Moody's revises global pharmaceutical sector outlook to stable from negative

Moody's revises global pharmaceutical sector outlook to stable from negative

Global Credit Research - 24 Sep 2012

New York, September 24, 2012 -- Moody's revised its outlook for the global pharmaceutical industry to stable, with earnings expected to rebound in 2013 as patent expirations ease from their peak, says Moody's Investors Service in a new industry outlook, The Worst Is Over. The outlook was previously changed to negative in October 2007.

"The stable outlook reflects our view that the worst of the industry's blockbuster patent expirations has passed," said Michael Levesque, a Moody's Senior Vice President. "Although industry earnings will still be affected by very recent patent expirations, earnings for large, branded players will reach a trough point in late 2012 and rebound in 2013."

Although some major companies with recent patent expirations -- including Bristol-Myers Squibb (A2 stable) and AstraZeneca (A1 negative) -- will still face year-over-year declines in earnings during the remainder of 2012 and into 2013, Moody's says that the next 12 months will be less onerous than the past 12 months when blockbuster drugs like Lipitor and Plavix went generic.

The industry remains challenged by a difficult regulatory approval environment for new products, and by areas of research that are still seeing limited success, such as Alzheimer's Disease, says the report.

The industry is also pressured by global cost containment efforts that seek to reduce healthcare spending. The use of generic drugs is rising and will benefit generic companies such as Teva Pharmaceutical Industries Ltd. (A3 stable), Watson Pharmaceuticals Inc. (Baa3 stable) and Mylan Inc. (Ba1 stable). However, generic companies face ongoing price erosion and stringent manufacturing compliance requirements that will cut into profits, says Moody's.

Moody's industry outlooks reflect the rating agency's expectations for fundamental business conditions in the industry over the next 12 to 18 months.

Moody's research subscribers can access this report at http://www.moodys.com/research/Global-Pharmaceutical-Industry-The-Worst-Is-Over--PBC_145645

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Michael Levesque, CFA
Senior Vice President
Corporate Finance Group
Moody's Investors Service, Inc.
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Marie Fischer-Sabatie
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Releasing Office:
Moody's Investors Service, Inc.
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U.S.A.
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