Fred Hutchinson Cancer Research Center, WA Rating Raised To #A+# On Expected Financial Im Outlook Positive

Stocks and Financial Services Press Releases Friday May 25, 2018 09:42
CENTENNIAL--25 May--S&P Global Ratings

CENTENNIAL (S&P Global Ratings) May 24, 2018--S&P Global Ratings raised its long-term rating to 'A+' from 'A' on Washington Health Care Facilities Authority's series 2017A-2017C revenue bonds, issued for Fred Hutchinson Cancer Research Center, and raised its long-term rating to 'A+' from 'A' on the authority's series 2011A, and 2015A revenue bonds, issued for Fred Hutch. We also raised our issuer credit rating (ICR) on Fred Hutch to 'A+' from 'A'. The outlook is positive.

"The raised rating reflects our opinion that Fred Hutch's balance sheet will likely strengthen in fiscal 2018 due to the sale of its shares in Juno Therapeutics," said S&P Global Ratings credit analyst Sean Lacy. The proceeds of approximately $400 million in the sale of its stock will double the cash and investments of Fred Hutch and significantly bolster the financial resources to levels more commensurate with the higher rating.

"The positive outlook reflects our expectation that Fred Hutch will significantly improve its financial resource ratios further over the next two years, as well as continue to post positive operations to levels that could be consistent with a higher rating," Mr. Lacy added. "It is our understanding that Fred Hutch may receive up to an additional $200 million from the sale of Juno Therapeutics based on the performance of the company. It is unlikely that Fred Hutch will receive the additional cash in fiscal 2018; however, additional cash could improve the financial resources to a level more commensurate with the higher rating."

While we expect to see strengthening in the balance sheet in fiscal 2018, management continues to execute on its large strategic initiative, which has led an increase in expenses over the past two years, and in fiscal 2017 diminished the strong operating surpluses we saw in fiscal 2015 and 2016. We expect to see operating margins normalize (excluding the Juno proceeds) as Fred Hutch continues to implement its strategic plan. Over the next four fiscal years, Fred Hutch is planning to diversify revenue through the enhancement of the commercialization of innovations derived from the center's investigators, as well as increasing fundraising capabilities. We view Fred Hutch's goal of revenue diversity positively, but we recognize it could take time for fundraising to reach par with Fred Hutch's peers.

Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column.


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