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Rating Action: Moody's reviews Jazz Pharma's ratings for downgradeGlobal Credit Research - 04 Feb 2021New York, February 04, 2021 -- Moody's Investors Service ("Moody's") placed the ratings of Jazz Securities Designated Activity Company, a subsidiary of Jazz Pharmaceuticals plc (collectively "Jazz") under review for downgrade. The ratings placed under review include the Ba3 Corporate Family Rating, the Ba3-PD Probability of Default Rating, and the Ba1 senior secured rating. There is no change to Jazz's SGL-1 Speculative Grade Liquidity Rating.These actions follow the announcement that Jazz will acquire GW Pharmaceuticals plc ("GW") for approximately $6.7 billion net of cash acquired. The acquisition will be funded largely with incremental debt, as well as cash on hand. This will initially increase Jazz's debt/EBITDA to over 6x compared to 2.5x at September 30, 2020, prompting the rating review.Ratings put on review for downgrade:Jazz Securities Designated Activity Company:.Corporate Family Rating, Ba3.Probability of Default Rating, Ba3-PD....Senior Secured Revolving Credit Facility, Ba1 (LGD2)....Senior Secured Term Loan A, Ba1 (LGD2)Outlook actions:Jazz Securities Designated Activity Company:Changed to ratings under review from stableRATINGS RATIONALE / FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSJazz's Ba3 rating (under review for downgrade) reflects the company's position as a niche, specialty pharmaceutical company with annual revenue of over $2 billion. The credit profile also reflects Jazz's good growth prospects for the next several years and its strong market position in sleep disorder drugs, as well as a growing oncology business. Growth will be supported by the recent approvals of Zepzelca in small-cell lung cancer and Xywav in certain sleep disorders. The credit profile is constrained by Jazz's limited scale and high product concentration in Xyrem, which generates over 70% of sales. With a Xyrem authorized generic entry anticipated in early 2023, strong commercial execution of Xywav and other newer products will be important to reduce earnings pressure. To further diversify revenue, Jazz is likely to make debt-funded acquisitions, constraining its credit profile.Social and governance considerations are material to the rating. Jazz faces 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. These risks appear highest in the US, where Jazz has substantial revenue concentration. Among governance considerations, Jazz has historically maintained low financial leverage. Given approaching Xyrem generics, it appears the company is adopting a more aggressive financial policy, notwithstanding a commitment to deleveraging following the GW acquisition.The rating review will focus on financial leverage following the acquisition, as well as the company's deleveraging plans, which include reducing net debt/EBITDA below 3.5x by the end of 2022. The review will encompass the strategic benefits of the acquisition as well as execution risks. GW has good growth opportunities from its lead product Epidiolex, a cannabinoid product approved in several rare diseases. The review will also consider the growth prospects for Jazz's own product portfolio, which includes several good growth drivers but also the approaching genericization of Xyrem in 2023.Jazz Securities Designated Activity Company is an Irish subsidiary of Jazz Pharmaceuticals plc (collectively referred to as "Jazz"), a specialty pharmaceutical company with a portfolio of products that treat unmet needs in narrowly focused therapeutic areas. Total revenues were approximately $2.3 billion for the 12 months ended September, 2020.The principal methodology used in these ratings was Pharmaceutical Industry published in June 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1062755. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor 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_1243406.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.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 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. Michael Levesque, CFA Senior Vice President Corporate Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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