Fitch downgraded AstraZeneca PLC's long-term issuer default rating and senior unsecured rating to A- from A with a negative outlook.
The downgrade takes into account increasing business risk as the company transitions to next-generation therapies. The mixed late-stage pipeline developments in oncology are also causing uncertainty regarding the timing and magnitude of AstraZeneca's growth trajectory, according to the rating agency.
Fitch also noted the sustained revenue pressure the company faces from patent expiry on blockbuster drugs. The agency said "sales-at-risk" related to U.S., EU, Japan and China patent expiries up to the end of 2019 rose to 45% of 2016 sales - making AstraZeneca the European pharmaceutical most exposed to generic competition in the Fitch-covered universe.
In addition, Fitch observed that the acceleration of investments in the group's science base has resulted in AstraZeneca's free cash flow margins being below those of its A-rated peers.
The negative outlook reflects Fitch's expectation of continuing negative free cash flow due to continued investment in the business, restructuring costs and shareholder returns.