While affirming Pfizer’s credit rating which, by the way, was lowered last December, Mike Levesque has now lowered the rating outlook to negative from stable. Given yesterday’s news that the drugmaker reported plunging profits and is taking a $2.8 billion charge to scuttle its disastrous Exubera insulin inhaler, the Moody’s decision is hardly surprising. Nonetheless, the move only serves to underscore the difficulties facing Pfizer ceo Jeff Kindler.

The change in rating outlook follows Pfizer’s third quarter 2007 earnings report and reflects:

1 - the $2.8 billion write-down of Exubera assets;
2 - continuing pressure on US Lipitor sales and market share;
3 - the approaching loss of exclusivity for Lipitor in either 2010 or 2011.

“Despite Pfizer’s excellent balance sheet, Moody’s negative outlook reflects challenges Pfizer faces in improving shareholder value as it heads into the difficult patent expiration period between 2010 and 2012,” says Levesque, a Moody’s senior vice president. (This was sent by e-mail. We will provide a link to the statement when it becomes available). He goes on to say that the Exubera disappointment represents a “key strategic setback.”

A critical factor in Pfizer’s credit rating will be its financial policies, according to the analyst. For the past several years, Pfizer’s financial policies have been relatively conservative, with share repurchases less than free cash flow (excluding share repurchases related to the sale of Pfizer Consumer Health). Now, though, speculation is rising that Pfizer will try to buy its way out of trouble, and Sanofi-Aventis and Biogen are both mentioned as possibilities.