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Moody’s changes Eisai’s A2 rating outlook to negative

Tokyo, January 13, 2010 -- Moody's Investors Service has changed the 
rating outlook for the A2 issuer rating and senior unsecured rating of 
Eisai Co., Ltd. (Eisai) to negative from stable.

This action is based on Moody's view that Eisai's overall credit metrics
could weaken after the expiration of the patent for one of its core 
products, Aricept -- used in the treatment of Alzheimer's disease -- in 
the US market in November 2010.

Sales of Aricept in the US accounted for 23.5% of Eisai's total revenues 
in the first half of FYE3/2010. The company has focused on developing an 
additional dosage and sustained-release formulation with advantages over 
the current Aricept 10mg tablet, named Aricept SR, and an additional 
extended-release formulation of AcipHex for proton pump inhibitors, named 
AcipHex ER, in addition to other promising new products, such as E7389 
for breast cancer and others, and E5564 for severe sepsis. All of these
products, except for Aricept SR, are expected to be submitted for a New 
Drug Application to the FDA over the next several months. Aricept SR was 
already submitted in September 2009.

However, Moody's is concerned that there will be time lags between the 
Aricept patent expiration and approvals for or the start of revenue
contributions from these promising products. Therefore, earnings and 
cash flow from 2011 could experience pressure for some years.

As such, Moody's will continue to closely monitor how the company can 
implement life cycle management for Aricept to mitigate the expected
negative impact on earnings and cash flow as it strengthens portfolio
and cost management.

Moody's notes that Eisai maintains its conservative financial policy,
stipulating the use of free cash flow for shareholder returns, investment 
for growth and debt payments. The repayment of its long-term debt -- 
financing for the MGI PHARMA, Inc acquisition in 2008 --has not yet 
started. But, Moody's recognizes that Eisai has steadily prepared for 
repayments which will start from 2011 by strictly controlling the use of 
free cash flow based on its current financial policy.

How it stabilizes earnings and cash flow from 2011, while realizing an 
improvement in its balance sheet structure, will be key for further
rating actions.

Eisai's A2 rating also considers a rating factor of its strong 
relationship with its main banks as one of the regional factors in Japan, 
which is incorporated into the rating by two notches.

Eisai's rating will face downward pressure if the negative impact of the
Aricept patent expiration on overall earnings is much larger than Moody's 
expects due to the insufficient contributions of promising new products
or additional formulations of its core products. And these negative
results could limit the free cash flow for its future repayment of its
long-term debt obligations.

On the other hand, the rating outlook could be changed to stable from 
negative, if Eisai can overcome the risks of the patent expiration and 
put its revenues and earnings back on the track of sustainable growth,
while improving its financial fundamentals.

Moody's last rating action with respect to Eisai was taken on March 5,
2008 when it lowered to A2 from Aa3 the issuer rating and assigned the
stable outlook.

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