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Onondaga County Industrial Dev. Agy., NY -- Moody's affirms Bristol's A2 rating; revises outlook to stable

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Rating Action: Moody's affirms Bristol's A2 rating; revises outlook to stableGlobal Credit Research - 04 Feb 2021New York, February 04, 2021 -- Moody's Investors Service ("Moody's") affirmed the ratings of Bristol-Myers Squibb Company ("Bristol") including the A2 senior unsecured long-term rating and the Prime-1 commercial paper rating. At the same time, Moody's revised the rating outlook to stable from negative. These actions follow Bristol's launch of a tender offer to accelerate the repayment of up to $4 billion of debt using cash on hand."The outlook stabilization reflects our expectation that accelerated debt repayment, along with strong earnings growth associated with existing and new product launches, will result in Bristol sustaining debt/EBITDA below 2.5x," stated Michael Levesque, Moody's Senior Vice President.The rating affirmation reflects Moody's expectations for solid operating performance with good growth in Bristol's core pharmaceutical products, strong free cash flow of over $10 billion per year, and good opportunities in the late stage pipeline including deucravacitinib and mavacamten.Ratings affirmed:Senior unsecured Bank Credit Facility at A2Senior unsecured Commercial Paper at P-1Senior unsecured notes at A2Backed Revenue Bonds (issued by Onondaga County Industrial Dev. Agy., NY) at A2Backed Revenue Bonds (issued by P.R. Ind Tour Ed Med & Env Ctl Facs Fin Auth) at A2Backed Revenue Bonds (issued by P.R. Ind Tour Ed Med & Env Ctl Facs Fin Auth) at P-1Senior Unsecured Shelf at (P)A2 Subordinate Shelf at (P)A3 Preferred Shelf at (P)Baa1 Outlook actions: Outlook revised to stable from negativeRATINGS RATIONALEBristol's A2 rating reflects its large scale and solid positions in immuno-oncology, hematology and immunology. Products like Eliquis and Pomalyst will continue strong growth and recent pipeline launches will expand revenue. Following loss of market share for Opdivo in lung cancer, growth will steadily rebound following recent label expansion in first line lung cancer (in combination with Yervoy) plus other new indications over time. Free cash flow will remain robust at over $10 billion per year. Pipeline opportunities include deucravacitinib in autoimmune disorders and mavacamten in hypertrophic cardiomyopathy.The rating is constrained by high revenue concentration in Revlimid, Eliquis and Opdivo, which comprise over 60% of revenue. Large patent cliffs will considerably dampen earnings beginning in 2026 and likely place continued reliance on acquisitions. Revlimid will initially face US generics in 2022, and while generic volume will be limited according to patent settlement agreements, this will still constrain growth. Pro forma debt/EBITDA is moderate at about 2.7x, and Moody's anticipates further deleveraging from both earnings growth and debt maturities.Social and governance considerations are material to Bristol's rating. 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. Some US legislative proposals target price increases in both types of products, requiring new rebates if the list prices rise faster than inflation. Other proposals would tie Medicare reimbursement to drug prices in countries outside the US, although such proposals face high hurdles to adoption. Separately, Revlimid is the subject of an investigation by the US House Panel Committee on Oversight and Reform which concluded that Revlimid price increases were 'uninhibited' and not justified by R&D expenses, and had high costs to US taxpayers. Among governance considerations, disciplined financial policies and a deleveraging commitment are a positive, notwithstanding the increase in financial leverage from recent transactions.The outlook is stable, reflecting Moody's expectations for solid operating performance and deleveraging through both earnings growth and debt reduction.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSFactors 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. Quantitatively, debt/EBITDA sustained below 1.5x could lead to an upgrade.Factors that could lead to a downgrade include weak pipeline execution or slow commercial uptake of new products, unexpected generic competition for key products, or additional debt-funded acquisitions. Quantitatively, 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. Total revenues in 2020 totaled $42.5 billion.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. 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 © 2021 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. 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