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Merck has agreed in principle to pay $688 million to settle two federal securities class-action lawsuits involving the company's anticholesterol drugs Vytorin and Zocor, thereby avoiding trial.
Merck has agreed in principle to pay $688 million to settle two federal securities class-action lawsuits involving the company's anticholesterol drugs Vytorin and Zocor, thereby avoiding trial. The suits are pending in the US District Court for the District of New Jersey against Merck, Schering-Plough and certain of their current and former officers and directors.
The lawsuits followed after shareholders, who purchased certain securities issued between December 2006 and March 2008, claimed that they lost money because Merck and Schering-Plough, delayed publication of data from the Enhance trial, which evaluated the combination drug Vytorin (ezetimibe plus simvastatin) compared with Zocor (simvastatin). The study was completed in 2006 but Merck took almost two years to publish the results, leading to accusations that the company was trying to conceal unfavourable data. Results from the trial indicated that Vytorin was no better in preventing atherosclerosis than the cheaper statin Zocor, despite being able to reduce cholesterol levels. The lawsuits claimed that Merck and Schering-Plough knew that the trial had failed but did not disclose this information to investors for a year. When the results were released in January 2008, the company’s share prices plummeted.
Under the proposed agreement, which was reached after almost five years of protracted litigation, Merck will pay $215 million to resolve the securities class action against all of the Merck defendants and $473 million to resolve the securities class action against all of the Schering-Plough defendants. Both settlements still require court approval. In connection with the settlement, Merck recorded a pre-tax and after-tax charge of $493 million, which reflects anticipated insurance recoveries.
Merck still believes that both companies acted responsibly in connection with the Enhance study. The agreement contains no admission of liability or wrongdoing. Bruce Kuhlik, executive vice president and general counsel of Merck, said in a press statment, "This agreement avoids the uncertainties of a jury trial and will resolve all of the remaining litigation in connection with the Enhance study. We believe it is in the best interests of the company and its shareholders to put this matter behind us, and to continue our focus on scientific innovations that improve health worldwide."
Merck acquired Schering-Plough in 2009. Before the merger, the companies collaborated on the development of Vytorin, which came to market in 2004 and generated more than $1.7 billion in sales last year.