Wyeth's Court Win a Good Sign

There's an old saying in journalism that if something occurs once, it's happenstance. If it occurs twice, it's a coincidence. If it occurs three times, it's a trend.

Using that guideline, Wyeth's(WYE) victory in the first trial of hormone replacement therapy drugs Premarin and Prempro is happenstance. Still, a few analysts are suggesting that Wyeth could be headed toward a favorable trend, or at least a course of events in which the ultimate legal outcome won't damage the company.

Wyeth's product liability risk "appears manageable, but [it's] still in [the] early innings," says John Boris of Bear Stearns, reacting to Wyeth's win in a federal court in Arkansas Friday afternoon. "Initial bellwether cases are predictive of determining how remaining cases are litigated."

By Wyeth's count, there are some 5,000 personal injury lawsuits in the U.S. alleging the drugs, used as treatments for hot flashes and other symptoms of menopause, raise the risk of breast cancer, ovarian cancer, stroke or heart disease. A second trial is underway in a Pennsylvania state court.

"Typically federal courts are more 'balanced' to state courts," adds Tim Anderson of Prudential Equity Group. "[The] consensus has been that Prempro litigation won't end up being an issue for Wyeth. Additional verdicts will determine if this is accurate."

The lawsuits evolved from research in 2002 and 2004 showing that hormone replacement therapy raised the risk of heart attack, stroke, breast cancer or blood clots in the legs. The impact on Wyeth was dramatic, whose Premarin and Prempro family of drugs produced $2.07 billion in sales in 2001. Sales dropped steadily, hitting a trough of $880 million in 2004.