S&P downgrades Alkermes

Standard& Poor’s said it lowered the corporate credit rating on Alkermes plc to BB- from BB.

The agency also said it lowered the rating on the company’s senior secured debt to BB from BB+. The recovery rating on this debt remains at 2, reflecting 70% to 90% expected default recovery.

The outlook is stable.

The downgrades reflect a view that the company’s transition to a more integrated pharmaceutical model is taking longer than expected and the potential scale of costs required to fully complete the transition may be higher than previously modeled, S&P said.

The downgrades also consider the uncertainty around the company’s ability to handle these persistently elevated expenses, given the company’s limited experience at marketing its own products, the agency said.

The ratings continue to consider the significant cash balance that will cushion losses and cash outflows projected over the next two years, S&P said.

However, management’s willingness to tolerate cash flow deficits for such prolonged period somewhat weakens confidence in the company’s governance, the agency said.

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