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