Merck & Co has suffered something of a setback with the news that a court has reinstated a securities fraud lawsuit against the firm related to disclosures to investors involving the withdrawn painkiller Vioxx.

A divided decision (ie 2-1) of a three-judge panel of the 3rd Circuit Court of Appeals has reinstated a consolidated securities class action suit, reversing a ruling by a federal judge in Newark, New Jersey who had dismissed the suit in April 2007. The cases stem from Merck’s decision to pull Vioxx (rofecoxib) from the market in 2004 after a study showed that the drug doubled the risk of heart attack or stroke. The effect on the firm’s share price was devastating and a number of investors brought a suit in connection with disclosures regarding Vioxx.

Merck says it is considering asking either the full court of appeals or the US Supreme Court to review the decision to reinstate the suit. If the latest ruling is not reversed, the firm said it will renew its request to dismiss the suit on “several alternative grounds” it presented earlier.

In the process, the New Jersey-based company will seek to rely upon a new standard established by the Supreme Court after the April 2007 ruling that imposes a higher bar for plaintiffs pursuing a securities case. It adds that the panel “has made no ruling on the merits of the plaintiffs' lawsuit”.

The securities suit is unrelated to a $4.85 billion settlement between Merck and plaintiffs who filed personal injury lawsuits against the company.