Negative credit ratings puts US pharma in glum Moody
for the US pharma industry and has revised is credit ratings
outlook from stable to negative.
Credit ratings for the whole US pharma sector have been "essentially stable" in 2007, but it now faces negative rating pressure over the next 12 months, according to Moody's.
"Approaching patent expirations between 2010 and 2012, a tougher regulatory climate, and a shift towards more aggressive financial policies create the potential for rating downgrades," said Moody's Senior Vice President Michael Levesque.
These problems are not just limited to the US pharma market and the whole industry is undergoing rapid changes to the way it works, to try and stave off disaster.
Most of the large US pharma firms rated by Moody's face significant patent expirations in the 2010 through 2012 timeframe, Levesque added; a period some analysts have dubbed 'the patent blackhole', in reference to the magnitude of the problems some companies are facing.
For most companies, cumulative patent expirations through 2012 affect more than 40 per cent of current revenues - and in some cases over 50 per cent - according to Moody's "US Pharmaceutical Industry Snapshot and Semiannual Update" , which will be published soon.
The report also notes that the pace of approvals by the US Food and Drug Administration (FDA) has slowed recently and more companies are receiving non-approvable letters or approvable letters contingent upon new clinical trials.
Levesque also sounded a warning that policies, which have supported high credit ratings, may be subject to revision.
He said a larger number of pharmaceutical companies appear likely to consider larger acquisitions and share repurchase strategies in order to improve lagging shareholder returns.
There have been several rumours of so-called 'mega mergers' in the past few weeks alone: first Sanofi-Aventis was reportedly interested in buying Bristol-Myers Squibb (BMS) and then Sanofi was the subject of a takeover rumour itself with Pfizer supposedly in the frame to buy it's fellow pharma-giant.
In the last few days, Biogen Idec has announced it is open to offers for the company.
Levesque believes this is thanks to the benefits of cost restructuring programs, cleaner litigation profiles, and the success of several key pharmaceutical products approved in 2005 and 2006, fuelling growth for certain companies.
In all, Moody's rates 21 US pharmaceutical companies, which have about $90bn (€63bn) in rated debt and bank credit facilities.
