(FORTUNE Magazine) – Merck's next drug problem

Merck's decision to withdraw Vioxx, its $2.5-billion-a-year arthritis pain drug, left it with major headaches. It wiped out $27 billion of its market value in one day, and going forward the company will face the nightmare of physically pulling all the drugs off shelves and endure the ever-mounting pressure on CEO Ray Gilmartin to step down or agree to a large-scale merger. But Merck also faces another challenge in coming months. Its next potential $1 billion blockbuster, Arcoxia, which the FDA was expected to approve in mid-November, is a COX-2 inhibitor in the same class as Vioxx. The painkiller, already approved in 47 countries, has been delayed in the U.S. once before, in 2002, after the FDA asked Merck to provide additional safety data. When Peter Kim, head of Merck's Research Labs, announced the Vioxx recall, he urged consumers to not make assumptions about the safety of similar drugs. But the feds aren't likely to take Kim's word. In the wake of the Vioxx mishap, the FDA is likely to delay Arcoxia again, possibly for up to two years, as it examines the drug's effects on the heart. That's a double blow for Merck, which is already facing the patent expiration of its biggest-selling drug, cholesterol-fighter Zocor, in mid-2006. But Merck may not be the only one to feel the pain. The Vioxx debacle could prompt doctors to cut back on prescriptions of other COX-2 drugs--so Pfizer, which makes Celebrex and Bextra, shouldn't start cheering just yet. -- John Simons