Why I Shorted MRK: The Math $1Trillion

Discussion in 'Stocks' started by fxpeculator, Aug 19, 2005.

Is Merck a short Here?

  1. Yes, this is a short, clear as day, this is a potent downside catalyst

    23 vote(s)
    39.0%
  2. Yes, shorted also, was a great trade

    6 vote(s)
    10.2%
  3. Not ashort, Dividend is worth the risk, I say Long

    8 vote(s)
    13.6%
  4. This is not a short, Normal Overreaction today

    7 vote(s)
    11.9%
  5. I am staying on the sidelines, no bias long or short

    9 vote(s)
    15.3%
  6. I would not be Greedy and take profits Monday morning

    6 vote(s)
    10.2%
  1. 4200 Lawsuits X253M (Todays Award)=1 Trillion! This is the risk here!

    Mercks Market Cap was 61.61B!

    It is not reasonable to think every suit will win or even go to trial. Even better, Merck may settle for a much lower amount per suit.

    At the minimum, I see a $500 billion risk here and although i was tempted to take profits into the close, I say this goes into the teens. It snaps 25.60 and keeps plunging!

    Also, there is risk of a criminality element here.
     
  2. i think where it trades monday will depend on how the gurus spin it in the weekend papers but longer term it looks bad for mrk.
     
  3. isnt 1 trillion by 4000*254million?
     
  4. Why don't you just say that Merck will fork over the entire USA GDP to these greedy lawyers/claimants?

    I don't give a crap either way but this is an example of why medications are so ridiculously expensive. What a crooked system!


     
  5. Jury Finds Merck Liable in Vioxx Death

    By GARY MCWILLIAMS
    Staff Reporter of THE WALL STREET JOURNAL
    August 19, 2005 5:08 p.m.

    ANGLETON, Texas -- Merck & Co. was found negligent in the death of a 59-year-old triathlete who used Vioxx, a prescription painkiller taken by more than 20 million Americans before it was linked to heart attacks. The jury awarded the man's widow $24 million in actual damages, plus $229 million in "exemplary," or punitive damages, for a total of around $253 million.

    A jury of seven men and five women ruled against Merck on each of three key questions. They found Merck failed to warn doctors of the Vioxx's danger, that the drug was improperly designed, and that Merck's negligence caused Robert Ernst's death. Merck plans to appeal.

    WALL STREET JOURNAL VIDEO




    The plaintiff in the Vioxx trial, Carol Ernst, and her attorney Mark Lanier comment on the jury's ruling that Merck is liable in the death of a triathlete who used the drug. Plus, Merck's lead attorney Jonathan Skidmore answers questions about plans to appeal the ruling. CNBC's Maya Kulycky reports from the court house on the jury's.



    Mark Lanier, attorney for Carol Ernst, widow of Robert Ernst, slammed papers down and shouted "Yes!" when the judge read the punitive damages. Mr. Lanier told reporters, referring to the jury: "These people are good, solid people. They know right and they know wrong. It sends the message that the drug companies must tell us the good the bad and the ugly."

    Merck shares dropped $2.35, or 7.7%, to $28.06 at 4 p.m. on the New York Stock Exchange in the wake of the verdict. The company lost 27% of its value on a single day last year when the company acknowledged Vioxx increased the risk of heart attack and sudden cardiac death and pulled the drug from the market.

    The decision came midway through the second day of deliberations in this closely watched trial. The case is the first to go to trial of more than 4,000 lawsuits alleging injuries from Vioxx. Analysts have speculated Merck's liability could reach $18 billion.


    Plaintiff Carol Ernst


    In a statement, Merck said the plaintiff "did not meet the standard set by Texas law to prove Vioxx caused" the death of Mr. Ernst. Merck said it is "examining various bases for appeal," including that certain testimony presented to the jury was by "unqualified experts." Corporate defendants usually are successful in lowering jury damages or at least settling for a lower amount before the cases reach an appeals court. (See Merck statement.)

    Merck reiterated that it will fight individual Vioxx cases "one by one over the coming years."

    The case, Carol A. Ernst v. Merck & Co. Inc., in District Court of Brazoria County, Tex., had been considered a challenge for the plaintiff because Mr. Ernst's death certificate said he died of an arrhythmia, or irregular heartbeat.

    Merck voluntarily removed Vioxx from the market last September after a study linked Vioxx to a higher rate of heart attacks and strokes after 18 months. Merck argued in the trial that there was no evidence linking Vioxx to arrhythmias, so it couldn't have caused Mr. Ernst's death.


    Mr. Lanier, the attorney for the plaintiff, argued that Vioxx led to a heart attack that caused the arrhythmia, but that the clot had been dissolved or dislodged by the time of the autopsy.

    The verdict is particularly nettlesome for Merck because it sends a signal that plaintiffs may not need a heart attack or stroke to successfully sue Merck—any heart problem will do. More than 20 million Americans took Vioxx while it was on the market, and more than 4,000 lawsuits have been filed against Merck. Thousands more were expected, even before Friday's verdict.

    Before the trial, analysts had estimated Merck's liability from Vioxx at $4 billion to more than $20 billion.

    Write to Gary McWilliams at gary.mcwilliams@wsj.com

    http://online.wsj.com/article/0,,SB112447069284018316,00.html?mod=home_whats_news_us
     
  6. I was too timid, I only shorted 800 shares, but I regret not holding 200 short going into the weekend. You know a ton of downgrades may follow and MRK can gap much lower on Monday. A lot of pharma analysts will be putting in a ton of OT tonight.
     
  7. Sell off seems a tad overdone. Look at the tobacco lawsuits for example, and there are way more smokers than people who were potential harmed by Vioxx....MO still trades at $65+.

    I see MRK hit some kind of previous support level on daily chart.
    Perhaps it'll whipsaw back up if people think this is just an initial reaction?
     
  8. JORGE

    JORGE

    Not sure how long you've been trading, but you might want to look back at MO from late 98 to 00 (-70%), when the company was losing one verdict after another. I remember more than one analyst believed bankruptcy was a real possibility in early 2000.

    While MRK may provide a few trading opportunities short term, I would wait for some type of settlement plan before looking for a meaningful rebound. This thing could break 20 before all is said and done.
     
  9. I wasn't trading back then , but I pulled up a chart of XLP -

    XLP CONSUMER STAPLES SPDR
    "The fund invests in the development and production of consumer products that cover food and drug retailing, beverages, food products, tobacco, household products, and personal products. "


    MO is a diverse company, food products etc.

    Below is XLP chart for 99, 00, +

    Looks like whole sector was under pressure at that time. But I do recall how MO fell from the 40's down to $20 or $25.
     
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  10. brokers defending after the close. " Dividend will support $27 to remain cautious. " I know you're all surprised.

    It'll just make the collapse worse- slower and worse. I'm holding the weekend, and i don't do that often anymore.
     
    #10     Aug 19, 2005