Novice Investing - Merck Won First Federal Case

Date: Monday 13th 2008f October 2008 06:07:01 PM

Merck Won First Federal Case - 02/18/2006

By: Hari Wibowo

We have said it a lot of times that as Merck & Co. Inc. (MRK) investors, we should watch for the outcome of the first federal case originally tried in New Orleans. It has since been relocated to Houston, Texas. Why should we care? Because federal case will set the bar for other federal or local cases. Right now, Merck has around 9650 pending lawsuits against it with regards to its Vioxx liability lawsuit.

Having said that, what is the outcome of this first federal trial? On Friday 17th February 2006, the jury handed Merck its first victory in the federal level. The jury found Merck not liable for the death of the late Richard Irvin who had taken Vioxx one month earlier. For your information, Merck pulled Vioxx after clinical study showed an increase in the risk of heart attack after 18 months of use. My gut feeling is that we can rely on this scientific evidence very tightly. Picture this. In September 2004, nobody was complaining about this heart attack risk. Management just received the critical data and decided to pull the drugs from the market. Would they benefit if they hide the clinical data that shows heart risk when using Vioxx for a mere one month? Nope. Because, Vioxx had been around for sometime and a lot of its users had been using it for more than 18 months.

Now, the good news is that around half of the pending lawsuit is for Vioxx users of less than 18 months. Based on this new federal case outcome, we can rest assure that Merck will win at least half of the 9650 pending lawsuit. Let's just assume that around 5000 of the lawsuit is filed by plaintiff who had taken Vioxx for more than 18 months. Now, Merck won't just give out cash to all these 5000 pending lawsuits. Let me explain why.

There are many reasons for cause of death or heart attack. It can be Vioxx, it can be poor lifestyle or it can be the lazy bum who refuse to exercise while consuming junk foods daily. This is why these matters are tried in court. The purpose is to decide who/what is responsible for the death or the sickness of the plaintiff. If those having a heart attack drank water, does that mean drinking water cause all the heart attack? Nope. The same goes here. The 5000 pending lawsuits claim that Vioxx cause the sickness or

death of the plaintiff. I believe that not all of those death were caused by Vioxx. There is no doubt that Merck will lose some cases due to its own negligent, but I don't think Merck will lose all 5000 pending lawsuits.

The latest federal trial outcome is a good first step for Merck. Now, plaintiff know that they have a slim chance of winning if they have taken Vioxx for a short period of time. I am very surprised that the case in Houston was tried at all! Hey, I just took this pain killer for a month and I now have chest pain. So, that drug must be the cause of my chest pain, right? Well, wrong! If someone hit you on the chest, it can cause some chest pain too. Not all chest pain (heart attack) is due to Vioxx. Now, Merck can concentrate on defending the 'truly' needed case where the plaintiff has been using Vioxx for more than 18 months. Merck investors shall follow this closely and ignore the rest of the lawsuits.

END

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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Merck Co & Inc. (MRK) or any other securities.

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