Moody's changed the outlook on Novartis AG's Aa3 long-term rating to negative following the company's announcement of a $5 billion share buyback.

Moody's said that the debt-funded buyback exceeds Novartis' free cash flow, further straining the company's "already weak" credit metrics over the next 12 months especially when sales are expected to be flat year over year.

Knut Slatten, Moody's vice president and analyst, added that Novartis could strengthen its metrics by divesting assets and allocating the proceeds for "debt reduction rather than shareholder returns."