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Legal Questions Still Dogging Wyeth

Wyeth says little about hormone-replacement therapy litigation, except to give a tally of trial results and lawsuit filings in its quarterly reports to the SEC. By March 31, Wyeth was defending approximately 5,400 lawsuits affecting 7,900 plaintiffs. Wyeth said it doesn't have a litigation reserve because it cannot estimate the potential liability or know for sure if there is a liability.

Merrill Lynch analyst David Risinger recently told clients that Wyeth hasn't set aside a reserve because its $350 million insurance policy for the drugs hasn't been exhausted.

"When the company has run through that insurance, it will need to expense defense costs," he said in a June 23 report. Risinger, who has a buy rating, doesn't own shares. His firm says it expects to receive or seek investment-banking compensation from Wyeth in the near future.

Wyeth has won 22 of 27 cases thus far by jury verdict, summary judgment or voluntary dismissal by plaintiffs, according its latest SEC filing. All cases involved breast-cancer claims. Of the five losses, two cases were settled and two are being appealed. In one case, a judge ordered a new trial.

Legal experts say an early victories by companies in product-liability suits discourage plaintiffs from filing weak cases while encouraging settlements.

Merck is the prime exhibit for this strategy. Its fight-every-Vioxx-case approach and its ability to win more than it lost in early rounds led to a November agreement to settle most of the U.S. cases. Merck is paying $4.85 billion into a special fund, and it said it would contest other cases in court.

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