Merck Still Murky

One analyst with a more emphatic view about Merck's litigation and share-price prospects is Michael Krensavage of Raymond James, who reaffirmed his strong buy rating.

"Litigation concerns are overblown," he tells clients in a research report. He doesn't own shares, but his firm says it intends to receive or seek investment banking related compensation from Merck within three months.

The latest verdict "underscores a key point to our thesis," Krensavage says. "Plaintiffs will have a difficult time proving Vioxx caused their heart attacks. This is because most people have other risks such as obesity, high blood pressure or high cholesterol."

Krensavage says a primary issue for upcoming trials will be how many plaintiffs took Vioxx at recommended doses consistently for more than 18 months. That's the cutoff point at which a Merck-sponsored clinical trial showed statistically significant cardiovascular risk between people taking Vioxx vs. those receiving placebo. That's also the clinical trial that prompted Merck to withdraw Vioxx on Sept. 30, 2004.

Critics say other tests showed that Vioxx exhibited signals of cardiovascular risk much earlier than 18 months.

The late Robert Ernst, whose family sued and won in Texas, took Vioxx for eight months. Frederick Humeston, who lost the New Jersey case, took the drug for about two months.

Kenneth C. Frazier, Merck's general counsel, said Thursday that he had "no reliable information" on how many plaintiffs took Vioxx consistently for more than 18 months but he believes most took the drug for less than that.

Frazier reiterated the company's strategy that it will litigate every case. If juries evaluate the science and find Merck provided information "fully and promptly" to doctors and regulators, the company will win future cases, he said.

Where to Compare

Court fights are expensive, but Frazier said Merck still isn't setting a reserve of potential liabilities. Such a reserve is "not appropriate now," he said. Although the company monitors litigation expenses, it's sticking with its $675 million reserve for legal expenses for now.