Moody's affirms Endo on acquisition plan

Moody's Investors Service said it affirmed Endo Luxembourg Finance I Co. Sarl’s Ba3 corporate family rating, Ba3-PD probability of default rating, Ba1 (LGD2) senior secured credit facilities and SGL-2 speculative grade liquidity rating and the B1 (LGD5) senior notes issued by Endo Finance LLC and Endo Finance Co. The outlook remains negative.

Each company is a subsidiary of Endo International plc.

The affirmation follows the announcement that Endo will acquire privately held Dava Pharmaceuticals, Inc. for $575 million up front and up to $25 million of milestone-based payments. The agency said the acquisition will increase Endo's financial leverage but not enough to trigger a downgrade.

Endo's Ba3 corporate family rating reflects its modest size and scale relative to larger pharmaceutical peers, partially offset by the company's solid market positioning as a niche player in the pain and urology markets and by its revenue diversity across branded drugs, generic drugs and medical devices, Moody’s said.

In explaining the negative outlook, the agency said mesh-related litigation outflows will constrain Endo's cash flow at a time when Lidoderm sales are declining and debt may rise in support of business development.

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