Vioxx Recall Takes Toll on Merck Earnings

The September 2004 recall of pain reliever Vioxx took a heavy toll on Merck's fourth quarter earnings, which plummeted by more than 20 percent as a result of the action.

Merck said its fourth quarter profits fell from $1.4 billion, or 62 cents a share, in the fourth quarter of fiscal 2003 to $1.1 billion, or 50 cents a share, in the fourth quarter of fiscal 2004 -- a 21 percent decline in profit. Sales revenue rose slightly to $5.7 billion in the fourth quarter, up from $5.6 billion a year earlier.

The company's fiscal 2004 results include an additional $604 million reserve recorded in the fourth quarter solely for future legal defense costs for Vioxx (rofecoxib) litigation.

As of Dec. 31, 2004, Merck said it's been served or is aware that it has been named as a defendant in approximately 575 lawsuits regarding Vioxx, including approximately 1,400 plaintiff groups alleging personal injuries resulting from the use of the anti-inflammatory painkiller. The lawsuits include allegations of gastrointestinal bleeding, cardiovascular events, thrombotic events or kidney damage.

In addition to product liability lawsuits, a number of purported class action lawsuits have been brought alleging Merck and several current or former executives made false and misleading statements regarding Vioxx in violation of securities laws. As of Dec. 31, 2004, Merck said 14 of these securities lawsuits have been filed.