S&P Lifts Sepracor Rating

The rating goes to B-plus from B.
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Standard & Poor's on Monday raised its credit rating on

Sepracor

(SEPR)

to B-plus from B.

Although the rating is several notches below the minimum investment grade of BBB-minus, S&P says Sepracor's outlook is positive.

S&P cited an improving operating performance from growing sales of the insomnia drug Lunesta and the asthma medication Xopenex, but said that Sepracor "still has a heavy debt burden and must continue to successfully compete against much larger current and future rivals."

Sepracor

recently issued a fourth-quarter earnings report that easily beat Wall Street expectations, and the Marlborough, Mass., drugmaker issued 2006 guidance that exceeded consensus forecasts.

"Because of Sepracor's need to heavily promote its products, the company must increase its marketing spending, such as for sales force expansion and increased direct-to-consumer advertising," S&P said. "This increase in spending may keep cash flows negative in the near term."

The firm added that it believes Sepracor's "sales base will continue to significantly expand and will soon more than support the growing cost structure."

Separately, Sepracor said the Food and Drug Administration has begun reviewing its application for arformoterol tartrate, an experimental treatment for chronic obstructive pulmonary disease. The FDA is expected to rule by Oct. 12.

Sepracor's stock was unchanged Monday at $55.65.