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Wall Street Batters Merck

Some analysts said yesterday that the study that prompted Vioxx's recall may slow the approval of Arcoxia, which is a similar drug, and they are concerned about potential lawsuits from patients. Since Vioxx was introduced in 1999, about 84 million prescriptions for the drug have been written.

"The litigation risk is real," Goldman Sachs analyst James Kelly said. "We believe that Merck has taken rigorous, appropriate steps in the last week given this data. The battle will be fought on whether the earlier clinical trials should have driven Merck to a decision earlier."

About 64 million Vioxx prescriptions have been written since 1999. (Mary Altaffer -- AP)

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Merck first alerted the FDA to a link between Vioxx and heart attacks in 2000, but regulators said Thursday that they determined at the time that a warning on the drug's packaging was sufficient.

In the largest previous pharmaceutical recall, Bayer AG paid more than $1 billion to settle nearly 3,000 lawsuits stemming from its 2001 decision to take the cholesterol drug Baycol off the market. Wyeth has set aside $16.6 billion to deal with product liability claims stemming from its diet drugs, popularly known as fen-phen.

"While Merck shares appear cheap, we see no reason to bottom-fish here. In our view there are no meaningful catalysts in the near term, and there are still many significant hurdles for Merck," First Albany Capital Inc. analyst Adam Greene wrote in a report published after the announcement.

The Vioxx announcement also sparked scrutiny of an unusual spike in Merck options Wednesday. The overall volume of Merck options -- contracts that give the buyer the right to buy or sell shares at a certain price at a certain date in the future -- was 10,125, slightly below this year's average of 12,000 contracts a day, said Pam Tvrdy, spokeswoman for the Options Clearing Corp.

But 2,900 of the options that changed hands Wednesday were "puts," allowing the owners to sell Merck shares at $42.50 on Oct. 16, more than 22 times the average daily volume for that type of contract, according to Bloomberg. The price of that contract rose from 10 cents Wednesday to more than $10 after the Vioxx announcement.

A spokesman for the Chicago Board Options Exchange said the exchange's department of market regulation reviews all unusual trading but does not comment on particular investigations. The Securities and Exchange Commission also investigates when there are unusual patterns in stock or options trading.

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