $950 million to resolve allegations by the U.S. Justice Department and state governments that the company deceived the government about the safety of Vioxx, and marketed it for uses not included in the prescribing label approved by the Food and Drug Administration.

Merck recorded more than $11 billion in Vioxx sales during the drug's years on the market.

As part of the 2011 settlement, Merck pleaded guilty to a misdemeanor criminal violation of a federal drug law, admitting that it promoted Vioxx to treat rheumatoid arthritis before that use was approved by the FDA. Merck didn't admit liability or wrongdoing in connection with the civil allegations in that settlement.

(END) Dow Jones Newswires

January 16, 2016 02:47 ET (07:47 GMT)

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