Merck Securities Litigation

The Situation

Merck & Co. Inc. (“Merck”) was sued on behalf of investors in a securities class action. Plaintiffs alleged that Merck had provided false assurances regarding the cardiovascular dangers of Vioxx, a drug that Merck was developing and ultimately brought to market. Plaintiffs argued that Vioxx should never have been brought to market and that the prices of Merck’s securities were inflated because investors were misled as to the commercial viability of Vioxx.

NERA's Role

NERA Senior Vice President Dr. David Tabak was retained by counsel for investors to provide opinions relevant for market efficiency and damages. Dr. Tabak submitted written testimony finding that the markets for Merck’s common stock and options were efficient, a prerequisite for the most common method of obtaining class certification. Dr. Tabak also testified about his findings in deposition. For the damages portion of the case, Dr. Tabak performed statistical analyses to isolate the movement in Merck’s stock price due to the allegations presented by Plaintiffs. He further presented a damages model that was flexible enough to account for various possible decisions by the finder of fact, such as that Vioxx either would never have been brought to market or would have been marketed but with a reduced level of sales. Defendants disputed Plaintiffs’ allegation that Vioxx should never have come to market and argued that if that allegation were dismissed, there would be no proper method to determine damages. At the summary judgment phase, the Court made findings in a 13 May 2015 ruling that led it to conclude that “Plaintiffs’ contentions that Vioxx should never have come to market and related damages calculations no longer fit with the facts of this case. However, as Plaintiffs point out, Tabak’s model  provides for other scenarios[.]” The Court therefore found that a reasonable jury could find in Plaintiffs’ favor on damages and allowed the case to proceed.

The Result

On 28 June 2016, the Court approved a settlement of $1.06 billion, the tenth-largest settlement ever for a securities class action and the largest ever against a pharmaceutical company, per NERA’s Recent Trends database. Settling investors’ allowable claims was based on Dr. Tabak’s damages model, in which the amount of the claim varied frequently by the date of purchase or sale, reflecting the careful analyses of loss causation and damages that Dr. Tabak and other NERA experts have developed in their work for both plaintiffs and defendants in securities litigation.