| Global Credit Research |
| Announcement |
| 10 OCT 2007 |
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Announcement:
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Moody's: Credit outlook for U.S. pharmaceuticals now negative |
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New York, October 10, 2007 -- The U.S. pharmaceutical industry faces negative rating pressure over the next 12 months, says Moody's Investors Service in its semi-annual industry outlook update, to be published soon.
Credit ratings for U.S. pharmaceutical companies have been essentially stable in 2007, but Moody's is now revising its rating outlook for the sector to negative from stable.
"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.
Most of the large U.S. pharmaceutical companies rated by Moody's face significant patent expirations in the 2010 through 2012 timeframe, says Levesque. For most companies, cumulative patent expirations through 2012 affect more than 40% of current revenues -- in some cases over 50% or current revenues.
Levesque believes that this patent exposure is high, and that U.S. pharmaceutical companies will be challenged to replace maturing products with growth in newer products and upcoming pipeline launches.
The recent pace of FDA approvals appears slower than prior years, Moody's says. In addition, a number of important new drug applications have received non-approvable letters or approvable letters contingent upon new clinical trials.
Levesque also cautions that financial policies -- previously conservative and supporting high credit ratings -- may be subject to revision. A larger number of pharmaceutical companies appear likely to consider larger acquisitions and share repurchase strategies in order to improve lagging shareholder returns.
Mitigating factors include the benefits of cost restructuring programs, cleaner litigation profiles, and the success of several key pharmaceutical products approved in 2005 and 2006, fueling growth for certain companies.
In all, Moody's rates 21 U.S. pharmaceutical companies, which have about $90 billion in rated debt and bank credit facilities.
The new report, "U.S. Pharmaceutical Industry Snapshot and Semiannual Update" will soon be available on www.moodys.com. * * * * NOTE TO JOURNALISTS ONLY: For a copy of this report when it becomes available, please contact EMEA Press Information in London +44-20-7772-5456; New York Press Information +1-212-553-0376; Juan Pablo Soriano in Madrid +34-91-310-1454; Alex Cataldo in Milan +39-02-914-81-100; Eric de Bodard in Paris +331-5330-1076; Detlef Scholz in Frankfurt +49-69-707-30-700; Mardig Haladjian in Limassol +357-25-586-586; Alex Sazhin in Moscow +7495-641-1881; Petr Vins in Prague +4202 2422 2929; Tokyo Press Information +813-5408-4110; Hilary Parkes in Toronto +1-416-214-1635; Hong Kong Press Information +852-2916-1150; Sophie Davidson in Sydney +612 9270 8185; Luiz Tess in São Paulo +5511-3043-7300; Alberto Jones Tamayo in Mexico City +5255-1253-5700; Daniel Rúas in Buenos Aires +54 11-4816-2332 ext. 105; Craig Jamieson in Johannesburg +27-11-217-5470; Philipp Lotter in Dubai +971 4 365 0284; or visit our web site at www.moodys.com
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© Copyright 2007, Moody's Investors Service, Inc. and/or its licensors including Moody's Assurance Company, Inc. (together, "MOODY'S"). All rights reserved. |
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