New York, December 06, 2019 -- Moody's Investors Service ("Moody's") upgraded
the senior unsecured ratings of Celgene Corporation to A3 from Baa2.
The outlook is negative. This concludes the rating review initiated
on January 3, 2019. Moody's anticipates that the ratings
of Celgene will eventually be withdrawn.
Ratings of Celgene Corporation upgraded:
Senior unsecured notes, to A3 from Baa2
Outlook Actions:
Outlook changed to Negative from Rating Under Review
The upgrade of the ratings follows the recent acquisition of Celgene by
Bristol-Myers Squibb Company ("Bristol") in which Celgene
became a subsidiary of Bristol. The upgrade reflects an improvement
in Celgene's credit quality stemming from being part of a larger,
more diversified company, as well as a significant reduction in
debt within Celgene. About 92% of Celgene's bonds
were exchanged into direct obligations of Bristol, with about $1.6
billion of debt remaining at the Celgene level.
Moody's understands that Bristol is not guaranteeing Celgene's
remaining bonds. In the absence of such formal support, Bristol's
A2 rating does not automatically extend to Celgene's bonds.
In addition, Moody's anticipates withdrawing the ratings on
Celgene's bonds based on the expectation that Bristol's financial
reporting will likely become insufficient to continue analyzing Celgene
on a stand-alone basis.
RATINGS RATIONALE
Celgene's A3 rating reflects its high margins and cash flow, its
robust growth prospects, and its strong market position in multiple
myeloma. Rising use of the multiple myeloma drugs Revlimid and
Pomalyst is supported by positive clinical trial results and geographic
expansion. Key late-stage pipeline opportunities include
ozanimod in multiple sclerosis and ulcerative colitis, liso-cel
in non-Hodgkin's lymphoma and bb2121 in multiple myeloma.
The credit profile of Celgene benefits from becoming part of the larger
Bristol-Myers Squibb organization, and having little debt
at the Celgene level relative to its earnings.
Tempering these strengths, Celgene has high revenue concentration
in Revlimid and in multiple myeloma, subjecting it to rising competition
and cliff risk associated with patent expirations. Like other branded
pharmaceutical companies, Celgene also faces pipeline execution
risks.
The outlook is negative, as it is generally tied to the rating outlook
of Bristol, which is negative, in part due to pipeline execution
risk at Celgene.
Factors that could lead to a downgrade of Bristol's and Celgene's
ratings include weak pipeline execution or slow commercial uptake of new
products, substantial erosion of Opdivo revenue, or unexpected
generic competition for key products. Alternatively, a downgrade
could occur if Bristol sustains debt/EBITDA above 2.5x
Conversely, factors that could lead to an upgrade of Bristol's
and Celgene's ratings 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, an upgrade could occur if Bristol sustains debt/EBITDA
below 1.5x.
Social and governance considerations are material to Celgene's credit
profile. Like other pharmaceutical companies, Celgene 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. Celgene has higher-than-average revenue
concentration in the US market, as well as the high use of certain
product by Medicare beneficiaries results in above-average exposure
to this risk. Among governance considerations, the company
has demonstrated an appetite for moderately high debt/EBITDA occasionally
spiking above 4x to support acquisitions and share repurchases.
Headquartered in Summit, New Jersey, Celgene Corporation ("Celgene")
is a specialized biopharmaceutical company focusing on drugs treating
cancer and inflammatory diseases. Annual revenues total approximately
$15 billion. Celgene became a wholly-owned subsidiary
of Bristol Myers Squibb Company on November 20, 2019.
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