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Rating Action:

Moody's affirms Takeda's ratings; assigns Baa2 to proposed notes

 The document has been translated in other languages

25 Jun 2020

Tokyo, June 25, 2020 -- Moody's Japan K.K. has affirmed the Baa2 long-term issuer and senior unsecured ratings of Takeda Pharmaceutical Company Limited (Takeda) and its subsidiaries, and assigned (P)Baa2 foreign currency senior unsecured rating to shelf registration of Takeda and Baa2 ratings to its proposed senior unsecured notes.

The outlook on the ratings remains stable.

A full list of the affected ratings and outlooks can be found at the end of this press release.

RATINGS RATIONALE

"The affirmation of Takeda's Baa2 ratings reflects its being on track to deleveraging as expected following its transformative Shire acquisition," says Yukiko Asanuma, a Moody's Analyst.

In the year and a half following the JPY6 trillion acquisition of Shire plc, Takeda increased sales of its key drugs and divested non-core assets, and has used free cash flow to pay down JPY657 billion of debt, which is down 11% from just following the acquisition in fiscal 2018 ended March 2019. Consequently, the company has moderated its gross debt/EBITDA to around 4.5x in fiscal 2019 ended March 2020 from around 5.5x in fiscal 2018 pro-forma.

Takeda has committed to $10 billion of divestments to lower its net debt/EBITDA to 2x over fiscal 2021-23 from 4.7x pro forma at the end of March 2019. The company has made significant progress so far, having received cash proceeds for about $4 billion of non-core asset sales, including Xiidra and over-the-counter drugs in the Middle East, Africa and Russia/CIS. Takeda has also agreed to sell additional non-core and over-the-counter drugs in Latin America, Europe and the Asia Pacific, which should bring total proceeds to approximately $6 billion during fiscal 2020.

Steady progress in cost synergy also contributed to generate solid cash flow, with $1.1 billion in cost savings achieved in fiscal 2019 mainly from SG&A reductions. Takeda has revised up its cost synergy target from $1.4 billion to $2.3 billion to increase funds available to in invest for growth in China, plasma-derived therapies and R&D.

Takeda's underlying revenue increased 1.6% in fiscal 2019 because of higher sales of its key products such as Entyvio, Ninlaro, Takhzyro, Vyvanse and plasma-derived therapy drugs, which exceeded the sales decline in its rare diseases and non-core therapeutic products.

The proposed senior unsecured notes will refinance a like amount of existing US dollar and Euro term loans that were part of the Shire financing. Excess financing, if any, will similarly be used for deleveraging.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

The stable rating outlook reflects Moody's expectation that Takeda will continue to generate free cash from revenue growth and cost synergies, make further asset sales toward its target, and reduce debt to lower its gross debt/EBITDA to close to 4x in fiscal 2020 from 4.5x in fiscal 2019.

Moody's could upgrade Takeda's ratings after the company establishes a track record as a much larger company, and if it achieves sufficient cost synergies and proceeds from the divestment of its non-core assets are used to reduce debt, such that the company sustains its gross debt/EBITDA below 3.5x.

Moody's could downgrade Takeda's ratings if it fails to achieve sufficient cost synergies and debt reduction through divestitures, such that its debt/EBITDA remains above 4.5x in fiscal 2020. Large debt-funded acquisitions or shareholder returns could also result in a downgrade of its ratings.

The principal methodology used in these ratings was Pharmaceutical Industry (Japanese) published in July 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_196413. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Headquartered in Tokyo, Takeda Pharmaceutical Company Limited is the largest pharmaceutical company in Japan by revenue.

The following ratings are affected:

Assignments:

..Issuer: Takeda Pharmaceutical Company Limited

....USD Senior Unsecured Regular Bond/Debenture (Foreign Currency), Assigned Baa2

....EUR Senior Unsecured Regular Bond/Debenture (Foreign Currency), Assigned Baa2

....Senior Unsecured Shelf (Foreign Currency), Assigned (P)Baa2

Affirmations:

..Issuer: Takeda Pharmaceutical Company Limited

....LT Issuer Rating (Foreign and Local Currency), Affirmed Baa2

....Senior Unsecured Regular Bond/Debenture (Foreign and Local Currency), Affirmed Baa2

....Outlook, Remains Stable

..Issuer: Baxalta Incorporated

....BACKED Senior Unsecured Regular Bond/Debenture (Local Currency), Affirmed Baa2

....Outlook, Remains Stable

..Issuer: Shire Acquisitions Investments Ireland Designated Activity Company

....BACKED Senior Unsecured Regular Bond/Debenture (Foreign Currency), Affirmed Baa2

....Outlook, Remains Stable

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 its website www.moodys.com.

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.

Yukiko Asanuma
Analyst
Corporate Finance Group
Moody's Japan K.K.
Atago Green Hills Mori Tower 20fl
2-5-1 Atago, Minato-ku
Tokyo 105-6220
Japan
JOURNALISTS: 81 3 5408 4110
Client Service: 81 3 5408 4100

Mihoko Manabe
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 81 3 5408 4110
Client Service: 81 3 5408 4100

Releasing Office:
Moody's Japan K.K.
Atago Green Hills Mori Tower 20fl
2-5-1 Atago, Minato-ku
Tokyo 105-6220
Japan
JOURNALISTS: 81 3 5408 4110
Client Service: 81 3 5408 4100

No Related Data.
© 2022 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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