Moody's downgrades Astellas

Moody’s Investors Service said it downgraded Astellas Pharma Inc.’s rating to A3 from A2 and also changed its outlook to stable from negative.

"The downgrade reflects the relative weakness of Astellas' business profile when compared with global peers – given the high concentration of its revenue in a few products – and its vulnerability to upcoming patent expirations," said Yukiko Asanuma, a Moody's analyst, in a press release.

Moody’s noted that Astellas earns more than half of its revenue from three drugs making the company vulnerable to changes in these products’ sales. The patents for mirabegron and Xtandi will start expiring in 2023 and 2027, respectively, whereas the patent for Prograf has already expired.

“Moody's expects that the sales of its off-patent drugs will decline while that of Xtandi will grow until its patent expires, further increasing Astellas' product concentration risk. As a result, Astellas faces the risk of a material decline in revenue for some time while the need to embark on more acquisitions to replenish its pipeline grows steadily,” the agency said.

Astellas is moving to shore up its weaknesses, Moody’s said. It acquired a number of biotech companies, including Audentes last year and is moving research and development resources into new areas.

“The stable outlook reflects Moody's expectation that Astellas' still strong balance sheet will afford it some financial flexibility to manage further acquisitions. Given its disciplined financial policy, the company has the financial flexibility to keep its debt/EBITDA at around 1x over the next 12-18 months,” the agency said.

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