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In what may be the largest settlement ever in securities class action litigation involving a pharmaceutical company, Merck has agreed to a combined settlement of $688 million to settle two related securities class action cases. The company's February 14, 2013 press release announcing the settlements can be found here.
The lawsuits relate to alleged representations concerning the anti-cholesterol drug Vytorin. The drug was marketed through a joint venture between Merck and Schering-Plough. The shareholder claimants allege that the companies and certain of their directors and officers withheld information relating to poor clinical trial results while continuing to promote the drug's benefits.
According to the company's press release, the company will pay $215 million to resolve the claims against the Merck defendants and $473 million to resolve the claims against the Schering-Plough defendants. The company also announced that it would take a pre-tax and after-tax charge of $493 million, which the company indicated "reflects anticipated insurance recoveries." (Although it is not entirely clear, the company statement about the charge suggests that the company "anticipate" insurance recoveries of $195 million, possibly under the insurance programs of the two companies).The settlements are subject to court approval.
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Read other items of interest from the world of directors & officers liability, with occasional commentary, at the D&O Diary, a blog by Kevin LaCroix.
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