* Outlook cut to negative on fears of ongoing sales decline
* Current long- and short-term credit ratings AA-/A-1+
LONDON, April 8 Standard & Poor's cut its credit
outlook for AstraZeneca to negative from stable on
Monday in response to a major strategy update by the drugmaker's
new chief executive last month.
The ratings agency said it did not believe the new strategy
would halt the downward trend in revenues following patent
expiries on many of the company's top-selling medicines.
"This could lead to a downgrade if the new management cannot
stabilise key credit metrics in the short term," S&P said.
The squeeze on profits could see the ratio of funds from
operations (FFO) to net debt falling below 60 percent, which S&P
said was the minimum level needed to justify the current long-
and short-term credit ratings of AA-/A-1+.
New CEO Pascal Soriot is banking on further cost cutting and
organic growth, fuelled by a revamp of research operations, to
turn Britain's second biggest drugmaker around.
But his strategy does not offer any quick fixes. S&P expects
revenue to decline by 9 percent this year, reflecting loss of
patent protection on antipsychotic Seroquel and the beginning of
sales erosion to stomach acid drug Nexium and cholesterol
fighter Crestor ahead of their U.S. patent expiries in 2014 and
The worry is that the sales decline will continue for a
number of years, pressuring the group's creditworthiness, since
AstraZeneca has no obvious new products to replace those going
In addition to watching the FFO-to-net-debt ratio, S&P said
it could also lower the rating if there were double-digit rates
of declines in future sales, if profitability fell significantly
or if the new drug pipeline weakened further.