"The listing reflects Standard & Poor's heightened concern that Madison, N.J.-based Wyeth's diet drug litigation exposure is greater than previously considered," said Standard & Poor's credit analyst Davis Lugg. The volume and types of claims seen by a settlement trust differ materially from the projections used to design the settlement. The latest example of an adverse development was a recent $1.36 million verdict in a Texas case. While likely to be appealed, it could raise the cost and expectations for the settlement of the remaining cases. The company is particularly exposed to the 78,000 people who chose not to participate in the settlement plan --the "opt outs" -- who will pursue their claims in court. Ongoing uncertainties led the company to take an additional $2 billion charge in the third quarter of 2003 to increase its litigation reserves. However, the charge only addressed that portion of exposure that could be reliably estimated, and the company has warned that additional exposure could be significant.

At the same time, the company's operating performance is quite strong and it has steadily reduced debt. Standard & Poor's expects to review with management the company's financial strategy for dealing with its litigation exposure, particularly in light of recent developments, in resolving the CreditWatch situation.