Moody's rates AbbVie notes Baa1

Moody's Investors Service said it assigned a Baa1 rating to the new senior notes of AbbVie Inc. and left the company’s Baa1 senior long-term rating unchanged. The outlook is negative.

The note proceeds, cash on hand and the proceeds of an equity issuance will be used to fund AbbVie's pending acquisition of Pharmacyclics, Inc. and a related accelerated share repurchase program.

"The Pharmacyclics acquisition provides an important new source of growth to help offset concerns about upcoming Humira biosimilars, but AbbVie's financial leverage is high for the Baa1 rating," Michael Levesque, a Moody's senior vice president, said in an agency news release.

The agency said AbbVie's Baa1 rating reflects its large scale, high margins and strong cash flow supported by the lucrative Humira franchise, a successful immunology drug and the world's top-selling pharmaceutical product, as well as a large amount of cash on hand ($8.4 billion as of Dec. 31) that will grow over time and a strong late-stage pharmaceutical pipeline.

Offsetting these strengths, the ratio of debt to EBITDA after the Pharmacyclics merger will be very high for the rating at 4.4 times for the last 12 months ending Dec. 31, Moody’s said.

The negative outlook reflects AbbVie's weak position in the Baa1 category based on high financial leverage and Humira reliance, the agency said, and the potential for a downgrade if operating setbacks or debt-financed acquisitions impede deleveraging.

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