Moody's Takes Jab At Pfizer (PFE)

Pfizer Inc. (NYSE: PFE) just got its long-term ratings downgraded by Moody’s.  It is amazing that bond ratings agencies still get to operate in a business as usual manner, but they do.  Long gone are the old “AAA” days.

Moody’s lowered Pfizer’s long term ratings to Aa2 from Aa1, and it left the Aa2 ratings under review for possible downgrade.
Moody’s affirmed its Prime-1 short-term rating.

This action reflects what Moody’s calls “some deterioration in Pfizer’s stand-alone credit quality based primarily on the approaching Lipitor patent expiration.”  Moody’s goes on to call the Pfizer pipeline on a standalone basis as relatively weak after the two recent Phase III study cancellations.

The ratings agency signaled this as a credit risk factor prior to the Wyeth acquisition with a negative outlook on the ratings of the drug giant since October 19, 2007.  The rating was also placed on review for a downgrade on January 26, 2009 at the time of the merger announcement.

Moody’s further stated that the ratings will fall to A1 if the Wyeth acquisition closes on the agreed upon terms.  It also assumes that there are no significant and unforeseen changes in the credit profile of either company.

Some positive notes were given on the dividend reduction as a boost to free cash flow.  It believes that Pfizer has time to consider what to do with this as it will move its effective tax rate higher.

This has actually had little impact today.  Shares are down 2% at $12.82, but they have been down around this level since late morning.

Yawn…..

JON C. OGG