Fitch downgrades Axplora

Fitch Ratings said it downgraded European Medco Development 3 Sarl's (EMD 3) long-term issuer default rating to B- from B and the senior secured debt issued by European Medco Development 4 Sarl to B from B+. RR3 is the recovery rating on the debt.

EMD 3 indirectly owns Axplora, which is the combined entity following the merger of PharmaZell and Novasep.

“The downgrade of the IDR follows the significant underperformance at its contract development and manufacturing operation (CDMO) business Novasep versus our prior expectations, due to the loss of three key contracts. This led to a spike in financial leverage above 6.5x in FY23, alongside weaker free cash flow (FCF) generation, which we project to be negative over FY24-FY26 (fiscal year-end March). The prospect of a quick recovery by replacing the lost contracts with new or existing clients remains uncertain, resulting in high execution risk in the near term,” Fitch said in a press release.

The outlook is stable.

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