MUMBAI (Thomson Financial) - Fitch Ratings affirmed its 'AA-' issuer default ratings and stable outlook on Merck & Co Inc following the company's announcement of a proposed settlement for most pending Vioxx liability cases pertaining to myocardial infarction and ischemic stroke in the US.
The settlement, which has been fixed at 4.85 bln usd, is estimated to address around 45,000-50,000 out of the 60,000 cases pending in the legal system, Fitch said. In addition, it is not a class action settlement but requires a number of gates that each individual must pass through to receive damage awards. There is also a requirement that plaintiffs' counsel submit all cases for consideration.
Merck has the financial flexibility to fund the settlement without incurring incremental debt, Fitch said.
Merck's R&D program has been highly successful over the past two years having commercialised six novel therapeutics, including the potential blockbuster products, Gardasil and Januvia, the rating agency added. However, it said the company's intellectual property position will continue to be challenged through 2012 as three of the company's top selling products will lose patent protection in the US.
Fitch estimates flat to slightly declining revenues through the long-term, as potential commercialisation of the R&D pipeline will not fully offset declines due to the maturing drug product portfolio. It also anticipates that Merck may seek a large corporate acquisition target to transform its maturing product portfolio, which could warrant further review of the rating. tfn.newsdesk@thomson.com sim/ran COPYRIGHT Copyright Thomson Financial News Limited 2007. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
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