New York, February 04, 2021 -- 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. At the same time, Moody's
revised the rating outlook to stable from negative. These actions
follow Bristol's launch of a tender offer to accelerate the repayment
of up to $4 billion of debt using cash on hand.
"The outlook stabilization reflects our expectation that accelerated
debt repayment, along with strong earnings growth associated with
existing and new product launches, will result in Bristol sustaining
debt/EBITDA below 2.5x," stated Michael Levesque,
Moody's Senior Vice President.
The rating affirmation reflects Moody's expectations for solid operating
performance with good growth in Bristol's core pharmaceutical products,
strong free cash flow of over $10 billion per year, and good
opportunities in the late stage pipeline including deucravacitinib and
mavacamten.
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 revised to stable from negative
RATINGS RATIONALE
Bristol's A2 rating reflects its large scale and solid positions in immuno-oncology,
hematology and immunology. Products like Eliquis and Pomalyst will
continue strong growth and recent pipeline launches will expand revenue.
Following loss of market share for Opdivo in lung cancer, growth
will steadily rebound following recent label expansion in first line lung
cancer (in combination with Yervoy) plus other new indications over time.
Free cash flow will remain robust at over $10 billion per year.
Pipeline opportunities include deucravacitinib in autoimmune disorders
and mavacamten in hypertrophic cardiomyopathy.
The rating is constrained by high revenue concentration in Revlimid,
Eliquis and Opdivo, which comprise over 60% of revenue.
Large patent cliffs will considerably dampen earnings beginning in 2026
and likely place continued reliance on acquisitions. Revlimid will
initially face US generics in 2022, and while generic volume will
be limited according to patent settlement agreements, this will
still constrain growth. Pro forma debt/EBITDA is moderate at about
2.7x, and Moody's anticipates further deleveraging
from both earnings growth and debt maturities.
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. Some US legislative proposals target price
increases in both types of products, requiring new rebates if the
list prices rise faster than inflation. Other proposals would tie
Medicare reimbursement to drug prices in countries outside the US,
although such proposals face high hurdles to adoption. Separately,
Revlimid is the subject of an investigation by the US House Panel Committee
on Oversight and Reform which concluded that Revlimid price increases
were 'uninhibited' and not justified by R&D expenses, and had
high costs to US taxpayers. 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 stable, reflecting Moody's expectations for
solid operating performance and deleveraging through both earnings growth
and debt reduction.
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.
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. Total revenues in 2020 totaled $42.5
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
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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
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and whose ratings may change as a result of this credit rating action,
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to rated entity, Disclosure from rated entity.
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Regulatory disclosures contained in this press release apply to the credit
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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_1243406.
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.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the UK and is endorsed
by Moody's Investors Service Limited, One Canada Square,
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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
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JOURNALISTS: 1 212 553 0376
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