c. Moody’s Investors Service downgraded the long-term senior unsecured rating of AZN from A1 to Aa2 in 2007. Assess any potential association between this downgrade and AZN’s arrangements with Merck.
Paris, July 30, 2007 -- Moody's Investors Service downgraded the long-term senior unsecured ratings of AstraZeneca plc and its guaranteed subsidiary to A1 from Aa2. This downgrade followed the announcement of AstraZeneca's acquisition of MedImmune for a total consideration of more than US$15 billion to be financed by cash and new debt. It reflects the shift in the company's financial policy to more aggressive principles and Moody's view that its weakened credit metrics will not recover to their previous very strong levels. The all-cash deal for MedImmune, worth $58 a share, appears to be the largest purchase ever of an American biotechnology company. The $58 a share AstraZeneca will pay represents a 21 percent premium over MedImmune’s closing price on Friday and is 53 percent higher than MedImmune’s closing price the day before it announced that it would put itself on the block. For AstraZeneca, based in London, the acquisition would help bolster its product pipeline after some recent setbacks, and would supplement its portfolio with biologic drugs — protein-based therapies that are made in cultures of living cells. There is another motive, too: because biotechnology protein drugs are far more complex than typical pills, which are simple chemicals, they have been largely insulated from the generic competition that can wipe out sales of a blockbuster drug almost overnight. The deal will also move AstraZeneca into vaccines. AstraZeneca said the deal would add to its cash earnings per share, excluding amortization, by 2009 and that it could achieve $500 million a year in cost savings. However, this acquisition jeopardised AZN financial situation as it put the company into debt for the first time. The debt-financed acquisition resulted in a change to the financial...
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