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Fitch Backs Its 'A+' Credit Rating on Merck


From Associated Press (October 12, 2011)


NEW YORK -- Fitch Ratings on Wednesday backed its `A+' rating on Merck & Co.'s credit, saying the company's revenue is likely to decline, but it has reduced its debt.


Fitch has a stable outlook on Merck's credit, meaning the firm does not expect to raise or lower its rating in the near future. Its rating is investment grade, and is six notches above "junk" status. Fitch said the rating applies to about $18.3 billion in debt held by the Whitehouse Station, N.J., company.


"Fitch currently anticipates a modest decline in both overall revenues and sales from the company's core human pharmaceutical business over the ratings horizon," said


The firm said that in the three years beginning last June 30, Merck's competitors could introduce low-cost generic versions of drugs that bring in 19.4 percent of the company's revenue. That includes the asthma and allergy drug Singulair, which is the company's top seller. Generic versions of Singulair are expected to reach the market in August 2012. Fitch added that it expects a partnership between Merck and AstraZeneca PLC to end in 2012, which will cost Merck about $1 billion in annual sales.


However, Fitch said Merck's leverage has decreased in the years since it completed the $41 billion acquisition of competitor Schering-Plough Corp., and the deal reduced Merck's vulnerability to generic competition. Fitch said that at the end of 2009, the company stood to lose 30 percent of its annual revenue to generic competition over the next three years.


Merck shares rose 56 cents to $32.49 in afternoon trading.




Posted: October 2011