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Fitch affirms Eli Lilly ratings with stable outlook

Fitch Ratings affirmed Eli Lilly and Co.'s long-term issuer default rating at A and short term issuer default rating at F1 based on its improving operation profile.

The outlook on the ratings is stable.

Fitch said 25% of the company's sales are at risk through 2020 due to the expiration of patents, and any fall in revenue will be balanced with the growth of products with longer duration patent protection and market exclusivities.

The ratings action comes after the announcement of the $8 billion acquisition of cancer specialist Loxo Oncology Inc. by the Indianapolis-based drugmaker.

Fitch said the Loxo transaction makes strategic sense but will raise the company's leverage to 1.7x for 2019. However, the agency believes that Lilly can operate and meet its strategic goals without stressing the leverage.

The agency believes Lilly is competitively positioned in terms of scale, breadth, depth, geographic reach and patent risk compared to its industry peers, noting that the rating reflects the smaller and less diversified nature of the company's operating profile versus larger innovative pharmaceutical industry peers.

On Jan. 8, S&P Global Ratings placed Lilly's ratings on CreditWatch with negative implications, while Moody's affirmed the company's ratings.