Merck Resolves Securities Class-Action Suit Related to ENHANCE, to Record $493M Charge

Merck (NYSE: MRK) known as MSD outside the United States and Canada, announced today thatit has reached an agreement in principle with plaintiffs to resolve twofederal securities class-action lawsuits. The suits are pending in the U.S.District Court for the District of New Jersey against Merck, Schering-PloughCorporation and certain of their current and former officers and directors.Under the proposed agreement, which will have no impact on Merck's 2013results of operations, the company will pay $215 million to resolve thesecurities class action against all of the Merck defendants and $473 millionto resolve the securities class action against all of the Schering-Ploughdefendants. In connection with the settlement, Merck recorded a pre-tax andafter-tax charge of $493 million, which reflects anticipated insurancerecoveries. This charge reduced the company's previously reportedfourth-quarter 2012 GAAP (generally accepted accounting principles) EPS(earnings per share) results from $0.46 to $0.30 per share and full-year 2012GAAP results from $2.16 to $2.00 per share, but did not change its previouslyreported non-GAAP results.The plaintiffs are investors who purchased certain securities issued by Merckand Schering-Plough between December 2006 and March 2008 and claim that theylost money when the results of the ENHANCE trial were published in early 2008.Merck continues to believe that both companies acted responsibly in connectionwith the ENHANCE study, and this agreement contains no admission of liabilityor wrongdoing. The agreement is subject to court approval.“This agreement avoids the uncertainties of a jury trial and will resolve allof the remaining litigation in connection with the ENHANCE study,” said BruceN. Kuhlik, executive vice president and general counsel of Merck. “We believeit is in the best interests of the company and its shareholders to put thismatter behind us, and to continue our focus on scientific innovations thatimprove health worldwide.”Judge Dennis M. Cavanaugh is presiding over the cases. Merck is represented byTheodore V. Wells, Jr. and Daniel J. Kramer of Paul, Weiss, Rifkind, Wharton &Garrison LLP.