Merck’s Relief in Texas

Although Merck (MRK - Analyst Report) is aiming to close the Vioxx chapter, it is far from over. The company’s long list of cases is still pending. Recently, Merck received a favorable ruling in a district court of Texas. The judge dismissed all claims in a lawsuit related to Vioxx filed on behalf of the State of Texas that sought a refund for money spent on the drug and granted Merck's motion for summary judgment. 

A summary judgment is a determination made by a court in a civil litigation, without a full trial. In addition to the Texas case, there are several other similar lawsuits filed by state attorney generals throughout the country. A similar trial filed against Merck by the Louisiana Attorney General is scheduled to begin in the federal court in New Orleans on April 2010. 

Earlier this year, in another lawsuit, Merck had agreed to pay $80 million to settle 190 outstanding claims regarding Vioxx, a blockbuster drug that catered to a huge arthritis and pain-relief market for nearly five years in the US. Merck had to withdraw the drug from the market in 2004. The withdrawal followed a finding which revealed increased risk of heart attack for long-term users of the medicine. 

In November 2007, the company agreed to pay $4.85 billion to settle several personal-injury lawsuits from former Vioxx users who held the drug responsible for causing heart attacks or strokes. Although the Texas decision is a relief for Merck, many investigations are still pending regarding Vioxx. Any unfavorable outcome of such lawsuits may affect the company’s financials. 

Moreover, various researches have shown that heart risk associated with Vioxx could have been detected before the drug’s withdrawal from the market, had the data been openly available. We believe disclosure of such findings may make things more difficult for the company. However, we are Neutral on the stock.

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