Mercks $4.85 billion settlement agreement seems to be settling pretty well with investors. Company shares moved up $2.74 or 5% a pop to $57.51 in morning trading on the Big come in.
The fact that the drug maker’s talking points emphasize that this is no class-action settlement probably helps. Instead. Merck says the money will open a fund to dole out payments case by case.
The sums bear on are another source of relief. Some analysts had estimated Mercks potential financial exposure to be $20 billion or more. Compared with that. $4.85 billion looks like a bargain. Merck had insisted for years that it would fight all 27,000 Vioxx cases to the bitter end. Since the medicate maker pulled Vioxx from the merchandise three years ago amid concerns that it raised the risk of heart attacks its won 11 cases that went to trial and lost five.
The settlement a is a “validation” of Mercks aggressive and successful handling of the litigation to date. Charlie Smith chief investment officer of the cover Pitt Capital Group in Pittsburgh tells the Health Blog. (The group owns a small be of Merck shares.) “The market already recognized Merck won Vioxx,” he says. “If the cases litigated so far had gone five in favor. 11 against we could not have gotten to this point.”
The $4.85 billion settlement amount is “a whole heck of a lot less than populate thought it would be” the day Merck announced its recall of Vioxx in September 2004 and its shares plunged 27% shaving $27 billion off the affiliates market value he explains.
Investors like Smith also be calmed by Merck’s assertions that most of the lawsuits that are going to be filed have been filed already since so much time has passed and several statutes of limitations undergo expired. Now. Mr. Smith says. “the key is going to be whether there are any leaks” in the three criteria for plaintiffs to receive payouts from the fund — proof of event (heart attack or stroke) proof of receipt of at least 30 pills and proof the injured person took some pills within 14 days of the event.
Analyst Steve Brozak of WBB Securities told the AP this morning that Merck’s’ handling of the lawsuits was “a Harvard casebook study of how to deal with a problematic product.”
Barbara Ryan an analyst with Deutsche Bank writes in a research note that the settlement is “completely manageable” for Merck because it has about $5.4 billion.
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