Second Vioxx trial seen as crucial test for Merck

Drug maker still smarting from big loss last month

September 12, 2005|By KNIGHT RIDDER/TRIBUNE

PHILADELPHIA -- Three days after Merck & Co. Inc. lost a huge liability case last month over the pain-reliever Vioxx, Chief Executive Officer Richard T. Clark told his 64,000 employees to stand fast.

"We have great strengths as a company, a business that is fundamentally sound, and a critically important life-saving mission," Clark said in an Aug. 22 memo to employees after Texas jurors ordered Merck to pay a widow $253.5 million.

"Nothing in last week's verdict changes that," Clark's memo said.

This week, Clark's confidence and his employees' faith will be tested in their own backyard. The nation's second Vioxx trial will begin in Atlantic City, N.J., pitting a heart-damaged Vietnam War veteran against the New Jersey-based pharmaceutical company whose travails have reverberated across the industry, Wall Street and Congress.

People who took Vioxx, lawyers, and Merck investors and employees are girding for the trial, the next among about 5,000 cases filed. Its outcome will weigh on Merck's legal strategy and financial outlook, the latter clouded by expiring patents and a stock price near the level it was in the mid-1990s.

Some of Merck's 12,000 employees in the Philadelphia area said the first verdict came as a shock after a year of roller-coaster emotions at the company once considered so trustworthy and secure that it was called "Mother Merck."

"Just losing a case hits hard," said Michael Wynne, 55, a longtime employee and union representative at Merck's West Point complex. "Merck is like our big brother. I can call him a jerk, but you can't. This is binding people together, not pulling them apart."

Still, employees said morale took a pounding after the Aug. 19 verdict. Executives led by Clark told workers in internal memos, Webcasts and meetings to be optimistic and to trust their bosses -- not news media "misinformation" -- for trial updates.

Both sides have a lot at stake. A second defeat for Merck would further sink morale and increase pressure to consider settlements to reduce potential losses, which Wall Street analysts have pegged at between $5 billion and $30 billion.

On Friday, Merck's general counsel, Kenneth C. Frazier, refused to discuss settlements.

A Merck victory could boost morale and deflate pressure for a settlement. It could vindicate Frazier's strategy -- closely watched by other drug companies -- and lift Merck's stock, which fell nearly 8 percent after the Texas verdict.

"The market is largely desensitized to more bad news" about Merck, said Timothy Anderson, pharmaceutical analyst from Prudential Equity Group. "I think the stock will go up more in a win than down on a loss."

This week's case is being brought by Frederick Michael Humeston, 60, of Boise, Idaho, who was on Vioxx four years ago when he suffered a heart attack that left him with permanent heart damage and anxiety about having another attack.

Humeston, a postal worker and former Marine with two Purple Hearts, filed his claim in August 2003, a year before Merck recalled its $2.5 billion blockbuster drug Sept. 30 last year. Since at least 1997, scientists outside and inside the company had raised concerns about risks from Vioxx and similar drugs, company records show.

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