$688 Million “ENHANCE” Settlement Could Pull Merck’s Q4, 2012 EPS By 16 Cents

Boston, MA 02/14/2013 (wallstreetpr) – The renowned healthcare solution provider, Merck & Co Inc., (NYSE: MRK) have settled two US investor-lawsuits for $688 million, it declared yesterday. The company was sued by several of its institutional investors (pension funds) in a class action lawsuit over knowingly withholding information about the potential of failure in another lawsuit which was later, more popularly named as ENHANCE.

The pension funds alleged the company knew it was going to lose the case, at least a year before the final adjournment of the case causing the pension fund losses which could have been avoided if the probability of failure was disclosed honestly and in time.

The ENHANCE lawsuit was filed in February, 2008 by a couple who were common shareholders of the Schering Plough Corp., which later became part of Mreck in November 2009. Both companies were marketing two anti cholesterol drugs Vyotrin and Zetia under a joint venture. Vyotrin controls the cholesterol production in human liver while Zetia stops the absorption of cholesterol present in food.

The plaintiffs in that case accused the company did not disclose the negative results of clinical trial of its anti cholesterol medicine; in a study called ENHANCE. The said study revealed that Vyotrin, a high priced anti- cholesterol drug made and marketed by Merck & Co Inc., (NYSE: MRK) was no better than its generic component called Zocor. After the death of one of the initial plaintiffs, their pension fund took charge as the plaintiff in the case.

The detailed results of the study were published at The American Conference of Cardiology on March 31st that year. Following the disclosure the company’s shares plunged nearly 15%.

According to the law firms representing the plaintiffs the two  settlements tantamount to the at least the tenth largest settlement granted in a securities class action lawsuit which was not related to the restatement of accounting results.

Merck & Co Inc., (NYSE: MRK) stated it has booked a charge of $493 million as a provision for the settlement costs excluding taxes, This will have a retrospective impact as its Q4-2012 EPS of 46 cents a share will decline to 30 cents a share .

The merged company will have to pay $215 million against its own defendants and another $473 million on behalf of Schering Plough which is now a part of its merged operations.

The settlements await the approval from the court.

Last day the company also announced its Q1, 2013 EPS will be slashed by 5 cents due to the restatement of local balance sheet for Venezuela, a designated hyper-inflationary economy since 2010. The Venezuelan government devalued its currency on February 8th; 1USD will now cost VEF6.30 instead of VEF4.30.

Shares of Merck & Co Inc., (NYSE: MRK) were down by 0.66% and currently trading at $40.88

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Published by Brendan Byrne

While studying economics, Brendan found himself comfortably falling down the rabbit hole of restaurant work, ultimately opening a consulting business and working as a private wine buyer. On a whim, he moved to China, and in his first week following a triumphant pub quiz victory, he found himself bleeding on the floor based on his arrogance. The same man who put him there offered him a job lecturing for the University of Wales in various sister universities throughout the Middle Kingdom. While primarily lecturing in descriptive and comparative statistics, Brendan simultaneously earned an Msc in Banking and International Finance from the University of Wales-Bangor. He's presently doing something he hates, respecting French people. Well, two, his wife and her mother in the lovely town of Antigua, Guatemala. You may contact Brendan via his email (brendanbyrne@wallstreetpr.com) or his Google+ page (https://plus.google.com/u/0/116608759701551457422).