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Monday, September 22, 2008
Moody's goes 'negative' on pharma sector

It's all about credit, lately.

And one of the big credit rating agencies views the outlook of the pharmaceutical sector as negative for the next 12 to 18 months.

Moody's Investors Service cites, what else, those long-time-in-coming expirations of the patents of some of the industry's biggest-selling drugs from 2010 through 2013.

It's no surprise Big Pharma nas been having trouble coming up with new medicines that could have the sales power of Lipitor and the other cholesterol-lowering statins. One response has been for the giants to ramp up their strategic partnerships with biotechnology firms.

But Moody's also sees a fair amount of pressure for consolidation in the industry. The firm says as M&A activity heats up that will pressure the credit ratings for companies that "opt to substantially increase financial leverage to pursue acquisitions."

If there's a silver lining, it's that the balance sheets of U.S.-based and Japanese-based drug companies are strong. Some of the European drug makers have "somewhat weakened" following acquisitions.

And demographic trends favor our using more medicines in the United States as we get older. While the weakness in the U.S. economy generally won't affect drug sales, it could spur health-care cost containment efforts that could, Moody's says.

 

Posted by Mike Armstrong @ 12:54 PM  Permalink | File Under: Pharma, Biotech | Post a comment
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About Mike Armstrong
Mike Armstrong, a business editor and writer for nearly two decades, is the Inquirer's business columnist and PhillyInc blog editor.
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