With its full-year earnings released on Tuesday, Merck (NYSE:MRK) has brought a challenging year to a close. Despite the demise of Vioxx, the company was able to squeak out revenue growth for the fourth quarter, posting $5.7 billion over last year's $5.6 billion. Net income was down, though, by about 21%, and earnings per share were down 19%.

For months, Vioxx's withdrawal has been the big story for Merck, and with good reason. Not only had the drug contributed $1.5 billion in sales for 2004 before its withdrawal, but also the flurry of lawsuits -- almost 600 to date -- will likely haunt the company for some time to come. During the quarter, the company raised its legal-defense reserves to $675 million. Investors should note that this is a reserve only for anticipated legal expenses -- not any anticipated payouts if Merck is found liable and ordered to pay damages. Although Merck is covered by product liability insurance to the tune of $630 million, that likely will be only a drop in the bucket.

But all of the hoopla over Vioxx makes it easy to forget that Merck has other drugs on the market, and many of them are doing well. Drugs like Singulair, Fosamax, Cozaar/Hyzaar, and Zocor continue to grow, and Merck's lower-profile drugs amounted to $1.5 billion for the quarter. What's more, the company's Vytorin partnership with Schering-Plough (NYSE:SGP) looks to be on its way to becoming a blockbuster.

Merck can also look forward to new drugs coming out of its research-and-development efforts. Muraglitizar, a potent anti-diabetes compound, could be a $1 billion-plus drug, and new vaccines for rotavirus, human papillomavirus, and shingles should add to the bottom line as well. Zocor will soon be losing patent protection, but Merck has other compounds in late development and still spends $4 billion in R&D to help keep the pipeline strong.

Is Merck is a good buy today? A trailing price-to-earnings ratio of 12 looks enticing, as does a dividend yield of over 5% (Merck is a Motley Fool Income Investor recommendation). The biggest danger at this point is the Vioxx litigation and the risk that aggressive lawyers will look at Merck's cash-generation ability as a perpetual lottery for themselves and their clients (in that order). Fortunately for Merck, the lawsuits will likely take years to wind their way through the judicial process, and any payouts are likely to be spread over a period of years.

While strict value investors may be put off by this open-ended liability, risk-tolerant Fools can buy these shares today, collect a nice dividend, and look for the strong underlying business at Merck to enjoy an eventual recovery.

Fool contributor Stephen Simpson holds a CFA. He has no ownership interest in any stocks mentioned.