Merck, the world’s third biggest drugmaker by revenue, is restating previously reported financial results due to the settlement. It’s one of the biggest recoveries ever in a securities fraud case that didn’t have a government finding of wrongdoing, according to law firms representing a number of large pension funds that brought the suit.
Merck said in a statement Thursday that as a result of the agreement in principle, it is taking a charge of $493 million. The company also reduced its 2012 fourth-quarter results to 30 cents per share from 46 cents per share, and its 2012 results to $2 per share from $2.16 per share.
The delay in releasing results of a study that was meant to bolster sales of the pricey cholesterol pills, Zetia and Vytorin, triggered criticism by analysts, investors, some scientists and the media — and ultimately an investigation by Congress.
Merck and its then-partner Schering-Plough, which it later acquired, for about two years had delayed disclosing results of the study, known by the acronym ENHANCE. It tested how well Vytorin and Zetia reduced plaque buildup in neck arteries of patients with high cholesterol. The drugs had already been on the market for a few years, and together generated billions in annual sales for the two New Jersey drugmakers.
The study was intended to give the pills a bigger edge over rival medicines in the huge market for cholesterol drugs, by showing that besides controlling cholesterol, the pills prevented it from clogging arteries — and presumably from causing heart attacks and strokes. But imaging of neck arteries of ENHANCE study participants showed that Zetia and Vytorin, which is a combination of Zetia and a generic version of Merck’s older cholesterol pill Zocor, didn’t work any better than cheap generic Zocor did alone.
When Merck in early 2008 finally released the ENHANCE study results, Merck stock tumbled, causing big losses for investors, and sales of the two pills declined in the U.S.
Merck, which is based in Whitehouse Station, N.J., said it agreed to the settlement because it’s in the best interest of the company and current shareholders. It admitted no wrongdoing.
The settlement comes less than three weeks before the case was to come to trial. It had been scheduled to begin on March 4, before U.S. District Judge Dennis M. Cavanaugh in Newark. Cavanaugh must approve the settlement.
Merck shares fell 29 cents to $40.86 in midday trading. They have traded in a 52-week range of $36.91 last March to $48 in mid-October.