Moody's likely to affirm Abbott

Moody's Investors Service said that Abbott Laboratories' debt ratings (A1/Prime-1) would likely be affirmed with a stable outlook if the company buys the vascular assets of Guidant Corp. in conjunction with Boston Scientific Corp.'s acquisition of Guidant.

The affirmation would consider Abbott's diversified product portfolio as well as the relatively low concentration risk associated with its key pharmaceutical products, the agency said. The ratings would also reflect some enhancement of Abbott's diversified businesses and the potential for higher sales and cash flow associated with a more robust vascular and drug-eluting stent product line and expanded sales force.

Nevertheless, Moody's said it believes that the company's financial flexibility within the A1 category would be reduced by this transaction and that Abbott faces prospects for lower sales growth because of generic competition for several key pharmaceutical products.

Also, while an investment in the vascular space could provide some diversification benefit, in Moody's opinion, the drug-eluting stent market is riskier because of development and regulatory hurdles as well as high levels of technological change and competition.

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