Merck defends its Vioxx strategy

The U.S. Justice Department has launched a criminal probe and the U.S. Securities and Exchange Commission has started an informal investigation of Merck after the recall of Vioxx. U.S. regulators estimate that Vioxx may have contributed to 27,785 heart attacks and deaths so far.

Another new development is the interview by Dr. Eric Topol, the Cleveland Clinic's chairman of cardiovascular medicine, who told the CBS news program "60 Minutes'' recently that Merck should have acted as early as 2000 since other studies had raised doubts about the drug. In other reports it has been reported that marketing executives at Merck prevailed and did not let the bad news out for four years.

Vioxx generated $2.5 billion in sales for Merck last year, about 11 percent of total revenue, and belongs to the category of what the pharma industry calls as the blockbuster drugs.

Merck CEO Gilmartin has taken a more active and aggressive role in defending Merck by issuing statements and in speaking to the press. Only time (and the hearings during the trial of thousands of lawsuits related to Vioxx) will tell if he is speaking the truth but such a stance is definitely not helping Merck create a great relationship with consumers (its ultimate customers who will buy other drugs from Merck) and investors.

Merck continues to hurt in the stock market as investors are not convinced that the company will survive the thousands of lawsuits. Experts estimate that Merck's liabilities may be as high as $18 billion and with the continued decline in stock price (the current price is ~$27 as compared to the pre-announcement price of ~$45) and distraction that the company will face in coming months, it would not be a surprise that Merck may become an acquisition target by another drugmaker.