Merck Floats Vioxx Re-Stock

Merck ( MRK) has suggested a powerful antidote for its sales sickness.

The company may reverse the biggest drug recall in history. In a surprising announcement late Thursday, a Merck executive hinted that the company may begin reselling Vioxx -- a painkiller that generated billions of dollars in sales -- after yanking it off the market last September due to cardiac risks.

Peter Kim, the company's director of research, said that Merck originally pulled the drug because it thought safer alternatives were available. However, research since the withdrawal has identified similar risks with other so-called Cox-2 inhibitors like two -- Bextra and Celebrex -- manufactured by rival Pfizer ( PFE).

Kim's statement came on the second day of a special three-day hearing held by government advisers who will help decide the fate of the entire class of Cox-2 drugs. Ultimately, the Food and Drug Administration could rule to withdraw all of the drugs or -- most believe -- require them to carry much stronger warning labels.

The possibility that Vioxx may rejoin the group of available Cox-2 inhibitors clearly took the public by surprise. Shares of Merck stock jumped 4.3% to $30.09 in premarket trade on Friday.

Still, analysts tend to doubt that Vioxx will actually reappear on pharmacy shelves. And even if it does, some say, demand for the once-popular painkiller will never be what it once was. If anything, they feel, the move would help Merck more in the courtroom -- where the company faces a slew of product liability lawsuits -- than in the ordinary course of business.

"While a reintroduction of Vioxx would be a surprising outcome in a number of ways, we believe that one of the greatest benefits would likely be on the legal side -- even more than any financial impact," wrote Morgan Stanley analyst Jami Rubin, who has an equal-weight rating on the stock. "If, even after all of the intensive scrutiny of recent months, the panel concluded that the overall risk/benefit profile for Vioxx supported marketing of the drug to certain populations, we believe this could help vindicate the company's -- and FDA's -- decision not to withdraw the drug earlier."

That said, Rubin believes the chance for a Vioxx relaunch is "less than 10%." Other analysts are similarly pessimistic.

For its part, Merck has suggested that a relaunch may make sense due to the unique characteristics of Vioxx. For starters, the company has always pointed to Vioxx as the only Cox-2 inhibitor that has been labeled as safer on the stomach than older painkillers. In addition, it is the only Cox-2 drug that can be used by patients with certain allergies. Some patients have been pleading for a return of the drug despite its cardiac risks.

Even so, Merck could face an uphill battle if it actually decides to pursue the drug's return.

"Given that Merck decided voluntarily to withdraw Vioxx, the possibility of re-launching was always present," wrote Lehman Brothers analyst Anthony Butler, who has a neutral rating on the stock. But, "We believe that there are likely to be multiple hurdles for Merck to overcome should they decide to re-launch."

Prior to its recall, Vioxx ranked as one of the most heavily marketed -- and prescribed -- drugs in the country. It once generated about $2.5 billion in annual sales.

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