Irvine-based drug maker Allergan Inc. has gotten a boost from a ratings agency.
Fitch Ratings Inc. of New York upgraded Allergan’s long-term debt ratings last week.
The agency raised the drug maker’s long-term debt ratings to A+ from A, both of which are investment-grade.
Fitch also affirmed its stable outlook for Allergan and affirmed its short-term debt ratings at F1, indicating a strong capacity to meeting financial commitments.
The agency said it upgraded the maker of Botox and other drugs for several reasons, including what it sees as the company’s ability to “withstand the macroeconomic headwinds in Europe given past operational success through the great recession in the U.S.”
International sales, including Europe, accounted for 40% of Allergan’s $5.4 billion in sales for 2011.
“Allergan’s exposure to troubled European countries is highly manageable,” Fitch said.
The drug maker’s exposure is made up of about $50 million in accounts receivables from public and non-public hospitals in Italy and Spain, according to Fitch.
“Also, the company had no government debt exposure to Greece at the end of 2011,” Fitch said.
Greece has been wrestling with a sovereign debt crisis since 2009 that has intensified in recent months.
The rating agency said the Allergan absorbed the worst of the recent recession in in 2009 and “still achieved top-line growth, albeit modest despite demand pressures on the cash-pay business leading to flat Botox revenue and declines in all medical device sales” that year.
• Headquarters: Irvine
• Business: drug maker
• Founded: 1948
• Ticker symbol: AGN (NYSE)
• Market value: about $28.7 billion
• Notable: Long-term debt upgraded from A to A+ by Fitch Rating Inc.
Fitch also noted that Allergan’s body and facial aesthetic products have proven re-silient to economic un-certainties. Both represent big portions of Allergan’s cash-pay businesses, which make up some 40% of the drug maker’s revenue.
Fitch’s upgrade also means it could be cheaper for Allergan to borrow money.
Allergan Chief Executive David E.I. Pyott earlier this year said his company would have “more shots on goal” when it comes to potential acquisitions, a phrase he borrowed from his son, a fan of the Anaheim Ducks hockey team.
Allergan spokesperson Heather Katt said the drug maker “has consistently taken a very disciplined approach” on how it manages its balance sheet. The company declined further comment on the recent upgrades by Fitch.
Fitch wrote that Allergan has “solid liquidity” with an $800 million line of credit that’s fully available.
The ratings agency noted that Allergan “has traditionally chosen to invest capital into the business” rather than boost dividends for shareholders. It noted that returns for investors have been modest throughout the company’s history, and quarterly dividends have remained at 5 cents a share since 2005.
Separately, Allergan got a victory in a trade lawsuit when a federal judge issued a permanent injunction against a German company that was seeking to sell a rival to Botox.
Allergan said last week that U.S. District Judge Andrew Guilford in Santa Ana ruled that Merz Pharma GmbH and its U.S. units violated California’s uniform trade secrets act.
Guilford’s injunction, among other things, prohibits Merz from selling or soliciting sales of its Xeomin drug in the facial aesthetics market for 10 months. Xeomin, a botulinum toxin, is seen as a potential competitor to Botox. His ruling came after a non-jury trial.
The court found that Merz misappropriated trade secrets belonging to Allergan, including “the specific identities and financial details” of Allergan’s relationships with virtually all of its doctor customers in the U.S. for Botox Cosmetic and lower-face filler Juvéderm, as well as a large segment of Allergan’s physician customers for Botox for therapeutic uses.
Guilford initially released the injunction without specific term or length. He followed up with specifics later.
Merz, in a release, said its Merz Aesthetics Inc. and Merz Pharmaceuticals LLC units were committed to what it said was “full remediation compliance” in the lawsuit.
