Here's a new diagnosis for the pharma industry, courtesy of Moody's Investors service. "The Worst Is Over," the research firm pronounced in its latest industry outlook. And Moody's raised its assessment to "stable" from "negative," where pharma has languished since late 2007.
What's changed over the past 5 years? The patent cliff. Now that Big Pharma has suffered the loss of exclusivity on its megablockbuster drugs--Pfizer's ($PFE) Lipitor, Sanofi ($SNY) and Bristol-Myers Squibb's ($BMY) Plavix, Eli Lilly's ($LLY) Zyprexa, AstraZeneca's ($AZN) Seroquel, and Merck's ($MRK) Singulair, to name a few--the losses still to come don't look so daunting.
"The stable outlook reflects our view that the worst of the industry's blockbuster patent expirations has passed," Moody's SVP Michael Levesque said in a statement. "Although industry earnings will still be affected by very recent patent expirations, earnings for large, branded players will reach a trough in late 2012 and rebound in 2013."
So, by Moody's lights, the second-quarter bloodbath in pharma earnings is a case of, "Well, it can't get any worse." You'll recall that several of the world's biggest drugmakers saw year-over-year sales plummet on those patent losses. AstraZeneca, for one, saw sales drop by 21% for the period, as Seroquel revenues lost some $900 million. Pfizer lost 9% in overall Q2 sales, thanks to a year-over-year loss of more than $1 billion in Lipitor sales.
"The next 12 months will be less onerous than the past 12 months," Moody's said.
That's not to say that pharma doesn't face pressures it didn't expect back in 2007. Europe's pricing squeeze, for instance, wasn't such a threat 5 years ago.
- see the statement from Moody's
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