Vioxx Market Withdrawal Giving Merck a Huge Pain in the Profit

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Reported by Annette Kreuger, Pharmaceutical-Biotech Industry Manager for Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Vioxx, Merck's (NYSE: MRK) (Whitehouse Station, New York) blockbuster arthritis drug was pulled off the market last week, amid reports linking it to heart attacks and strokes. Following the drug's withdrawal, Merck watched as its stock plummeted nearly 30%, with shares closing on Thursday, down $12.07, to an eight-year low of $33.00. The removal has led Merck to cut its 2004 earnings forecast, and analysts are currently estimating a loss of $2.55 billion in revenue associated with Vioxx. This leaves the company exposed to possibly billions of dollars in legal liabilities. Avaricious legal firms across the country have already put out ads by the score seeking those "damaged by Vioxx".

Vioxx, a non-steroidal anti-inflammatory drug (NSAID), is part of a class of drugs known as COX-2 inhibitors. It was approved by the FDA in May 1999 for the relief of the signs and symptoms of osteoarthritis, for the management of acute pain in adults, and for the treatment of menstrual symptoms. The drug was later approved for the relief of the signs and symptoms of rheumatoid arthritis in adults and children. Pfizer Incorporated's (NYSE: PFE) (New York, New York) Celebrex and Novartis AG's (Basel, Switzerland) experimental drug Prexige are also members of the COX-2 inhibitor class. Both companies are hopeful of cashing in on Merck's loss.

An estimated two million people worldwide take Vioxx, and over 80 million prescriptions have been written for it, which makes this one of the largest prescription drug withdrawals in history. Bayer suffered a similar blow a couple of years back with the failure of its popular Baycol, an anti-cholesterol drug. The company was forced to stop construction of a $200 million production plant in Kansas City, Missouri. There is no word yet if the Vioxx debacle will impact Merck’s plans to build a $300 million vaccine manufacturing plant in North Carolina.

A few years ago, Merck was the world's largest drugmaker. Now it is facing murmurs of mergers and possible takeover attempts. In the past few days, the companies most often mentioned as potential buyers are Novartis AG, Johnson & Johnson (NYSE: JNJ) (New Brunswick, New Jersey), and Schering-Plough Corporation (NYSE: SGP) (Kenilworth, New Jersey). Merck's current financial picture is not all a bleak canvas, as it has cash and investments valued at $13 billion, and only $6.6 billion in debt. It is certain that Merck is not looking forward to the next bump in the road, anticipated though it may be, which will occur in 2006, when it loses U.S. patent protection of its $5 billion cholesterol-lowering drug, Zocor.

Interestingly enough, doctors across the country are reporting that among the calls pouring in from worried Vioxx patients, they are also hearing from those who do not want to stop the drug. For patients who suffered no negative effects, the drug allowed them a new-found mobility and freedom from pain. Other doctors have reported being concerned about the drug's safety prior to the withdrawal and had stopped prescribing it on their own.

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