Thanks Again, Fred Hassan! ENHANCE Securities Claims May Proceed As Federal Class Action

This is bad news for New Merck, and represents almost a complete dismissal of the defendants' arguments to avoid having the ENHANCE securities claims become a federal class action. As of tonight, those claims are a duly certified federal class action, thus per Judge Cavanaugh, sitting in New Jersey's federal District court (the full 22 page opinion in PDF, here):

. . . .Plaintiffs allege that Schering knew or recklessly disregarded, but did not disclose, the results of the ENHANCE study, which showed that Vytorin was in fact no more effective at reducing CA IMT than simvastatin alone. Plaintiffs allege that Schering knew the results of the ENHANCE test well before the results were “un-blinded,” but withheld that information in order to forestall any negative implications the results would have on Defendants’ common stock price. . . .

The gravamen of Plaintiffs’ allegation is the same whether Lead Plaintiffs purchased common stock, preferred stock, or options; that is, Lead Plaintiffs need to prove, inter alia, that Defendants made material misstatements and/or omissions regarding the ENHANCE trial. Accordingly, the Court finds that Lead Plaintiffs may represent options traders and preferred stock traders, and the Court will not exclude those traders from the class. . . .
For For the reasons stated herein, the Court certifies this matter as a class action, and approves the definition of a Class as follows:

All persons and entities that purchased or acquired Schering common stock, or call options, and/or sold Schering put options, during the period between January 3, 2007 through and including March 28, 2008, and who did not sell their stock and/or options on or before January 14. 2008, and who were damaged thereby. . . .

This will greatly increase the pressure on New Merck to settle this matter. It seems clear that Judge Cavanaugh now "smells the smoke. . . ." Merck would be wise to not let him "see the fire." While settlement talks/mediation continue, I think there is still a firm trial date set for November 13, 2012 -- should the efforts fail.