Fitch cuts Merck's debt ratings to "AA-minus"

NEW YORK, Feb 16 (Reuters) - Fitch Ratings on Friday cut its ratings on Merck & Co. (MRK.N), citing risks as some of the pharmaceuticals company's patent protections are set to expire.

"Merck's intellectual property position is the most tenuous of the pharmaceutical industry, considering that four of the company's top-selling products have lost or will lose patent protection in the U.S. through 2012," Fitch said in a statement.

These products, Zocor, Fosamax, Cozaar, and Singulair, collectively generated 56 percent of total revenues in 2006, the credit ratings agency said.

Merck in January reported a 58 percent drop in fourth-quarter earnings on special charges and generic competition for its Zocor cholesterol drug. For details, see [ID:nN30359227]

Merck is expected to have flat to slightly declining revenues through the long term, as potential commercialization of the research and development pipeline will not fully offset declines due to the maturing drug product portfolio, Fitch said.

"Notwithstanding a significant corporate acquisition to bolster revenue and earnings growth, improvement to the credit profile is dependent on operating cost efficiencies gained from ongoing restructuring activities as well as strengthening equity income from its joint ventures," Fitch said.

Fitch cut Merck's senior unsecured debt by one notch to "AA-minus," its seventh highest rating, from "AA." The outlook is stable, indicating an additional cut is not expected over the next one to two years.

Merck's 4.75 percent bond due 2015 last traded at 62 basis points over Treasuries on Wednesday, according to MarketAxess.