Moody's Investors Service says U.S. drug manufacturers can expect to see their credit ratings drop over the next year, despite respectable cash flow and decent profitability. Companies such as Schering-Plough, J&J, Genentech and Pfizer were major debt drivers, according to Moody's semi-annual report. The report looked at the ability to pay debts in addition to the often-mentioned issues of patent expirations, generic competition and regulatory challenges.
The report cites concerns about increasing levels of offshore cash by the companies, which held $58 billion in the U.S. and $27 billion offshore in 2006, but increased offshore holdings to $63 billion in 2007, with just $29 billion in the U.S. that year. Couple this with an increasing debt level from $75 billion to $94 billion in the same time-frame and the pharma industry's usually strong credit rating is likely to fall.
- read the WSJ piece
- check the report from Forbes