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Moody's affirms A2 rating on GSK; outlook remains stable


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Moody's affirms A2 rating on GSK; outlook remains stable

Moody's Investors Service affirmed the A2/(P)A2 long-term and (P)Prime-1 ratings of GlaxoSmithKline PLC and its subsidiaries after the U.K. drugmaker's decision to pay $13 billion to acquire full control of its consumer healthcare joint venture with Novartis AG.

The outlook on the ratings remains stable, Moody's said.

GSK's purchase of the Novartis AG stake will be financed by a committed loan facility and the deal is expected to close in the second quarter of 2018, according to the credit rating agency.

The credit metrics are weak for the A2 rating, but are expected to improve by the end of 2019 due to asset disposal by GSK "to mitigate the impact on its balance sheet," Moody's said.

The agency said the A2 rating is also supported by GSK's low exposure to patent expiration and a diversified portfolio of drugs as well as vaccines and a presence in the consumer healthcare sector, which includes products like toothpaste and over-the-counter medicines.

The stable outlook reflects Moody's expectations that the British pharmaceutical company's EBITDA will grow with the launch of new pipeline products over the next three to four years.

GSK's asthma drug Advair might face generic competition due to patent expiration. However, the launch of a generic competitor can be accommodated within the current A2 rating, according to Moody's.