APP Pharmaceuticals' Unit Rated 'Ba3' With Stable Outlook - Moody's

Moody's Investors Service assigned a 'Ba3' corporate family rating to APP Pharmaceuticals LLC, a unit of APP Pharmaceuticals Inc -- which in turn will be a newly formed entity resulting from the separation of Abraxis BioScience Inc into two independent publicly traded companies.

The outlook for the rating is stable.

Moody's said the ratings are constrained by the increase in financial leverage and deterioration of credit metrics resulting from incremental debt. In addition, Moody's believes there is event risk associated with the complex and highly regulated manufacturing and supply processes in the injectable pharmaceutical industry.

In the past the company has experienced events of this nature including a voluntary plant shut-down in 2005 in order to upgrade and re-validate a manufacturing facility and constraints on the availability of certain products.

The ratings are also constrained by the limited scale of the company.

However, the ratings are supported by Moody's expectation for improvement in credit metrics over the next twelve to eighteen months resulting from debt repayment, the launch of new products from a strong pipeline, and favourable industry fundamentals.

In addition, APP benefits from very high barriers to entry in the injectable, generic pharmaceutical industry and has demonstrated a track record of competing successfully with larger pharmaceutical companies.

Moody's also believes that infrastructure investments in recent years should support increased manufacturing capacity and could reduce the likelihood of a manufacturing or supply event.

'All ratings are subject to review of final documentation,' the agency concluded.

SOURCE: Moody's Investors Service