Moody's prunes Emergent BioSolutions

Moody's Investors Service said it downgraded Emergent BioSolutions Inc.’s ratings, including the senior unsecured rating to Caa3 from Caa2, the corporate family rating to Caa1 from B3, the probability of default rating to Caa1-PD from B3-PD and the speculative grade liquidity rating to SGL-4 from SGL-3.

“The downgrades reflect volatility in U.S. government ordering patterns for key Emergent products, creating ongoing earnings pressure and elevated financial leverage. Over the next several quarters, lower anthrax and smallpox sales will more than offset solid Narcan sales and the positive impact of aggressive new cost reduction efforts.

“Moody's believes that underlying demand from the U.S. government for Emergent's medical countermeasure products is becoming less certain, raising the company's credit risk profile. Despite the benefits of cost reductions, Emergent's earnings are becoming more difficult to predict. Absent a substantial turnaround in financial performance driven by strong underlying demand, Emergent faces potential covenant violations and rising exposure to refinancing risk given the May 2025 expiration of its credit agreement,” the agency said in a press release.

The outlook remains negative.

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