AstraZeneca receives A1 rating upgrade from Moody’s, outlook stable

Investing.com -- Moody’s (NYSE:MCO) Ratings has announced an upgrade in the senior unsecured ratings of AstraZeneca PLC (LON:AZN) from A2 to A1. The senior unsecured medium-term note programs and backed senior unsecured medium-term note programs issued by AstraZeneca PLC and AstraZeneca (NASDAQ:AZN) Finance LLC have also been upgraded from (P)A2 to (P)A1. In addition, the backed senior unsecured ratings of AstraZeneca Finance LLC were raised from A2 to A1. The company’s Prime-1 short-term Commercial Paper rating was affirmed and the outlook for both entities has been changed to stable from positive.

The upgrade reflects AstraZeneca’s strengthening portfolio and pipeline, which is well-positioned for continued robust growth in organic revenues and EBITDA. The company’s low leverage of 1.8x at December 31, 2024, down from 2.3x at December 2023, is expected to remain stable or decrease further. AstraZeneca’s financial policy is considered conservative, with modest growth in dividend distributions, low leverage, and limited strategic need for large acquisitions.

Despite three ongoing investigations in China, Moody’s expects the outcomes to be manageable for AstraZeneca. The ratings reflect the company’s broad product portfolio, strong pipeline, rapid growth in product sales, high potential late-stage pipeline drugs, and conservative financial policy.

In 2024, AstraZeneca achieved 21% revenue growth at constant exchange rates (CER), driven by organic growth across all therapy areas, particularly in BioPharmaceuticals and Oncology. The company’s largest-selling drug, Farxiga, saw sales grow by 31% at CER. Core operating profit increased by 22% at CER, with a 50 basis point improvement in core operating margin.

The company maintains a strong and diverse pipeline with 19 new drugs in phase three clinical trials or at approval stage, including for hypertension and breast cancer. The company aims to grow revenue organically to $80 billion in 2030, up from $54.1 billion in 2024.

Due to the company’s strong growth, the Moody’s-adjusted debt / EBITDA ratio was reduced to 1.8x at December 2024, from 2.3x at December 2023. Deleveraging is expected to continue at a more gradual rate or stabilize over the next 12-18 months.

AstraZeneca is currently subject to three anti-corruption investigations in China, relating to alleged medical insurance fraud, illegal importation of some oncology medicines, and personal data breaches. However, the company has sufficient resources to absorb a large fine, should it be imposed.

AstraZeneca’s liquidity is excellent, with cash and cash equivalents of $5.5 billion as of December 31, 2024. The company also has access to $4.9 billion of undrawn long-term committed bank facilities maturing in April 2030.

The stable outlook reflects Moody’s expectation that AstraZeneca will maintain solid organic growth in revenues and EBITDA and continue to execute successfully on its new product pipeline. The outlook also assumes that the investigations in China will not have a materially detrimental effect on the company’s business or leverage metrics.

Upward pressure on AstraZeneca’s ratings could develop if the company continues to execute successfully on its late-stage pipeline, manages forthcoming patent expiries, maintains strong diversity of revenues across products, and records strong product sales growth with operating leverage. A downgrade could occur if the pipeline quality significantly deteriorates, the financial policy turns more aggressive, or there are material adverse outcomes from litigation or investigations into business practices.

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