Johnson & Johnson's AAA Rating Under Scrutiny Following Intra-Cellular Therapies Acquisition
Deal News | Jan 14, 2025 | EIN
Johnson & Johnson has placed its AAA credit rating under pressure due to its recent acquisition of Intra-Cellular Therapies. This move has led S&P Global Ratings to place the company’s rating on CreditWatch Negative, given the expected increase in leverage, which surpasses the 1.0x downside trigger for the current AAA rating. Despite concerns, projections indicate that leverage may decrease to more manageable levels by 2025, contingent upon continued business growth and smaller acquisitions. Johnson & Johnson aims to strengthen its neuroscience franchise by adding CAPLYTA to its portfolio, while maintaining its strategic approach toward integration and financial conservatism.
Sectors
- Pharmaceuticals and Biotechnology
- Medical Devices
- Credit Rating Agencies
Geography
- United States – Johnson & Johnson is a US-based company, and the acquired company, Intra-Cellular Therapies, is also based in the United States.
Industry
- Pharmaceuticals and Biotechnology – This sector is involved due to Johnson & Johnson's acquisition of Intra-Cellular Therapies, a company in the biotechnology field.
- Medical Devices – Johnson & Johnson's history of acquisitions in this sector, including Shockwave Medical and Abiomed, demonstrates its active participation in the medical devices industry.
- Credit Rating Agencies – This industry is relevant as S&P Global Ratings is involved in the assessment and credit rating impacts on Johnson & Johnson.
Financials
- 1.4x leverage – The post-acquisition leverage of Johnson & Johnson, which exceeds the acceptable level for maintaining a AAA rating.
- 1.1x by 2025, below 1.0x by 2026 – Projected leverage reduction targets for Johnson & Johnson following strategic management and smaller acquisitions.
Participants
| Name | Role | Type | Description |
|---|---|---|---|
| Johnson & Johnson | Acquirer | Company | A major US-based multinational corporation focusing on pharmaceuticals, medical devices, and consumer health products. |
| Intra-Cellular Therapies Inc. | Target | Company | A biopharmaceutical company specializing in the development of therapies for complex psychiatric and neurological diseases. |
| S&P Global Ratings | Credit Rating Agency | Company | An entity that provides independent credit ratings, research, and risk analysis. |