Merck & Co. Inc., in a sudden admission of problems with a blockbuster drug, said yesterday that it was withdrawing its Vioxx arthritis pain medicine because of an increased risk of heart attack and stroke.
The announcement stunned Wall Street, sending Merck’s shares down 27 percent, and even took the blue-chip Dow Jones industrial average lower. Until now, the company had consistently defended Vioxx, its $2.5-billion-a-year medicine for arthritis and acute pain, even after several earlier studies raised safety questions.
Although Merck remains financially solid, the announcement pressures the company to bolster its pipeline of new drugs, and it raises concern over whether it will face costly litigation from patients who took the drug.
The company said new data from a three-year clinical trial found that patients taking Vioxx for more than 18 months had double the risk of heart attack and stroke of those taking a placebo.
“It’s a big negative for Merck in timing and in dollars,” said Hemant Shah, an independent pharmaceutical analyst in Warren, N.J. Vioxx is one of Merck’s five largest drugs, accounting for about 11 percent of sales in 2003. But Vioxx sales had slipped in this year’s second quarter because of increasing concerns about the drug’s safety.
Merck, which is based in Whitehouse Station, N.J., employs 12,000 people at its huge research operation in Montgomery County.
The withdrawal of Vioxx comes as Merck, the second-largest drugmaker in the United States and fourth-largest in the world, faces the expiration of the patent for its top-selling cholesterol-lowering drug Zocor in early 2006, when sales are expected to fall to generic competition.
Merck said data showed that the increased risk of cardiovascular complications began 18 months after patients started taking 25-milligram doses of Vioxx once a day.
“We believe it would have been possible to continue to market Vioxx with labeling that would incorporate these new data,” chief executive officer Raymond V. Gilmartin said at a New York news conference. “However, given the availability of alternative therapies and the questions raised by the data, we concluded that a voluntary withdrawal is the responsible course to take.”
The U.S. Food and Drug Administration said the risk to individual Vioxx patients of a heart attack or stroke “is very small.” The FDA said it planned to monitor other drugs in the class of medicines known as COX-2 inhibitors for possible heart risks.
Peter S. Kim, president of Merck Research Labs, said at yesterday’s news conference that 7.5 patients out of 1,000 taking the placebo had a heart attack or stroke after 18 months, while 15 out of 1,000 taking Vioxx had a heart attack or stroke during the same 18 months.
“There were five cardiovascular deaths on placebo and five cardiovascular deaths on Vioxx no difference in number of cardiovascular deaths between placebo and Vioxx,” Kim said.
Merck’s announcement could benefit rival Pfizer Inc.’s Celebrex, which was the first COX-2 inhibitor when it was introduced in 1998. Vioxx came on the market in 1999. Pfizer said yesterday that Celebrex, which is No. 1 in sales in the COX-2 inhibitor group of arthritis drugs, was safe.
Adam Greene, an analyst with First Albany Capital, said the company’s withdrawal of Vioxx for safety reasons could “lead to years of litigation expenses.” Vioxx has been used by 84 million patients worldwide since it was introduced, the company said.
Shah, the independent analyst, said the biggest negative for Merck would be if the Vioxx recall resulted in “fen-phen liability” expenses for Merck. He was referring to the $16.6 billion that Wyeth has set aside for litigation costs stemming from its recall for health reasons of two diet drugs in 1997.
Kenneth Frazier, Merck’s general counsel, said “numerous lawsuits alleging personal injury” had been filed against the company by Vioxx users, including two proposed class-action lawsuits that are pending. “The company believes it has meritorious defenses to these cases and will defend them vigorously,” Frazier said.
Merck emphasized that it was strong financially, with more than $13 billion in cash and investments.
Gilmartin also rejected talk that the company should find a merger partner. “We continue to believe a large-scale merger does not meet our definition of creating shareholder value,” Gilmartin said. He also said he did not intend to resign because of the Vioxx recall.
He said the company saw no reason to change its strategy, which includes licensing promising drugs from other companies and investing in research in its own labs. Merck spent $2 billion on research and development in the first half of this year.
Gilmartin said that the company would not close any plants as a result of the recall, but that it would redeploy sales representatives, scientists and marketing employees to other products. However, he did not rule out future layoffs.
Merck has laid off 4,400 employees worldwide in the last year, including an undisclosed number at its campus in West Point, Montgomery County.
Merck said the Vioxx recall would not affect the company’s application to the FDA to sell the next-generation successor to Vioxx, Arcoxia, which is already sold in 47 countries. An FDA decision on Arcoxia is due by Oct. 30, the company said.
Merck officials estimated that the recall would cut its 2004 earnings by 50 to 60 cents a share from the previous estimate of $3.11 to $3.17 a share. The company estimated that the lost Vioxx sales would be $700 million to $750 million in this year’s fourth quarter.
Merck shares fell $12.07, or 26.78 percent, to close at $33 on the New York Stock Exchange.
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