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Wed, Dec. 15, 2004

Merck to try to bar Vioxx class actions

The N.J. drugmaker plans to battle all claims individually, its general counsel told analysts and reporters yesterday.

Philadelphia Inquirer Staff Writer

An executive at Merck & Co. Inc. offered a glimpse yesterday of its legal strategy over the recalled painkiller Vioxx when he said it would try to defeat any attempt to certify a class action and fight all claims individually.

"These are individual cases that are not appropriate for class treatment," Kenneth C. Frazier, general counsel and senior vice president, told analysts and reporters. He added, "This litigation most certainly will play out over a number of years."

Digging in its heels on the drug debacle that has intensified scrutiny of the industry and the federal drug review process, Merck tried to present an upbeat picture of its overall prospects during an annual business review at its international headquarters here, about 60 miles north of Philadelphia.

The company, with thousands of employees across Pennsylvania and New Jersey, said it had laid off 5,100 of them already, slightly more than the 4,700 disclosed earlier. It identified most as part-time contractors involved in manufacturing but declined to say where they worked. Merck had 63,200 employees worldwide at the end of 2003.

Vioxx was an anti-inflammatory drug and pain reliever that Merck withdrew voluntarily on Sept. 30 after a company-sponsored clinical trial showed increased risk of heart attack in some patients after 18 months. It had generated at least $2.5 billion in sales in 2003, making the drug its top seller.

The price of the company's stock has plunged since the withdrawal, closing yesterday at $29.62, up 57 cents. Shares were trading above $45 as of Sept. 29.

Analysts have put Merck's liability and legal costs over Vioxx at about $20 billion, with estimates ranging from just a few hundred million dollars to $55 billion.

Frazier declined to comment on any of the figures but did offer a few details about the nature of the lawsuits it faces so far. As of Nov. 30, the company knew of at least 475 lawsuits involving roughly 11,000 plaintiff groups, alleging that Vioxx caused gastrointestinal bleeding, cardiovascular events and kidney damage.

As of this week, an additional 18 lawsuits had been filed related to shareholder claims and class-action lawsuits alleging securities-law violations. Ten others have been filed under a federal law governing savings plans, such as 401(k) plans. Two state pension boards also have sued, Frazier said.

He also said the Food & Drug Administration, the Justice Department, one Senate committee, and two House committees are conducting investigations. And several countries, including France and Israel, have begun Vioxx investigations.

Merck expects the first civil case to come to trial during 2005, Frazier said. But he said the company was confident that it could defeat any claims of direct causation, noting that plaintiffs will be at pains to prove that Vioxx alone caused, for example, a heart problem.

About 60 percent of the cases filed so far are in state courts; the rest, in federal court. The company has filed a motion to combine all the cases in one federal district, but still expects to have to fight initially in Texas or Alabama, where courts are thought to be less sympathetic to companies in such cases, analysts have said.

While declining to compare Merck's situation directly to any other past product-liability case, such as the withdrawal of the diet-drug combination known as "fen- phen ," Frazier did say that Johnson & John-son's strategy in defense of its heartburn remedy Propulsid showed that major liability losses could be avoided.

The company's comments were not surprising to analysts, who had pushed executives without success to speculate further on their strategy if Merck lost its bid to block any class-action certification.

"The cost of litigation is the defining issue right now," said Richard T. Evans, senior research analyst at the New York investment firm Sanford C. Bernstein & Co. Inc.

In other issues, Merck highlighted several promising drugs in early development but did not announce any major product launches for 2005, which analysts in the past have called a sign of weakness.

Merck did announce that it picked " Gardasil " as the name of its new vaccine for the human papilloma virus, or HPV, which can cause cervical cancer. Merck is racing to file this year for FDA approval of the drug, hoping to beat GlaxoSmithKline P.L.C., which is also developing such a vaccine, called Cervarix .

Contact staff writer Thomas Ginsberg at 215-854-4177 or .