August 17, 2006

Merck loses Vioxx case, told to pay $51 million

By Peter Henderson

NEW ORLEANS (Reuters) - A federal jury on Thursday found
that Merck & Co. Inc. was negligent and knowingly made
misrepresentations about its withdrawn pain medicine Vioxx, and
awarded $51 million to the plaintiff.

The New Orleans jury, in the second federal trial involving
a Vioxx product-liability lawsuit, found that Merck had
knowingly misrepresented or failed to disclose a material fact
to the plaintiff's physicians and that doctors in the case and
the plaintiff himself were not at fault.

The plaintiff, Gerald Barnett, a 62-year-old retired FBI
agent who had a heart attack in 2002 after taking Vioxx for 31
months, was awarded $50 million in compensatory damages and $1
million in punitive damages.

Barnett, who used Vioxx for pain caused by a car accident,
is a resident of South Carolina, where the suit was originally
filed and which bases punitive damages on the conduct and
business of the defendant solely in that state, rather than in
the entire country.

Merck, which has now has lost four cases and won five in
its defense of Vioxx, vowed to appeal Thursday's verdict. The
company is facing at least 14,200 other lawsuits from people
who claim to have been harmed by the drug.

"Both the finding and the amount of damages were totally
uncalled for in this case because Merck acted appropriately in
providing information to the medical, scientific and regulatory
communities in a responsible and appropriate manner," Merck
said in a statement.

The pain and arthritis drug had annual sales of $2.5
billion before it was recalled in 2004 after a clinical trial
showed it doubled the risk of heart attack among people taking
it for more than 18 months.

"This verdict will remind people that Merck still faces
significant potential financial liability for Vioxx, which
could wind up being at least $5 billion in the long run," said
Shaojing Tong, an analyst with Mehta Partners.

Even so, Tong said he was not overly concerned with the
jury award because Merck, through its appeal, will likely
reduce the size of the judgment.

He noted that Merck has still won a majority of the jury
verdicts, and will therefore likely stick to its strategy of
fighting each case one by one, rather than attempting to
conclude a costly national settlement with plaintiffs.

Money manager David Dreman, whose Merck shares form a major
holding of his $17 billion portfolio, said the verdict was not
all that surprising because New Orleans juries have a history
of favoring plaintiffs over companies.

"This one is coming from a district that has always been
anti-corporate," said Dreman, who predicted the judgment will
"probably get knocked down on appeal."

Merck shares were down 1.8 percent, or 73 cents, to $40.45
in afternoon activity on the New York Stock Exchange, after
touching as low as $40.30.

The stock plunged when Vioxx was recalled two years ago,
but has reclaimed almost all lost ground due to earlier
favorable Vioxx verdicts and enthusiasm for the company's new
Gardasil cervical cancer vaccine and its experimental Januvia
diabetes treatment.

Merck shares have risen about 28 percent this year,
outperforming about an 8 percent rise for the American Stock
Exchange Pharmaceutical Index of large drug makers.

(Additional reporting by Edward Tobin, Herb Lash, Ransdell
Pierson and Lewis Krauskopf)