Moody's: Abbott outlook negative

Moody's Investors Service said it affirmed Abbott Laboratories' A1 senior unsecured notes, A1 industrial revenue bonds, provisional A1 senior shelf and Prime-1 short-term rating and Abbott Japan Co., Ltd.'s A1 backed senior unsecured notes following the announcement that Abbott plans to acquire Kos Pharmaceuticals Inc. for about $3.7 billion.

The outlook remains negative.

The agency said this transaction will complement Abbott's presence in the dyslipidemia market by adding additional cholesterol drugs to its product mix, and despite the increase in debt, Moody's believes the company can absorb this transaction at the current A1 rating assuming its cash flow levels continue to improve. The affirmation of Abbott's ratings further assumes that the company will maintain satisfactory liquidity.

The negative outlook is based on Moody's concerns that the additional leverage associated with the acquisition reduces financial flexibility and that the acquisition of Kos so soon after the acquisition of Guidant's vascular assets earlier this year highlights the company's aggressive growth strategy, which raises leverage as well as integration risk.

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