Investing.com -- S&P Global Ratings has revised the rating outlook for Amgen Inc (NASDAQ:AMGN). from negative to stable following the company’s consistent reduction of its debt. The biopharmaceutical company’s debt has been reduced to 2.9x as of March 31, 2025, below S&P Global Ratings’ downside trigger. This comes after Amgen’s acquisition of Horizon in 2023.
Amgen has been able to reduce its debt through a combination of growth and debt repayment. The company has also avoided significant acquisitions and share repurchases, which has contributed to the decline in leverage. The company is expected to generate a solid annual discretionary cash flow of more than $4 billion, providing the ability to balance acquisition and share repurchase activity while keeping leverage below 3x.
While the company does not have a specific leverage target, it has expressed the importance of maintaining an investment-grade rating. Following the Horizon acquisition, Amgen’s goal has been to return gross leverage to the levels achieved at the end of 2022, which S&P Global Ratings estimates would equate to a debt to EBITDA ratio in the mid-to-high 2x area.
Despite the loss of exclusivity for key franchises Prolia and Xgeva this year, Amgen sees growth in other products. Drugs such as Repatha, Tezspire, and Blincyto, an immunology drug for leukemia, continue to grow rapidly. The company also recently launched Imdelltra, the first bispecific T-cell engager for treating small-cell lung cancer. Growth is also expected from drugs acquired from Horizon, including Tepezza for thyroid eye disease, Krystexxa for gout, and Uplizna for neuromyelitis optica spectrum disorder.
Amgen is currently involved in a dispute with the IRS over a transfer pricing matter. The issue has not affected S&P Global Ratings’ calculation of adjusted debt. However, a tax reserve, settlement announcement, or payment could potentially increase leverage. A trial on the matter occurred last year, but a final resolution is expected to take several years.
The stable outlook reflects S&P Global Ratings’ expectation that Amgen’s revenue and EBITDA will remain stable despite patent expirations and the impact of the Inflation Reduction Act. It also anticipates that the company will generate sufficient cash flow to balance capital allocation and keep leverage below 3x.
S&P Global Ratings could lower the rating if Amgen pursues aggressive financial policies, such as large acquisitions or significant share repurchases, or experiences a setback like a sizable tax settlement, resulting in adjusted leverage remaining above 3.25x. Conversely, the rating could be raised if the company convincingly commits to maintaining leverage below 2.5x.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
