Pfizer Inc. Senior Unsecured Debt Issuance Rated 'AA-': All Ratings On CreditWatch Negative

NEW YORK (S&P Global Ratings) March 25, 2020--S&P Global Ratings today assigned its 'AA-' issue-level rating to Pfizer Inc.'s senior unsecured notes, and placed them on CreditWatch with negative implications. We expect the company will likely issue $1 billion and use the proceeds for environmental and social projects. Pending allocation to projects, the company can use the proceeds to refinance and redeem existing debt, in a leverage-neutral transaction.
Our 'AA-' long-term issuer credit rating on New York City-based pharmaceutical giant Pfizer, is on CreditWatch with negative implications. We expect to lower the rating one notch to 'A+' upon the consummation of the Upjohn divestiture scheduled to close later this year. We view that divestiture transaction as modestly negative to Pfizer's business strength, because it weakens the company's therapeutic diversification and scale (that segment represents about 20% of revenues).
The rating on Pfizer reflects the company's leading position in the attractive and patent-protected market for prescription drugs, which is relatively insensitive to economic conditions, and which benefits from rising incomes and increasing demand for health care in emerging markets. The company has excellent product and therapeutic diversification, strong profitability (EBITDA margins around 40%), and our assessment of the business as better-than-most big pharma peers, reflects the very large scale, and superior level of diversification. The company has a strong market position in various therapeutic markets, with particular strengths in neurology, oncology, and vaccines. The rating also reflects our expectation for Pfizer's long-term leverage ratio to remain below 2.5x.
Following the planned divestiture of the Upjohn segment, we expect the company to experience low- to mid-single-digit organic revenue growth, even in the current environment where price increases on drugs are limited, due to public and political pressure, as well as aggressive pricing by managed care and pharmacy benefit managers. This level of topline growth is in line with industry peers, and alleviates the company's historical reliance on growth via significant spending on acquisitions.
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