The drugmaker is expected to announce Friday morning in federal court in New Orleans that it will settle all claims relating to the painkiller, which was withdrawn in 2004 over links to heart attacks and strokes, according to The Wall Street Journal. The paper cites one unnamed source for a development that may allow Merck to largely put the Vioxx scandal behind it.

UPDATE: “We have been asked by the judges to talk with the plaintiffs and that s what we have been doing,” a Merck spokesman tells Pharmalot, which is the same thing that was told the paper. ” Right now there is no finalized agreement.”

The drugmaker faces about 27,000 lawsuits in state and federal courts around the country. As far as Wall Street is concerned, Merck execs and their legal team have done a good job of isolating the litigation while successfully introducing new meds. As a result, its stock has jumped about 27 percent in the past year. But the idea that litigation might continue indefinitely meant unknown litigation costs could suddenly appear and, moreover, the occasional Vioxx headline would serve as a reminder of a sordid chapter in the drugmaker’s history.

Merck bargained from a position of strength. Ever since the 2004 withdrawal, Merck vowed to fight each case in hopes of frustrating plaintiffs’ lawyers. And to date, Merck’s legal team has won 11 cases that went to trial and lost five, and four of its victories were considered bellwether cases. US District Judge Elden Fallon, who oversees the litigation, had said following those test cases that he wanted the parties to meet to gauge where things stood. Talks have been under way for three months, Bloomberg News reports.

Plaintiffs’ lawyers have indicated for some time they wanted to negotiate with Merck, acknowledging privately the large expense involved in bringing cases to trial. Even when plaintiffs win, it can take years for the suits to wind their way through appeals and payouts to be made. Of course, litigation is expensive for Merck, too. The drugmaker spent $160 million in the third quarter on litigation and took a $70 million charge, after taking a $598 million charge a year earlier. Merck set aside $720 million for its defense costs, which doesn’t include any potential damages to plaintiffs

This isn’t the only good Vioxx legal development for Merck. In September, New Jersey’s Supreme Court ruled that health insurers’ lawsuits against Merck couldn’t be consolidated into a nationwide class action, removing the largest financial exposure from the Vioxx litigation. The suit sought reimbursement for as much as $9.6 billion of Vioxx purchases. And last April, a ruling by a Texas state court judge undercut the legal basis for about 1,000 lawsuits filed there, the Journal reminds us.