Healthy Skepticism Library item: 7237
Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.
Publication type: news
Kirdahy M.
Vioxx Not Merck's Only Problem
Forbes.com 2006 Nov 8
http://www.forbes.com/2006/11/08/merck-vioxx-taxes-markets-equity-cx_mk_1108markets03.html?partner=yahootix
Abstract:
Investors went sour on Merck Wednesday when the pharmaceutical beast disclosed four separate tax disputes in the U.S. and Canada with potential liabilities of $5.58 billion. That’s in addition to the pending lawsuits the company has yet to settle regarding its painkiller Vioxx.
Shares of the Whitehouse Station, N.J.-based Merck slipped 3.25%, or $1.49, in midday trading Wednesday, partly due to the Democrats taking the House majority this election. The Democrats favor lower, more affordable prescription drugs.
Merck said it is fighting the tax disputes, which were detailed in a quarterly filing with the Securities and Exchange Commission.
“Management currently believes that the resolution will not have a material adverse effect on the company’s financial position or liquidity,†Merck said in the filing.
The company, however, cautioned that an unfavorable resolution could affect results in a quarter in which it is recorded.
“I wouldn’t declare this a major problem yet,†said Les Funtleyder, an analyst at Miller Tabak & Co. “The numbers are big and when you get numbers that big it can be a little scary. I don’t know, and no one will know, the final impact until Merck sits with the IRS and comes to some resolution or they go to court.â€
The analyst said Merck certainly has enough on its balance sheet to cover a substantial loss.
As of Sept. 30, Merck had $15.22 billion in current assets, including $6.22 billion in cash.
Of the $5.58 billion in potential liabilities disclosed Tuesday, Merck had previously disclosed $2.3 billion related to a partnership deal dating back to 1993, according to an article in The Wall Street Journal.
According to Merck’s SEC filing, the Canada Revenue Agency issued the company a notice on Oct. 10 for $1.76 billion in back taxes and interest “related to certain intercompany pricing matters.”
Merck already faces liabilities that could reach tens of billions of dollars related to Vioxx, the painkiller it withdrew from the market in September 2004 after evidence showed that it increased the risk of heart attacks and strokes. Merck has been fighting the cases one by one. It has won five cases and lost four.
