Merck Pulls Vioxx Painkiller From Market, and Stock Plunges

September 30, 2004

By TERENCE NEILAN

Merck & Company announced today that it was immediately pulling its arthritis and acute pain medication Vioxx from the worldwide market after data from a clinical trial showed that the drug produces an increased risk for heart attacks and strokes.

"We are taking this action because we believe it best serves the interests of patients," Merck's chairman, president and chief executive officer, Raymond V. Gilmartin, said.

"Although we believe it would have been possible to continue to market Vioxx with labeling that would incorporate these new data, 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," Mr. Gilmartin said in a statement posted on the New Jersey-based company's Web site.

The recall represents a big blow for Merck, with Vioxx accounting for $2.55 billion in sales in 2003. Merck's shares plunged at the opening bell on the New York Stock Exchange this morning, falling more than $12, to as low as $32.46, and closed only slightly higher, at $33, down $12.07, or 26.78 percent on the day. As a result, the company's market capitalization was reduced some $25 billion.

Shares of Pfizer, maker of Celebrex, Vioxx's main competitor, surged $1.24, to $31.25, at the opening, but gave up most of that gain to close at $30.60, up 42 cents, or 1.39 percent.

A Merck company spokesman, Tony Plohoros, said there were two million current users of Vioxx worldwide and that 84 million prescriptions had been written for the drug since 1999.

Merck said the Vioxx cardiovascular risk came to light during a three-year trial to evaluate the drug's effect in helping patients with colon cancer. The company found that after 18 months of treatment, patients taking Vioxx were at greater risk for heart attacks compared with those taking a placebo.

At a news conference in New York this morning, Merck officials said they received the data from the trial last Friday and examined it over the weekend, consulting with various medical experts.

Company officials informed the board of directors Tuesday morning, and later met with the F.D.A. to inform it of their intentions. The company then notified other regulatory agencies around the world.

There were already suggestions of cardiovascular risks linked to Vioxx going back to 1999, when the drug was introduced to the American market, an industry analyst, Barbara A. Ryan of Deutsche Bank, said.

And in 2002, the company changed the label on the drug to include information about higher risks of heart attacks for Vioxx patients, compared with the risk in patients taking an older painkiller, naproxen.

The recall comes at a time when Merck's overall sales have been sluggish, and just two years before the company is to lose patent protection on its biggest-selling drug, the cholesterol fighter Zocor, in 2006.

At the news conference, Mr. Gilmartin asserted that Merck remained "very strong financially" that there would be no need to close any plants as a result of the Vioxx action. "We had anticipated expanding the sales forces," he said. "This will allow us to redeploy our sales force instead of hiring new employees."

But he acknowledged that he expected some people to leave the company. In reply to a question, he said he would not resign.

Mr. Gilmartin said he expected earnings per share to be "negatively affected by 50 to 60 cents" a share, and as a result, the third-quarter earnings estimate would be scaled back.

Ms. Ryan, the managing director of Deutsche Bank, in Greenwich, Ct., said she estimated that today's action would cost Merck "anywhere from 60 to 75 cents a share" in earnings next year, or a drop from a forecast level of $3.25 a share to about $2.50 or more, depending on the company's ability to cut costs.

"Originally in our model we had net income of about $7.2 billion," Ms. Ryan said, adding that the new forecast would result in earnings dropping to about $5.6 billion.

There is now legitimate concern about today's action being viewed as "a black eye" for the whole class of arthritis-pain drugs known as Cox-II, Ms. Ryan said.

But she said that the longstanding concerns about Vioxx did not exist for Celebrex, which has been "held to the same kind of standard and study." That suggested the same concerns are not an issue for Pfizer, which could pick up some of the lost Merck earnings.

Users have been told that they can stop using Vioxx with little or no problem, and that over-the-counter drugs like Ibuprofen are just as effective in fighting pain.

Merck officials declined today to speculate on potential litigation against the company or the impact it might have.

Mr. Gilmartin said Merck would undertake "many pro-active steps" to inform patients of the recall, including placing advertisements in newspapers. Information can be found on the Web sites merck.com and vioxx.com.

The Merck clinical trial confirmed the findings of a Food and Drug Administration investigator who reported similar risks with the drug in August.

The difference in heart risk was statistically significant between a recommended dose of Vioxx, 25 milligrams a day or less, and Celebrex, according to results that the investigator, Dr. David Graham, presented on Aug. 25 at a conference in France of the International Society for Pharmacoepidemiology.

The study also found that Vioxx doses in excess of 25 milligrams a day more than tripled the risk, compared with patients who had not taken painkillers within the past two months.

He said his findings did not reflect the F.D.A.'s official position.

The acting F.D.A. commissioner, Dr. Lester M. Crawford, said in a statement today that "Merck did the right thing by promptly reporting these findings to F.D.A. and voluntarily withdrawing the product from the market."

"Although the risk that an individual patient would have a heart attack or stroke related to Vioxx is very small," Dr. Crawford said, "the study that was halted suggests that, over all, patients taking the drug chronically face twice the risk of a heart attack compared to patients receiving a placebo."

At the time of Dr. Graham's investigation, Merck disagreed with the results of the study, a spokeswoman, Mary Elizabeth Blake, said. Conclusions from that type of examination do not carry as much weight as results from a study comparing two groups of patients actually taking the medicines for a set period, she said.

Vioxx has been marketed in more than 80 countries, Merck said. In some countries, the product is marketed under the trademark Ceoxx. Worldwide sales of Vioxx in 2003 amounted to roughly 11 percent of Merck's $22.5 billion in sales that year.

"While the cause of these results is uncertain at this time, they suggest an increased risk of confirmed cardiovascular events beginning after 18 months of continuous therapy," Peter S. Kim, president of Merck Research Laboratories, said in the Web site statement. "While we recognize that Vioxx benefited many patients, we believe this action is appropriate."