NEW YORK (Reuters) - Merck & Co has agreed to pay $4.85 billion to settle claims that its painkiller Vioxx caused heart attacks and strokes in thousands of users, the drugmaker said on Friday.
The agreement covers lawsuits filed against the company in U.S. courts, resolving a major legal battle that has dogged the drugmaker since it pulled Vioxx off the market three years ago.
Merck recalled the popular painkiller, which had $2.5 billion in annual sales, in September 2004 after a study showed it doubled the risk of heart attack and stroke in patients taking it for more than 18 months.
NEW YORK (Reuters) - Merck & Co has agreed to pay $4.85 billion to settle claims that its painkiller Vioxx caused heart attacks and strokes in thousands of users, the drugmaker said on Friday.
The agreement covers lawsuits filed against the company in U.S. courts, resolving a major legal battle that has dogged the drugmaker since it pulled Vioxx off the market three years ago.
Merck recalled the popular painkiller, which had $2.5 billion in annual sales, in September 2004 after a study showed it doubled the risk of heart attack and stroke in patients taking it for more than 18 months.
In the settlement, reached with representatives of plaintiffs in federal and state courts, Merck did not admit Vioxx caused patient injury and did not admit fault.
The drugmaker, whose shares rose nearly 2 percent in pre-market trade on news of the deal, said it would take a charge of $4.85 billion to cover costs of the agreement.
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The settlement marks a shift in strategy for Merck, which previously said it intended to fight Vioxx litigation on a case-by-base basis rather than consider a broad settlement.
"The agreement is structured to provide a significant degree of certainty toward resolving the majority of the outstanding Vioxx product-liability claims in the United States for a fixed amount," said Richard Clark, chairman, president and chief executive officer of Merck.
The drugmaker said it would still defend all claims not included in the settlement. Since the withdrawal of Vioxx, Merck has won 11 court cases over the drug and lost five.
While it is appealing those cases that it lost, analysts said the settlement will solidify Merck's future.
"They're trying to reduce the uncertainty surrounding the costs related to Vioxx," said Damien Conover, an analyst at Morningstar. "While it will probably bring a little more clarity, I think there are still going to be a lot of cases that won't settle within this agreement."
Conover said the cases included in the settlement are likely the weakest cases.
"What you're going to be left with is a significant number of plaintiffs who will want to address Merck on an individual basis, which means they will likely seek higher compensation," he said.
Conover said that while it is difficult to gauge how many people will try to fight Merck alone, he estimates the company could be facing 1,000 to 2,000 outstanding claims and could face more than $1 billion in additional costs.
Mike Ward of Nomura Securities in London said a settlement value of less than $5 billion likely would be taken positively by the market, noting that litigation over Wyeth's Phen-Fen diet drug was only now coming slowly to a close after 10 years in the courts and over $21 billion in settlement costs.
Merck shares tumbled on news of the withdrawal of Vioxx in 2004, losing more than a third of their market value. But with Merck's Vioxx victories in court, and a string of successful new medicines, the shares have recouped those losses.
The stock, even with the major litigation drag, has outperformed its peers on the American Stock Exchange pharmaceutical index this year, rising 25 percent, compared with little change in the index.
Merck shares rose to $55.70 in pre-market trade from a Thursday close at $54.77 on the New York Stock Exchange. The stock is trading just below a four-year high of $58.36, reached earlier this month.
(Reporting by Edward Tobin, Lewis Krauskopf, Justin Grant and Ben Hirschler; editing by Derek Caney and John Wallace)
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