TEXT - Fitch says Merck's settlement of Vytorin class actions manageable

Thu Feb 14, 2013 4:30pm EST

Feb 14 - 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 court approval. 

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.
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