Group work in course Financial Management & Markets (20198)
Companies selected for research:
Novarits and Takeda

Milano, November 2015
NOVARTIS & TAKEDA CREDIT RISK ANALYSIS

Moody’s rating methodology focuses on five broad rating factors and weightings. Each of this factor is meaningful as a credit indicator, and some of them are comprised of sub-factors that provide further detail.
• Five key factors: Scale, Business Profile, Patents and Pipeline, Leverage and Cash coverage and
Financial Policy.

Moody’s ratings are forward-looking and incorporate expectations for future financial and operating performance.

There are also historical data (in most cases, the last 12 months of reported results) helpful for understanding patterns and trends for a company’s performance as well as for peer comparison.
• Ownership, management, liquidity, corporate structure, governance and country risk review.

After estimating or calculating each factor and sub-factor, the outcomes for each are mapped to a broad Moody’s rating category from Aaa to Ca. The final score, computed as the weighted average of factors, allows a first evaluation of the rating of the company, which is adjusted taking into account the other aspects mentioned above.According to the same rationale and given the constraints of an external analysis based only on publicly available data, we performed the subsequent analysis of the industry and observed the following similarities and differences between Novartis and Takeda.

Traditionally, the pharmaceutical industry has been characterized by the presence of only a few major companies that create and supply the most important prescription drugs available with stable market shares. These big multinationals show high R&D and marketing expenses. In particular, drug companies spend far more on marketing drugs ( in some cases twice as