Moody's Upgrades AbbVie's Credit Rating to A2

Key Takeaways of AbbVie's Rating Upgrade

Moody's Ratings has upgraded AbbVie Inc.'s credit rating to A2 from A3, shifting its outlook to stable from positive. The upgrade reflects the company's strong commercial execution and robust growth in its core immunology and neuroscience sectors, successfully navigating the patent expiration of its blockbuster drug, Humira.

Performance and Growth Projections

The rating agency highlighted AbbVie's above-average earnings growth despite market challenges. Future expansion is expected to be driven by the immunology portfolio, specifically Skyrizi and Rinvoq. The neuroscience division, with new treatments like Vyalev for Parkinson’s disease and Ubrelvy for migraines, is also set to bolster the company's business profile. AbbVie is projected to generate over $10 billion in annual free cash flow after dividends for the next two to three years, enabling funding for business development.

Strategic Strengths and Market Risks

AbbVie's A2 rating is supported by its significant global scale and leadership in immunology, oncology, neuroscience, and aesthetics. However, Moody's also noted risks, including a high therapeutic concentration in immunology and considerable exposure to US drug pricing policies. The company faces significant competition for its key product franchises Skyrizi and Rinvoq.

Future Outlook and Key Metrics

Future rating upgrades are contingent on increased product diversification, continued strong growth in core products, and sustained debt-to-EBITDA ratios below 2.5 times. Conversely, a downgrade could occur if key franchises face unexpected pressure, the pipeline suffers major setbacks, or large debt-financed acquisitions push the debt-to-EBITDA ratio above 3.25 times.

FAQ

Q: Why did Moody's upgrade AbbVie's rating?
A: The upgrade to A2 was due to AbbVie's strong commercial performance in its core immunology and neuroscience portfolios, which has effectively offset the impact of the Humira patent cliff.

Q: What are the main risks for AbbVie?
A: Key risks include high concentration in its immunology portfolio, significant competition, and greater exposure to US drug pricing policies compared to some of its peers.

Source: Investing.com