Merck's Future Rides on Jury

If Merck(MRK Quote) can't win a Vioxx trial in New Jersey, it can't win anywhere.

Now that the closing arguments have ended in the Atlantic City, N.J., trial pitting the company against postal worker Frederick "Mike" Humeston, the company's future is in the hands of the six women and three men on a jury that could render a verdict this week.

Even if the company loses, the monetary damage to Merck from this one case isn't likely to be anywhere near the $253 million verdict brought in against the company by a Texas jury in the first Vioxx trial. New Jersey state product-liability laws cap damages at a relatively low level.

But a loss by the Whitehouse Station, N.J.-headquartered pharmaceutical giant on its home turf, in a state where the legal system favors Merck, and in a trial where the company's lawyers have outperformed the plaintiff's team, would send trial lawyers around the country into a filing frenzy. And it will send Merck's stock further into the tank. (It's down 56% since June 2003 and 21% since May 4.)

After Merck's Texas defeat in August, the number of Vioxx lawsuits filed against Merck jumped from 4,200 at the time of the trial to 6,400 at the end of September. One estimate (granted, from a team of plaintiffs' lawyers) estimates that an additional 20,000 cases would be filed in state courts around the country if the verdict in New Jersey goes against Merck.

A jump like that -- or even one that just matched the increase after the Texas verdict -- could send Wall Street projections of Merck's potential Vioxx liability soaring well above the $38 billion that now marks the peak of analyst damage assessments. (The low-ball Wall Street estimate puts Merck's liability at $5 billion.)

Much in Merck's Favor

Why is winning one trial in New Jersey so important to Merck's future? Because the playing field in New Jersey is about as favorable as the company is going to get in any Vioxx trial. Here's how the odds in this trial favor Merck.