NEW YORK, Sept. 30 -- Shares of Merck and Co. plunged nearly 27 percent Thursday on news that the pharmaceutical giant was pulling the popular arthritis pain medication Vioxx off the market in the largest drug withdrawal in U.S. history.
Merck announced it was withdrawing Vioxx, which had $2.5 billion in worldwide sales last year, because of studies that found that the drug increases the risk of heart attack and stroke after 18 months of continuous use. Merck shares fell $12.07, to $33.00, erasing more than $26 billion in market value.
About 64 million Vioxx prescriptions have been written since 1999.
(Mary Altaffer -- AP)
The New Jersey-based Merck is one of the nation's most widely held stocks, particularly by mutual funds, and the announcement dragged the market benchmarks down with it. The Dow Jones industrial average and the Standard & Poor's 500-stock index both closed slightly lower but would have been up for the day if not for Merck. The Nasdaq composite index ended the day slightly higher.
"Really, the market was okay, except for Merck," said Andrew M. Brooks, head of stock trading at T. Rowe Price Associates Inc.
Merck rival Pfizer Inc., which makes competing medications Celebrex and Bextra, closed at $30.60, up 42 cents, or 1.39 percent.
The recall is likely to cut Merck's fourth-quarter sales by more than $700 million and shave 50 to 60 cents off Merck's earnings per share for the year, Chief Financial Officer Judy C. Lewent said at a news conference, according to a copy of her prepared remarks. The company had predicted earnings of $3.11 to $3.17 per share. Vioxx, which Merck sells for about $2.70 for a 25-milligram daily dose, is one of a class of painkillers known as Cox-2 inhibitors. It was the firm's fourth-biggest seller last quarter, said spokesman Tony Plohoros.
"The action we are taking is without question what is best for patients. That is always what is paramount for Merck," Lewent said. She said the company expects customers to return about one month's worth of the medication for refunds.
Merck was already facing serious concerns. The patent on Zocor, the cholesterol-reducing drug that is Merck's top seller, expires in 2006, and a recent study called into question the drug's benefit for patients who have had heart attacks.
"The action could not have come at a worse time," Morgan Stanley analysts wrote in a report Thursday. But they noted that the firm's shares are trading at less than 13 times earnings, lower than some of its competitors. "The sell-off may be overdone," they wrote.
Merck has a new arthritis pain drug in the works, Arcoxia, which was submitted to the Food and Drug Administration at the end of 2003, and analysts have high hopes for Zetia, a cholesterol absorption inhibitor that was developed in a joint venture with Schering-Plough Corp.