NEW YORK – Shares of Merck & Co. fell on Monday after a $253 million jury award in the first of possibly thousands of lawsuits the drug maker faces over its popular pain killer Vioxx (search).
Merck (MRK) was off 65 cents, or 2.32 percent, at $27.41 in midday trading on the New York Stock Exchange.
The drugmaker was found negligent on Friday in the death of a man who took Vioxx, and his widow was awarded damages by a Texas jury. The company's stock fell 7.7 percent on Friday on concerns it could set a precedent for the more than 4,200 lawsuits charging Merck hid the drug's health risks.
Merck said it would appeal the verdict.
Investors said they were concerned that Vioxx-related litigation could drag on the company for three to five years, and eventually pressure Merck's solid dividend payment.
Vioxx is a major distraction for management, which should be focused on getting Merck's faltering drug pipeline back on track, said Robert Millen, a partner at Jensen Investment Management Inc., a long-time Merck holder that sold its shares when the company announced it was withdrawing Vioxx last year.
Until Merck gets Vioxx behind it, possibly through a global settlement, there is too much uncertainty, he said.
"If they can get that distraction behind them, they can get that dollar number behind and in the meantime, hopefully, we'll see some signs of improvement in their pipeline," Millen said.
"Then they can focus all of their efforts growing their business again," he added. "Then it might be a stock that's worthy of investment."
Credit Suisse First Boston raised its rating on the company to "neutral" from "underperform," based on the stock's valuation. However, CSFB doubled its estimate for potential liabilities to $10 billion.
Brokerage A.G. Edwards said the verdict raised questions about Merck's dividend policy going forward, but other analysts said Merck would maintain its dividend.
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