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Rating Action:

Moody's affirms Pfizer's A1 rating; stable outlook

05 Feb 2015

Approximately $37 billion of rated debt affected

New York, February 05, 2015 -- Moody's Investors Service affirmed the ratings of Pfizer Inc. ("Pfizer") and rated subsidiaries, including the A1 senior unsecured long-term rating and the Prime-1 commercial paper rating. The rating outlook remains stable.

This rating action follows the announcement that Pfizer will acquire Hospira, Inc. for approximately $16 billion in cash plus the assumption of net debt. The affirmation reflects solid credit ratios post acquisition, with gross debt/EBITDA of roughly 2 times, significant scale and diversity, strong operating margins and cash flow, and substantial cash and investment levels in excess of $40 billion. The acquisition will bolster Pfizer's presence in the hospital pharmaceutical market and Hospira's expertise in biosimilar products provides a solid growth driver for Pfizer, complementing its own biosimilars pipeline.

"The Hospira acquisition is fundamentally credit positive, but raises event risk as Pfizer approaches a decision on a split-up of the company over the next 24 months," stated Michael Levesque, Moody's Senior Vice President.

Rating Affirmations:

Pfizer Inc.

A1 senior unsecured long-term bonds and issuer rating

(P)A1 senior unsecured shelf

Prime-1 commercial paper

A1 industrial revenue bonds

A1 senior unsecured bank credit facility

Pfizer Investment Capital

Prime-1 commercial paper

Wyeth

A1 senior unsecured long term bonds

Pharmacia Corporation (Old Monsanto)

A1 senior unsecured long-term bonds

The outlook on all ratings remains stable.

RATINGS RATIONALE

Pfizer's A1 senior unsecured rating reflects its position as one of the world's largest pharmaceutical companies, its strong product and geographic diversity, its high profitability, and its strong cash flow. Pfizer's has a conservative capital structure, with over $40 billion of cash anticipated after the Hospira acquisition, and with cash coverage of debt above 75%. Pfizer has good opportunities in its late-stage pipeline, including the breast cancer drug Ibrance, recently approved by the FDA.

Offsetting these strengths, Pfizer faces sluggish revenue growth even if pipeline launches are extremely successful. A number of its products are no longer patent-protected and are facing steady declines in mature geographic markets, despite growth in emerging markets. This large portfolio of drugs, generally comprising the business unit known as Global Established Products, will be a significant drag on Pfizer's aggregate growth rate. Pfizer will continue to evaluate the potential of splitting up its businesses, with a split possible in 2017.

The rating outlook is stable based on Moody's expectation that Pfizer will maintain solid credit ratios even in a slow-growth environment, and that its shareholder payouts and acquisitions will be disciplined. The stable outlook also reflects Moody's view that a potential split-up of Pfizer's business is outside the 12 to 18 month timeframe typically contemplated in a rating outlook.

The ratings could be downgraded if a split of Pfizer's business appears increasingly likely, if debt/EBITDA is sustained materially above 2.0 times, or if there are significant pipeline setbacks. Conversely, the rating could be upgraded if Pfizer reinvigorates top-line growth while sustaining key credit ratios at very strong levels including CFO/debt above 50% and debt/EBITDA below 1.5 times. However, upward pressure is unlikely until the possibility of a split is clarified.

Headquartered in New York, Pfizer is the world's largest pharmaceutical company, with revenues of $49.6 billion for the fiscal year ended December 31, 2014. Pfizer's flagship global brands include Lyrica, Prevnar, Enbrel, Celebrex and Viagra.

The principal methodology used in these ratings was Global Pharmaceutical Industry published in December 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt 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 rating action on the support provider and in relation to each particular 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 rating action, and whose ratings may change as a result of this 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.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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: 212-553-0376
SUBSCRIBERS: 212-553-1653

Peter H. Abdill, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's affirms Pfizer's A1 rating; stable outlook
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