Merck agrees to $4.85B Vioxx settlement

— -- If certain conditions are met, the company said it would pay the settlement amount into a fund to pay the claims of qualifying victims, with the first payments to start as soon as August 2008.

The deal, if finalized, could largely quell legal and financial uncertainty that began swirling around Merck in 2004, when the company pulled Vioxx off the market in response to a scientific test that showed the painkiller doubled the risk of heart attack or stroke in some circumstances.

"This is a good and responsible agreement that will allow the company to concentrate even more fully on its mission of discovering, developing and delivering novel medicines and vaccines," Merck CEO Richard Clark said in a conference call with Wall Street analysts and media reporters.

Investors appeared to agree, sending Merck shares up nearly 5% on a down day for stocks.

Under the deal, Merck would set up two funds for Vioxx lawsuit plaintiffs who suffered either a heart attack or stroke. The first, for $4 billion, would cover those who suffered myocardial infarctions, or heart attacks. The second, for $850 million, would cover those who suffered ischemic strokes.

The deal, which attorneys said was signed before dawn Friday in New Orleans, requires that law firms coordinating much of the Vioxx litigation recommend participation to all clients who suffered a heart attack or stroke. The agreement would become final only if 85% of the plaintiffs drop their lawsuits and participate.

"I don't think anybody's going to opt out, because it's a very fair deal for both sides," says Jere Beasley, one of the lawyers who negotiated the deal during roughly 50 bargaining sessions over the last two months.

"Most important from our perspective, the victims will be compensated for their injuries," says Beasley. "And from Merck's perspective, this ends the litigation, which should make their shareholders happy."