S&P lowers US Oncology

Standard & Poor's said it lowered its corporate credit rating on US Oncology Inc. to B from B+.

The ratings were removed from CreditWatch, where they were placed with negative implications on Aug. 14 and the outlook is stable, the agency said.

S&P noted that this action reflects the sharply curtailed usage of erythropoiesis-stimulating agents by the company's network of oncologists as a result of regulatory actions, adding that it believes reduced revenues will translate into roughly $35 million of lost EBITDA in 2007, depending on the extent of managed-care payor adoption of government reimbursement guidelines and, to a lesser degree, physicians' clinical interpretations regarding the administration of ESAs.

The agency noted that the speculative-grade ratings on US Oncology reflect its significant debt burden, its vulnerability to adverse changes in third-party reimbursement policies, its narrow operating focus on the treatment of a single disease and the risk of change in treatment modalities.

These factors are partially mitigated by rising long-term demand trends, the company's ability to recruit and retain oncologists, its broad geographic presence and its proven ability to manage growth, the agency said.

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