ARTHRITIS DRUG Merck recalls Vioxx; stock price plunges

In 2003, the arthritis drug had $2.5 billion in sales.
TRENTON, N.J. (AP) -- Pharmaceutical giant Merck & amp; Co. is pulling its blockbuster arthritis drug Vioxx from the market worldwide because new data from a clinical trial found an increased risk of heart attack and stroke. Its stock price plunged more than 25 percent as the company said the recall will hurt its earnings.
Merck said today that data from the trial showed the increased risk of heart attack and other cardiovascular complications began 18 months after patients started taking Vioxx.
The data come from a three-year study aimed at showing that Vioxx at a 25 milligram dose prevents recurrence of polyps in the colon and rectum. Such polyps can turn cancerous. The trial was stopped after Merck discovered the higher heart risk compared with patients taking dummy pills.
"It's a disaster for Merck, coming at the worst time," said independent health-care analyst Hemant Shah of HKS & amp; Co. in Warren, N.J.
Vioxx is one of Merck's most important drugs, with $2.5 billion in sales in 2003. But sales dipped 18 percent in the second quarter of this year to $653 million, partly due to increasing concerns about the drug's safety.
"We're taking this action because we believe it best serves the interest of patients," Ray V. Gilmartin, Merck's chairman, president and chief executive, said in a prepared statement.
"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," he said.
Shares dropped
Merck, the world's third-biggest drug maker, announced the news before the stock market opened. In early trading on the New York Stock Exchange, Merck shares plunged $11.40, or more than 25 percent, to $33.67.
The analyst Shah said the withdrawal of Vioxx comes "at a time when they really need to get ready for expiration" of its patent for Zocor, a high cholesterol drug which is Merck's top-selling drug. Zocor loses patent protection early in 2006 and sales are expected to plunge when generic competition begins.
In an effort to replace those revenues, Merck recently launched a drug with partner Schering-Plough Corp., Vytorin, that combines Zocor and Schering-Plough's Zetia to attack cholesterol levels in two complementary ways.
"This makes it almost inevitable for the company to find a merger partner for them to continue to grow," Shah said.
Helps out rival
Merck's announcement stands to benefit rival Pfizer Inc., the world's biggest drug maker. The two companies have been battling for market share, with Pfizer's Celebrex dominating the market with about $5 billion in U.S. sales alone last year. Pfizer shares were up 68 cents, or more than 2 percent, to $30.86 in early trading on the NYSE.
"I think Celebrex sales are going to significantly increase," Shah said.
Vioxx, launched in the United States in 1999, and a successor drug called Arcoxia, approved in some other countries and awaiting Food and Drug Administration approval here, are part of a class of anti-inflammatory drugs heavily touted by the pharmaceutical industry as being more effective and having less side effects, particularly on the gastrointestinal system, than older drugs.
Drug costs
Pfizer's Celebrex and its successor drug, Bextra, which already is on the market in the United States, also are in that class, called cox-2 inhibitors.
"This has never been the massive innovation which was promoted to be," Shah said of the drug class. "In terms of pain relief, these drugs are no better than ibuprofen and they cost 10, 15 times more."
He said it is possible the news, along with some prior reports about heart risk and gastrointestinal bleeding linked to the drugs, could push some patients to go back to older, cheaper drugs.
Shah also said physicians prefer ibuprofen more than Celebrex and Vioxx combined.
The company said the Vioxx recall will slash about 50 cents to 60 cents a share from its earnings for the rest of this year. That includes foregone sales, write offs of inventory held by Merck, customer returns of product previously sold and other costs of the pullback. Merck expects foregone fourth quarter sales of Vioxx of $700 million to $750 million alone.
Merck, which is based in Whitehouse Station, N.J., had previously been expecting 2004 earnings per share of $3.11 to $3.17.
Merck is scheduled to release financial results for the third quarter, which ends today, on Oct. 21.