Fitch: Merck's Settlement of Vytorin Class Actions Manageable
CHICAGO -- February 14, 2013
Merck and Co.'s settlement of two outstanding class action suits today, which
could result in $688 million of payments to plaintiffs, is manageable in light
of the company's strong liquidity position, according to Fitch Ratings.
The two suits, filed since December 2008, allege that Merck and
Schering-Plough executives delayed the release of unfavorable results from a
study that could have adversely affected sales of the company's Vytorin
cholesterol drug. The suits are pending in the U.S. District Court for the
District of New Jersey against Merck, Schering-Plough, and certain current and
former officers and directors.
The proposed agreement, which contains no admission of liability or
wrongdoing, requires the company to pay $215 million to resolve the securities
class action against all of the Merck defendants and $473 million to resolve
the securities class action against all of the Schering-Plough defendants.
Merck recorded a charge to fourth-quarter 2012 earnings of $493 million, net
of expected insurance recoveries. Finalization of the settlement is pending
We expect Merck's credit profile to remain consistent with the company's 'A+'
rating once cash payments to plaintiffs have been disbursed. As of Sept. 30,
Merck's liquidity included $18.1 billion in cash and short-term investments,
$4.5 billion in FCF, and full capacity under a $4 billion credit facility
maturing in May 2017, which provides the company with substantial flexibility
to fund the settlement.
The above article originally appeared as a post on the Fitch Wire credit
market commentary page. The original article can be accessed at
www.fitchratings.com. All opinions expressed are those of Fitch Ratings.
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL,
COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM
THE 'CODE OF CONDUCT' SECTION OF THIS SITE.
Michael Zbinovec, +1-312-368-3164
70 West Madison Street
Chicago, IL 60602
Bill Warlick, +1-312-368-3141
Brian Bertsch, +1 212-908-0549 (New York)
Press spacebar to pause and continue. Press esc to stop.