Schering-Plough's rating outlook revised to negative at Moody's
Source: CNNMoney.com (Original Article)
SAN FRANCISCO, Apr. 1, 2008 (Thomson Financial delivered by Newstex) — Moody’s Investors Service Tuesday downgraded Schering-Plough (NYSE:SGP PRB) (NYSE:SGP) Corp.’s rating outlook to negative from stable on concerns of negative script trends of Zetia and Vytorin.
The ratings agency affirmed Schering-Plough’s longer-term ratings, including the ‘Baa1′ senior unsecured rating and ‘Prime-2′ short-term rating.
The Zetia and Vytorin script trends may result in cash flow relative to debt that may no longer support the Kenilworth, N.J.-based pharmaceutical company’s ‘Baa1′ rating, Moody’s said.
The agency previously estimated that each 5% script decline could lead to an $80 million reduction in free cash flow, and that a total script decline of 20% or more would be material to Schering-Plough’s key credit ratios.
Moody’s said it will monitor Zetia and Vytorin script trends. Factors that could reduce the impact of script erosion include the absence of safety concerns or new FDA labeling; the likelihood that script declines outside the U.S. may be less pronounced; and the potential to achieve cost savings, such as reduced promotional expense, it said.
The rating affirmation reflects positive factors including improved scale and diversity from the recent Organon acquisition, and recent pipeline progress with FDA filings for schizophrenia treatment asenapine and muscle relaxant reverser sugammadex, Moody’s said.
Schering-Plough shares were trading up 4.3% at $15.03.
Brigid Gaffikin
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