Merck & Co.’s legal liability for the withdrawn pain pill Vioxx may be twice as high as previously estimated after the drug company lost the first of thousands of lawsuits, an analyst said Monday.
Credit Suisse First Boston analyst Catherine Arnold in New York doubled her liability estimate to $10 billion after the verdict Friday. The new total is based on an assumption that 48,000 U.S. patients will sue and may win payments averaging $200,000 each.
“We think our liability estimates are reasonable,” Arnold said in a telephone interview. “There is a lot of imprecision in knowing what the ultimate value will be in something that will take eight to 10 years to resolve.”
Merck, the third-largest U.S. drugmaker, may have to add to the $675 million it set aside for Vioxx-related legal costs, investors and lawyers said after a Texas jury issued its $253 million verdict Friday. Other analysts’ estimates ranged as high as $25 billion, while some said it is too early to determine total liability.
The company was ordered to pay $24.4 million in actual damages and $229 million in punitive damages to the family of Robert Ernst, a 59-year-old marathoner who died in 2001 after taking Vioxx for eight months. Merck may be liable for 10 percent of that amount because of a state cap on punitive damages.
“The result in the Ernst trial does not provide a basis for the re-evaluation of reserves established for legal-defense costs,” Merck spokeswoman Jeanine Clemente said Monday in an e-mailed statement. Merck is appealing the Texas case and said it plans to stick to its strategy of defending each case.
