Standard & Poor's cut its credit outlook for AstraZeneca to negative from stable on Monday in response to a major strategy update by the drugmaker's new chief executive last month.
The ratings agency said it did not believe the new strategy would halt the downward trend in revenues following patent expires on many of the company's top-selling medicines.
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"This could lead to a downgrade if the new management cannot stabilize key credit metrics in the short term," S&P said.
The squeeze on profits could see the ratio of funds from operations (FFO) to net debt falling below 60 percent, which S&P said was the minimum level needed to justify the current long- and short-term credit ratings of AA-/A-1+.
New CEO Pascal Soriot is banking on further cost cutting and organic growth, fuelled by a revamp of research operations, to turn Britain's second biggest drugmaker around.
But his strategy does not offer any quick fixes. S&P expects revenue to decline by 9 percent this year, reflecting loss of patent protection on antipsychotic Seroquel and the beginning of sales erosion to stomach acid drug Nexium and cholesterol fighter Crestor ahead of their U.S. patent expiries in 2014 and 2016.
The worry is that the sales decline will continue for a number of years, pressuring the group's creditworthiness, since AstraZeneca has no obvious new products to replace those going off patent.
In addition to watching the FFO-to-net-debt ratio, S&P said it could also lower the rating if there were double-digit rates of declines in future sales, if profitability fell significantly or if the new drug pipeline weakened further.
(Reporting by Ben Hirschler; Editing by Clelia Oziel)