New York, November 07, 2019 -- Moody's Investors Service ("Moody's") confirmed
the ratings of Bristol-Myers Squibb Company ("Bristol")
including the A2 senior unsecured long-term rating and the Prime-1
commercial paper rating. This concludes the rating review initiated
on January 3, 2019. Following these actions, the outlook
is negative.
"The confirmation of Bristol's A2 ratings reflects its solid
business profile and strong financial profile following the pending acquisition
of Celgene Corporation," stated Michael Levesque, Moody's
Senior Vice President.
Confirming the ratings is a more favorable outcome than Moody's
original expectations at the time of deal announcement. This results
from lower financial leverage compared to Moody's initial expectations,
a publicly articulated debt/EBITDA target of 1.5x by 2023,
strong business performance of both companies since the deal's announcement,
and positive developments in Celgene's pipeline execution.
Bristol's debt/EBITDA will rise to about 2.9x from under
1.5x before the acquisition announcement. This figure is
approximately 1.0 turn less than Moody's original expectations,
largely due to very high proceeds from the divestiture of Otezla.
However, the divestiture of Otezla is negative to Bristol's
business profile, increasing its revenue concentration in other
drugs and its susceptibility to a patent cliff in 2026. That said,
strong cash flow will allow Bristol to pursue collaborations and acquisitions
to prepare for the cliff.
Actions:
..Issuer: Bristol-Myers Squibb Company
....Senior Unsecured Bank Credit Facility,
confirmed at A2
....Senior Unsecured Commercial Paper,
confirmed at P-1
....Senior Unsecured Regular Bond/Debenture,
confirmed at A2
....Senior Unsecured Convertible Bonds,
confirmed at A2
....Backed Revenue Bonds, confirmed
at A2
....Backed Revenue Bonds, confirmed
at P-1
....Senior Unsecured Shelf, confirmed
at (P)A2
....Subordinated Shelf, confirmed at
(P)A3
....Preferred Shelf, confirmed at (P)Baa1
Outlook Actions:
..Issuer: Bristol-Myers Squibb Company
....Outlook, Changed To Negative from
Rating Under Review
RATINGS RATIONALE
Bristol's A2 rating reflects the company's large scale with approximately
$40 billion of pro forma revenue including Celgene, and its
solid position in immuno-oncology, hematology and immunology.
Cash flow will be strong, with over $8 billion of annual
free cash flow after dividends. Moody's anticipates that
capital deployment will focus on debt reduction, with steady repayment
of maturing obligations which total about $2.8 billion in
2020 and $2.0 billion in 2021. This will result in
debt/EBITDA declining to below 2.5x in 2021. The company
has publicly articulated a debt/EBITDA target of 1.5x by 2023.
These strengths are tempered by high revenue concentration in Revlimid,
Eliquis and Opdivo, which will approximate 65%-70%
of Bristol's revenue for the next several years. A likely
patent cliff in 2026 on Eliquis and Revlimid places high reliance on successful
pipeline execution and strong commercial uptake of new products.
Bristol faces increasing competition in areas like immunology and immuno-oncology,
where Bristol is significantly lagging rival Merck & Co.,
Inc.
Liquidity will remain strong following the acquisition. Moody's
anticipates over $10 billion of cash on hand, strong cash
flow, no commercial paper borrowings and full availability under
revolving credit agreements.
Social and governance considerations are material to Bristol's credit
profile. 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 to fund the Celgene acquisition.
Other positive governance considerations include a management compensation
design that is balanced with creditor interests, and good compliance
controls.
The rating outlook is negative, reflecting the risks of pipeline
execution as well as concerns about Opdivo's competitive position.
Improving Opdivo's growth will depend on an approval of an Opdivo/Yervoy
combination in first-line lung cancer, as well as successful
clinical trials in other expanded indications. Meaningful setbacks
in Opdivo or other late-stage pipeline drugs will leave Bristol
more exposed to its 2026 patent cliff on Revlimid and Eliquis, which
Moody's believes would increase the likelihood that Bristol pursues
another large acquisition.
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.
In addition, 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, substantial
erosion of Opdivo revenue, or unexpected generic competition for
key products. Alternatively, 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. Pro forma for the Celgene acquisition, annual
revenues total approximately $40 billion.
The principal methodology used in these ratings was Pharmaceutical Industry
published in June 2017. Please see the Rating Methodologies page
on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
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.
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: 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
