New York, October 05, 2020 -- Moody's Investors Service ("Moody's") affirmed
the ratings of Bristol-Myers Squibb Company ("Bristol")
including the A2 senior unsecured long-term rating and the Prime-1
commercial paper rating. The outlook remains negative.
These actions follow the announcement that Bristol will acquire MyoKardia,
Inc. for approximately $13.1 billion, to be
funded with a combination of cash on hand and new borrowings. Bristol
reported approximately $22 billion of cash and fixed income investments
as of June 30, 2020.
"The acquisition is credit negative based on its rich valuation
and the use of incremental debt to fund a development stage company with
negative earnings and cash flow," stated Michael Levesque,
Senior Vice President. "The deal also pushes out Bristol's
planned deleveraging timeframe by one year, from 2023 to 2024,"
continued Levesque.
However, the affirmation reflects Bristol's solid operating
performance with good growth in its core pharmaceutical products,
strong free cash flow of over $10 billion per year, and progress
at resolving patent challenges on Revlimid and Eliquis.
Ratings affirmed:
Senior unsecured Bank Credit Facility at A2
Senior unsecured Commercial Paper at P-1
Senior unsecured notes at A2
Backed Revenue Bonds (issued by Onondaga County Industrial Dev.
Agy., NY) at A2
Backed Revenue Bonds (issued by P.R. Ind Tour Ed Med &
Env Ctl Facs Fin Auth) at A2
Backed Revenue Bonds (issued by P.R. Ind Tour Ed Med &
Env Ctl Facs Fin Auth) at P-1
Senior Unsecured Shelf at (P)A2
Subordinate Shelf at (P)A3
Preferred Shelf at (P)Baa1
Outlook actions:
Outlook remains negative
RATINGS RATIONALE
Bristol's A2 rating reflects its large scale and solid positions in immuno-oncology,
hematology and immunology. Products like Revlimid and Eliquis will
continue strong growth and recent pipeline launches like Reblozyl and
Inrebic will also expand revenue. Following loss of market share
for Opdivo in lung cancer, growth will steadily rebound as its product
label continues to expand based on successful clinical trials.
Bristol's free cash flow will remain robust at over $10 billion
per year. Key pipeline opportunities include TYK2 in autoimmune
disorders and MyoKardia's mavacamten in hypertrophic cardiomyopathy.
The rating is constrained by high revenue concentration in Revlimid,
Eliquis and Opdivo, which will total over 60% of Bristol's
revenue for the next several years. Although not imminent,
large patent cliffs will considerably dampen Bristol's revenue beginning
in 2026 and likely continue to place a high reliance on acquisitions,
evidenced by the MyoKardia deal. Pro forma debt/EBITDA is moderately
high at about 3x including tax liabilities on offshore earnings,
but Moody's anticipates steady deleveraging from both earnings growth
and the repayment of maturing debt. This will result in debt/EBITDA
declining towards 2.5x in 2021.
Social and governance considerations are material to Bristol's rating.
Like other pharmaceutical companies, Bristol faces rising exposure
to regulatory and legislative efforts aimed at reducing drug prices.
These are fueled in part by demographic and societal trends that are pressuring
government budgets because of rising healthcare spending. Bristol's
higher-than-average revenue concentration in the US market,
as well as the high use of certain products by Medicare beneficiaries
results in above-average exposure to this risk. Opdivo is
a drug covered by Medicare Part B, while Revlimid and Eliquis are
covered by Medicare Part D, and all three have high use among the
Medicare population. The draft of a bipartisan US Senate bill targets
price increases in both types of products, requiring new rebates
if the list prices rise faster than inflation. Among governance
considerations, disciplined financial policies and a deleveraging
commitment are a positive, notwithstanding the increase in financial
leverage from recent transactions.
The outlook is negative, reflecting the risks of pipeline execution
as well as financial leverage somewhat outside Moody's expectations
for the rating. This leaves Bristol weakly positioned in the current
rating category to absorb any unexpected operating setbacks or to continue
performing debt-funded acquisitions.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Factors that could lead to an upgrade include improved revenue diversity,
successful pipeline execution on both new compounds and existing products
like Opdivo, and good commercial uptake of new drug launches.
Quantitatively, debt/EBITDA sustained below 1.5x could lead
to an upgrade.
Conversely, factors that could lead to a downgrade include weak
pipeline execution or slow commercial uptake of new products, unexpected
generic competition for key products, or additional debt-funded
acquisitions. Quantitatively, debt/EBITDA sustained above
2.5x could lead to a downgrade.
Headquartered in New York, New York, Bristol-Myers
Squibb Company ("Bristol") is a leading global pharmaceutical
company with strong positions in oncology, cardiovascular disease,
and immunology. Annual revenues total approximately $40
billion.
The principal methodology used in these ratings was Pharmaceutical Industry
published in June 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1062755.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
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Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Michael Levesque, CFA
Senior Vice President
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Jessica Gladstone, CFA
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
