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Rating Action:

Moody's places Amgen's Baa1 rating on review for downgrade, affirms P-2 commercial paper rating

12 Dec 2022

New York, December 12, 2022 -- Moody's Investors Service ("Moody's") placed the Baa1 senior unsecured long-term ratings of Amgen Inc. ("Amgen") under review for downgrade. At the same time, Moody's affirmed Amgen's Prime-2 commercial paper rating. Moody's revised Amgen's outlook to ratings under review from stable.

These actions follow the announcement that Amgen will acquire Horizon Therapeutics Plc ("Horizon") for approximately $27.8 billion plus Horizon's net debt. The acquisition will materially increase Amgen's gross debt/EBITDA, to close to 5.0x vs. 3.4x as of September 30, 2022 using Moody's calculations, prompting the rating review. Moody's debt adjustments include Amgen's repatriation tax liability associated with the US Tax Cuts and Jobs Act.

The acquisition will enhance Amgen's growth, and provides long-tailed revenue streams in the form of Tepezza, Krystexxa and Uplizna - Horizon's key marketed products. Amgen has announced a plan to restore leverage metrics over the next several years through $10 billion of debt repayment by year-end 2025.

Moody's currently anticipates that, should the transaction close on the terms as currently proposed, the downgrade of Amgen's senior unsecured rating will be limited to one notch, if any. The affirmation of the Prime-2 (P-2) commercial paper rating incorporates Moody's current assumptions around the potential outcome of the review for downgrade.

Ratings placed on review for downgrade:

..Issuer: Amgen Inc.

....Senior Unsecured Notes, currently Baa1

....Senior Unsecured Shelf, currently (P)Baa1

....Senior Unsecured Medium Term Notes, currently (P)Baa1

Affirmations:

..Issuer: Amgen Inc.

....Commercial Paper, Affirmed Prime-2

Outlook actions:

..Issuer: Amgen Inc.

....Outlook, revised to Ratings Under Review from Stable

Governance risk considerations are a key driver of the rating action. The transaction will materially increase Amgen's financial leverage, a financial strategy and risk management consideration in Moody's ESG framework.

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

Notwithstanding the rating review, Amgen's Baa1 rating reflects its sizeable revenue base and significant biotechnology presence, high margins and good cash flow. Moody's anticipates modest revenue growth, driven by products like Otezla, Repatha, Evenity and the recently launched cancer drug Lumakras and asthma drug Tezspire. Amgen's growing biosimilars business has several upcoming product launches. The credit profile also reflects moderate financial leverage, with gross debt/EBITDA typically sustained around 3.0x to 3.25x.

Tempering these strengths, Amgen faces execution risk in meeting its target of mid-single digit compound annual revenue growth through 2030. This reflects mature, declining products like Enbrel and Neulasta, as well as approaching biosimilar competition in 2025 for Prolia and Xgeva. In addition, recent and upcoming competitor launches somewhat dim the growth prospects for Otezla and Lumakras. Amgen is exposed to policy actions aimed at drug pricing, given high Medicare use of many of its products. There is also event risk of debt-financed acquisitions and exposure to unresolved tax disputes in which the IRS is asserting substantial underpayments and penalties.

ESG considerations are relevant to Amgen's credit profile, reflected in the Credit Impact Score of CIS-3, moderately negative. Exposures include social risks related to regulatory and legislative efforts aimed at reducing drug pricing such as the recently passed US Inflation Reduction Act. Compared to other investment-grade pharmaceutical companies, Amgen's concentration of revenues in the US markets is higher than average, at about 70%. Since many of Amgen's products are used by Medicare patients and essentially funded by the US government, Amgen's exposure to this risk is higher than average, reflected in the S-5 issuer profile score, very highly negative exposure. Amgen's environmental exposures include a large manufacturing presence in Puerto Rico, which in the past has faced power outages and damage from tropical storms, reflected in the E-4 issuer profile score, highly negative exposure. Governance exposures are neutral, reflected in the G-2 score, neutral-to-low exposure. This primarily reflects financial strategy and risk management policies that support an investment grade rating.

Moody's review will focus on Amgen's capital structure and financial leverage following the acquisition, as well as deleveraging prospects. The review will also focus on the strategic benefits of the acquisition including revenue and earnings enhancement, high growth in Tepezza and other Horizon products, and pipeline opportunities.

Headquartered in Thousand Oaks, California, Amgen Inc. is a leading global biopharmaceutical company. Annual revenues for the 12 months ended September 30, 2022 totaled approximately $26 billion.

The principal methodology used in these ratings was Pharmaceuticals published in November 2021 and available at https://ratings.moodys.com/api/rmc-documents/356413. Alternatively, please see the Rating Methodologies page on https://ratings.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 on https://ratings.moodys.com/rating-definitions.

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 issuer/deal page for the respective issuer on https://ratings.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 https://ratings.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://ratings.moodys.com/documents/PBC_1288235.

At least one ESG consideration was material to the credit rating action(s) announced and described above.

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 https://ratings.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, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on https://ratings.moodys.com.

Please see https://ratings.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 issuer/deal page on https://ratings.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

Ola Hannoun-Costa
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

No Related Data.
© 2023 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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Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

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MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY100,000 to approximately JPY550,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

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