Moody's Boosts Outlook on Celgene (CELG) to Stable; Affirms Ratings
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Moody's Investors Service revised the outlook on Celgene Corporation (Nasdaq: CELG) to positive from stable. At the same time, Moody's affirmed Celgene's existing ratings including the Baa2 senior unsecured rating and the Prime-2 commercial paper rating.
Ratings affirmed:
Baa2 senior unsecured notes due 2015, 2020 and 2040
(P)Baa2 senior unsecured shelf registration
Prime-2 commercial paper rating
"Expanding use of Revlimid and pending approvals of Apremilast in psoriatic arthritis and Abraxane in pancreatic cancer should sustain good growth momentum," stated Michael Levesque, Moody's Senior Vice President. "If pipeline execution is combined with conservative financial policies and healthy credit ratios, Moody's could upgrade Celgene's credit ratings," continued Levesque.
RATINGS RATIONALE
Celgene's Baa2 rating reflects strong operating margins, healthy cash flow and good growth prospects for flagship product Revlimid. Expanding usage of Revlimid is supported by ongoing clinical trials that are driving incremental use in multiple myeloma. Geographic expansion will also drive sales over time. Additionally, Celgene's pipeline execution is strong evidenced by the approval of Pomalyst this year and filings in Abraxane and Apremilast. Moody's expects continuation of healthy free cash flow and strong cash flow to debt ratios. Offsetting these strengths, Celgene has significant revenue concentration, and faces an unresolved patent challenge on Revlimid. In addition, Celgene may increase debt to support the company's expansion or to cover US cash needs, such as share repurchases.
The rating outlook is positive, reflecting expectations of continued robust growth driven by Revlimid and by recent and pending regulatory approvals. Moody's anticipates that Celgene will maintain strong credit metrics offset by very high product concentration. The ratings could be upgraded if Celgene continues to grow Revlimid sales and receives new regulatory approvals for Abraxane and Apremilast while maintaining a conservative capital structure, e.g. debt/EBITDA below 1.75 times and CFO/debt above 50%. Conversely, the ratings could be downgraded if there are major pipeline setbacks, an unexpected downturn in Revlimid utilization, or adverse rulings in the Revlimid patent challenge. The ratings could also be downgraded if the company adopts more aggressive financial policies such that debt/EBITDA exceeds 2.5 times.
Ratings affirmed:
Baa2 senior unsecured notes due 2015, 2020 and 2040
(P)Baa2 senior unsecured shelf registration
Prime-2 commercial paper rating
"Expanding use of Revlimid and pending approvals of Apremilast in psoriatic arthritis and Abraxane in pancreatic cancer should sustain good growth momentum," stated Michael Levesque, Moody's Senior Vice President. "If pipeline execution is combined with conservative financial policies and healthy credit ratios, Moody's could upgrade Celgene's credit ratings," continued Levesque.
RATINGS RATIONALE
Celgene's Baa2 rating reflects strong operating margins, healthy cash flow and good growth prospects for flagship product Revlimid. Expanding usage of Revlimid is supported by ongoing clinical trials that are driving incremental use in multiple myeloma. Geographic expansion will also drive sales over time. Additionally, Celgene's pipeline execution is strong evidenced by the approval of Pomalyst this year and filings in Abraxane and Apremilast. Moody's expects continuation of healthy free cash flow and strong cash flow to debt ratios. Offsetting these strengths, Celgene has significant revenue concentration, and faces an unresolved patent challenge on Revlimid. In addition, Celgene may increase debt to support the company's expansion or to cover US cash needs, such as share repurchases.
The rating outlook is positive, reflecting expectations of continued robust growth driven by Revlimid and by recent and pending regulatory approvals. Moody's anticipates that Celgene will maintain strong credit metrics offset by very high product concentration. The ratings could be upgraded if Celgene continues to grow Revlimid sales and receives new regulatory approvals for Abraxane and Apremilast while maintaining a conservative capital structure, e.g. debt/EBITDA below 1.75 times and CFO/debt above 50%. Conversely, the ratings could be downgraded if there are major pipeline setbacks, an unexpected downturn in Revlimid utilization, or adverse rulings in the Revlimid patent challenge. The ratings could also be downgraded if the company adopts more aggressive financial policies such that debt/EBITDA exceeds 2.5 times.
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