Moody's: Global pharma industry outlook change to stable reflects lower growth expectations

New York, March 03, 2016 -- Lower pricing flexibility, the stronger US  dollar and slower adoption of some new products will dampen earnings  growth in the global pharmaceutical industry, said Moody's Investors  Service. As a result, the rating agency has changed its outlook on the  sector to stable from positive.

"We are changing our outlook for the global pharmaceutical industry to  stable from positive because of a modest reduction in our expectations for the industry's earnings growth, said Michael Levesque, a Moody's  Senior Vice President. "We now expect growth of 3%-4% versus our previous  expectation of 4%-5%."

Moody's noted that pricing in the US was one of the contributing factors  to the outlook change. Owing to the continuing debate around high drug  prices in the US, many manufacturers are taking more modest price increases than in the past.

Pricing remains a headwind in Europe and Japan, where greater generic drug use is encouraged. In addition, the stronger US dollar will hurt  large US-based companies with overseas operations, but help non-US drug  manufacturers.

Moody's also notes that adoption rates for some products from large pharmaceutical companies have been slower than the agency expected. However, growth remains strong for cancer drugs, especially those in the  immuno-oncology category like Bristol-Myers Squibb Company's (A2 stable) Opdivo and Merck & Co., Inc.'s (A1 stable) Keytruda.

Patent expirations for blockbuster drugs will remain modest through late 2017, with the exception of AstraZeneca PLC's (A3 stable) Crestor, whose patent will expire in the US in 2016 and in the EU in 2017.

"Cost savings from acquisitions will also help industry earnings growth," said Levesque."Pharmaceutical companies will remain active in the M&A market as they try to cut costs, achieve greater scale and  diversification and acquire pipeline drugs with high potential."

Moody's subscribers can access the report, "Outlook Update: Global  Pharmaceuticals - Change to Stable from Positive on Lower Pricing  Flexibility and Stronger Dollar," at:

http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_1018539

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