Merck (MRK) Resolves Class Action Suit Related to Vioxx for $830 Million

Shares of Merck & Co. (MRK) were off -0.80 or -1.54 percent to $51.00 per share in Friday’s premarket after the company announced early this morning that it had reached an agreement with plaintiffs in a class action suit related to Vioxx. Merck & Co. stock closed at $51.80, up +1.14 or +2.25 percent in Thursday’s regular trading session.

Whitehouse Station, New Jersey based Merck & Co. is one of the world’s largest pharmaceutical companies.
Founded as a subsidiary of German company, Merck KGaA in 1891, the company began operations as an independent company in 1917. Merck & Co. is a major manufacturer of prescription medicines, biologic therapies, vaccines and health products for humans and animals and has operations in 140 countries worldwide. The company’s best known products include, Propecia/Proscar, Gardasil, Singulair and Vioxx to name only a few.

This morning’s announcement by Merck & Co. was about the resolution of In re Merck & Co, Inc. Securities Litigation. The litigation is a multi district class action lawsuit pending in a New Jersey Federal court. The settlement class consists of persons who purchased Merck securities between May 21st, 1999 and October 29th, 2007.

Under the settlement agreement, Merck will pay the claims for the plaintiffs in the amount of $830 million, in addition to attorney’s fees and expenses. After funds are made available through certain insurance policies, Merck’s cash payment to settle along with fees will come to about $680 million. The company will record a charge to its fourth quarter 2015earnings.

Merck & Co. has paid out billions of dollars to settle lawsuits related to Vioxx. The drug was originally for the treatment of arthritis and menstrual pain, but within five years of its release in 1999, the drug was linked to thousands of heart attacks, strokes and deaths. Merck denied there were any problems.

Studies concluded that Vioxx dramatically increased the chances of a fatal stroke or heart attack. Merck grudgingly changed the label, but continued to deny that there were any problems. After a second study on September 30th, 2004 confirming severe cardiovascular problems from Vioxx, Merck was forced to begin a worldwide recall of the drug, even though 25 million U.S. residents had already taken the drug.

To resolve the claims quickly, Merck set up a $4.85 billion settlement fund in 2007 paying 35,000 claimants. Nevertheless, of the original 59,365 claims, approximately 25,000 went without payment. Merck has also paid out billions in civil claims, of which today’s settlement is a part of.

According to Merck’s press release, settlement of the current action does not constitute an admission by Merck or any other individual defendants of any wrongdoing or liability. Merck & Co. is still facing previously disclosed individual civil lawsuits related to Vioxx.

Merck & Co. is being represented in the lawsuit by Evan Chesler of the law firm of Swaine & Moore LLP and Ted Wells of the law firm of Paul Weiss Rifkind Wharton & Garrison LLP. The presiding judge in the matter is Judge Stanley R. Chesler.

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Published on Jan 15, 2016
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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