Investing in Pharmaceutical stocks is always risky and comes with a big disadvantage as how anyone supposed to anticipate the right price for a stock like Merck’s, when the company is facing potential legal liability estimated as high as one-fourth of its entire value in vioxx settlements.Remember the predictions that the liability could run anywhere from $4 billion to $18 billion? It is glad that Merck had fallen on the lower side of settlement i.e. $4.5 billion.
Merck’s Vioxx settlements are far less compared to asbestos or tobacco law suits.Merck made its money from initial launch of Vioxx but discovering the trials result of heightened risk of diseases they were able to quickly remove Vioxx from pharmacies.This prevented extended damage.If you see their stock growth it is consistent over last two years.
What other investments does Merck is into these day ? It has been quietly building a cancer franchise since it bought gene-chip maker Rosetta InPharmatics several years ago for $600 million.Recently it announced a $1billion investment in cancer pill which will be jointly developed with Ariad Pharmaceuticals.
This settlement news comes at a good point and may be a best time for stock investors to grab some of the Merk stocks that are currently priced at $57.33 (Nov’9).