Moody's eyes investor backlash for InVentiv after CRO acquisitions

InVentiv Health ($VTIV) has regularly found itself in the spotlight with its acquisitions of various contract research divisions--from PharmaNet and SDI Health to Kforce. But while most will laud InVentiv for it, a credit rating service thinks some of InVentiv's purchase decisions could come back to haunt the contract research organization and its investors.

Moody's Investors Service, a division of the Moody's Corporation, downgraded the ratings outlook for InVentiv from stable to negative. The reason: InVentiv's decision to acquire PharmaNet last year may not pan out well in 2012, as Moody's explains in a statement.

"Given both industry-wide headwinds, such as pricing pressure, as well as inVentiv specific challenges, such as integration and project delays, Moody's is concerned about continued underperformance of that business."

Within the first 6 months of 2012, Moody's expects InVentiv to experience a significant cash burn "due to the timing of bond payments, credit amendment fees, cash severance and costs to achieve synergies, bonuses and acquisitions."

What harms InVentiv's rating in Moody's eyes is the potential of project cancellations, pharma consolidation and generic product competition--things that other CROs face on a regular basis. But as Moody and Outsourcing-Pharma note, InVentiv's size and diverse offerings are certainly on its side, so long as the company takes advantage of potential cross-selling opportunities and maintains strong business relationships.

- read the release from Moody's
- check out the story from Outsourcing-Pharma