TEXT-Fitch release on AstraZeneca PLC

(The following statement was released by the ratings agency)

Sept 5 - Fitch Ratings has today affirmed UK-based pharmaceuticals company AstraZeneca PLC's (AZN.L: Quote, Profile, Research) (AstraZeneca) Long-term Issuer Default rating ("IDR") at 'AA-' (AA minus). The Outlook for the Long-term IDR remains Stable. The Short-term IDR is affirmed at 'F1+'.

AstraZeneca's ratings are supported by its strong market position within the global pharmaceutical industry, its solid product portfolio, including 11 blockbuster drugs with sales above USD1bn, as well as by its significant presence in the US market (end-H108: 45% of group sales). AstraZeneca has a solid patent expiry profile with the next major US expiry (Arimidex) not due until December 2009. Negative rating factors include increased leverage following the USD15.6bn MedImmune acquisition in 2007, and the much improved but still relatively modest Phase III product pipeline.

During H108, AstraZeneca showed a yoy sales growth of 3% at constant exchange rates (CER) or 10% on a reported basis. This was driven by Seroquel, Crestor, Symbicort, Arimidex, and Pulmicort, which accounted for 42% of group sales and 75% of the group's sales growth on an actual basis in H108.

Approximately 15% of sales are at risk from US patent expiry by 2012-13, and the group is relying on new products to fill the sales gap. Although the number of new molecular entities in Phase III of AstraZeneca's product pipeline more than doubled from five in February 2007, to eleven at end-July 2008, this is still low compared to its peers. In terms of the company's existing patent litigation lawsuits, the risk of an early entry of generic competition for Nexium and Seroquel is reduced, as AstraZeneca settled a lawsuit with Ranbaxy regarding US patent litigation for Nexium in April and received a favourable court ruling for Seroquel in July 2008.

In July 2007, after its debt-financed acquisition of US biotechnology company MedImmune Inc (completed in June 2007), AstraZeneca clarified its financial policy, confirming its commitment to reducing gross debt (FYE07: USD15.2bn) over the next three to four years to a permanent debt (net of cash) of USD6bn-7bn. This financial policy is in line with the company's 'AA-' (AA minus) rating, and leaves AstraZeneca with the financial flexibility to further strengthen its product pipeline and to repurchase shares. Share repurchases will be reviewed annually by the board until the long-term debt target is achieved - taking into account its credit rating, cash flow and investment opportunities. For 2008, share repurchases are indicated by the company to be in the region of USD1bn.

AstraZeneca's FY07 lease-adjusted net debt/EBITDAR was 1x (FY06: -0.6x), and Fitch expects it will weaken slightly during FY08 due to the cash outflow to Merck ('AA-'/Stable Outlook) of USD2.6bn in Q108. The cash outflow result relates to the restructuring of the AstraZeneca and Merck & Co. joint venture in the US. A further cash payout from AstraZeneca to Merck can be expected in 2010.

The Stable Outlook reflects Fitch's view that the company's debt protection measures are likely to remain relatively stable over the medium term.