S&P calls Euro-Pharma 'recession resistant'

Standard & Poor's likes European pharma companies. It really, really likes them. In a new report, the ratings agency says that Europe's pharma sector "appears to be barely scathed by the economic recession." How so? The drugmakers tend to be growing in--you guessed it--emerging markets. "Medicines in developed markets are mostly financed by health insurance schemes and their market prospects are swelled by growing populations with increasingly unhealthy lifestyles," said S&P's credit analyst Olaf Toelke.

That emerging-market strength will help the European companies offset sluggish growth in the U.S., the report says. Among the companies with the strongest positions in developing countries, according to S&P are Bayer, Sanofi-Aventis, and AstraZeneca, partly because of their early entry to those markets and partly because of "geographic proximity."

If Euro-Pharma gets too enamored with M&A, however, S&P's love affair with the industry could fade. "[W]e see a heightened risk that companies could adopt more aggressive financial policies, which could potentially result in negative rating actions," Toelke said. To wit: the recent focus on mergers and acquisitions by large drugmakers in the U.S., the report states. Hmm. A backlash against the mega-merger? What do you think?

- read the S&P report