Feb. 14 (Bloomberg) -- Merck & Co. said it will pay $688 million to resolve class-action litigation claiming it defrauded shareholders by withholding adverse results of a clinical trial of the anti-cholesterol drugs Vytorin and Zetia.
The settlement announced today must be approved by U.S. District Judge Dennis Cavanaugh in Newark, New Jersey. He was to oversee a trial starting March 4. The accord benefits holders of securities of Merck and Schering-Plough, which Merck acquired in 2009. The companies earlier joined to develop Vytorin, which combined Merck’s Zocor and Schering’s Zetia.
The clinical drug trial, known as Enhance, sought to determine whether adding Zetia to less-expensive Zocor helped lower atherosclerosis more than Zocor alone. Investors claimed Enhance was an “unqualified disaster,” showing no benefit to Vytorin in slowing atherosclerosis compared to Zocor. Investors said Merck withheld those findings for a year before releasing top-line results on Jan. 14, 2008, and full results on March 30, 2008.
“It’s a terrific settlement,” said Daniel Berger, an attorney for investors at Grant & Eisenhofer PA. “When you have material information about the results of a drug trial on an important product, you’re required to disclose it so that investors can make an informed decision.”
Merck, based in Whitehouse Station, New Jersey, said holders of Schering-Plough securities will receive $473 million and holders of Merck securities will get $215 million, according to the statement. Merck said it will record a charge of $493 million, which reflects anticipated insurance recoveries of $195 million.
Merck “continues to believe that both companies acted responsibly in connection with the Enhance study, and this agreement contains no admission of liability or wrongdoing,” according to the statement.
“This agreement avoids the uncertainties of a jury trial and will resolve all of the remaining litigation in connection with the Enhance study,” Merck General Counsel Bruce N. Kuhlik said in the statement.
Merck expects to receive court approval within about eight months, Ron Rogers, a Merck spokesman, said today.
Merck’s lead trial attorney was Theodore V. Wells Jr. of Paul Weiss Rifkind Wharton & Garrison LLP.
The lead investors in the litigation included public pension systems in Massachusetts, Arkansas, Louisiana, Mississippi, Detroit and Jacksonville, Florida.
“Hopefully, this will serve as a deterrent in the pharmaceutical industry,” said investor attorney Salvatore Graziano of Bernstein Litowitz Berger & Grossmann LLP. “It continues to be a widespread problem that companies report good results in clinical drug trials quickly and delay or don’t report at all adverse results.”
Worldwide sales of Zetia were $2.57 billion last year, while Vytorin generated $1.75 billion in sales, Rogers said. Sales of Vytorin have been falling because of questions about its effectiveness.
The case is In re Schering-Plough Corp./Enhance Securities Litigation, 08-cv-397, U.S. District Court, District of New Jersey (Newark).
To contact the reporter on this story: David Voreacos in Newark, New Jersey, at firstname.lastname@example.org