May 27, 2009 - Supreme Court Agrees to Hear Merck Appeal
The U.S. Supreme Court said yesterday that it would hear an appeal by Merck & Co. Inc. seeking to block a shareholders' lawsuit over its withdrawn pain reliever Vioxx.
A federal appeals court ruling in Philadelphia reinstated the class-action securities lawsuit in 2008 after a U.S. district judge in New Jersey dismissed it on grounds that the claims had been filed too late under statutes of limitations.
The Supreme Court agreed to hear arguments during its term that begins in October.
Merck, which employs about 12,000 people in the Philadelphia area, contends that investors waited more than two years to sue after the first warnings that Vioxx might be unsafe.
The investors' suit is unrelated to the $4.85 billion Merck agreed to pay in November 2007 to settle thousands of lawsuits filed by patients and their survivors over Vioxx.
To date, more than 48,000 plaintiffs have filed claims relating to injuries or economic loss under the settlement.
Payment checks have been distributed to about 10,000 patients claiming heart-related problems and to 900 claiming they suffered strokes as a result of taking Vioxx, said a Merck spokesman.
The company withdrew Vioxx in September 2004 after a clinical trial showed an increased risk of heart attacks and strokes. Merck shares fell 27 percent on Sept. 30, the day it was withdrawn, and fell further in the following months. The stock began to recover the next year, but it fell because of the economy in early 2008. Shares closed up 39 cents, or 1.49 percent, at $26.56 yesterday.
In a statement, Merck said it was pleased the high court had agreed to hear its appeal and resolve a split among federal circuit courts around the country "on the important issue of what constitutes inquiry notice to would-be investors under the securities laws."
"We believe that the district court in this case correctly held that the intense public discussion of data surrounding Vioxx had put investors on inquiry notice of the relevant issues long before Merck became aware of and announced the new scientific information that led to the voluntary withdrawal," the statement said.
Merck said the evidence showed the company properly informed the Food and Drug Administration and the scientific community about scientific data as they emerged.
After recalling Vioxx, which had $2.5 billion in sales in 2003, Merck's fourth-quarter 2004 profit fell 21 percent. The company restructured.
It grappled with a weak research pipeline and loss of revenue from key products, including the blockbuster cholesterol drug Zocor, which went off patent in June 2006.
Revenue in recent years has rebounded. In March 2008, Merck reported a $3.3 billion quarterly profit, up from $1.7 billion in the first quarter a year earlier.
But as the industry consolidated and the economy tanked, Merck's first-quarter earnings, $1.4 billion, were less than half the $3.3 billion in the first quarter a year earlier.
In March, Merck said it would buy Schering-Plough Corp. for $41.1 billion in a deal that gives Merck key new businesses, access to a promising pipeline of new products, and an opportunity to further cut costs.
"We continue to like Merck," said analyst Timothy Anderson in a note to clients. "The combination with Schering-Plough offers several attractive attributes, including earnings-per-share durability through the patent cliff that impacts most of its peers significantly, an intermediate-term pipeline, and a best-in-class research and development backbone."