Big Pharma under pressure as drug patents expire and pipeline slows
Increasing exposure to patent expiries and downward trends in pipeline quality continue to underpin Moody’s negative outlook for the industry, though the outlook for generics is more positive.
Excerpts from Moody’s latest Global Pharmaceuticals Firms Industry Outlook:
- Companies have taken measures to alleviate these pressures – mainly through acquisitions; M&A strategies are expected to remain a key feature of the industry, albeit to a lesser extent than in the past 12 months.
- Although the implications of US healthcare reform are still in flux, we currently do not believe reform measures will be extremely onerous for the industry.
- Vaccines for swine flu will provide a boost to 2009 earnings for some companies; however, future revenue and earnings from pandemic flu vacinnes are unpredicatble and are not part of our base forecats.
- Despite recent M&A activity, liquidity has remained strong for most pharmaceutical companies, which have benefited from eay access to capital markets.
- Our outlook for generics-focused companies is more positive; despite ongoing pricing pressure, generics companies will benefit from a significant number of new generics in the coming years.
At June 2009, Moody’s had already factored in the expiry of some of the largest-selling drugs in the industry, including Pfizer’s ( PFE) Lipitor (LTM to September 2009 sales of US$11.4 billion), BMS/sanofi-aventis’s Plavix (US$10.0 billion) and AstraZeneca’s Seroquel (US$4.8 billion).
The revenues to be lost by the industry are expected to only be partially offset by drugs currently in late-stage development or in the approval process.
In addition, Moody’s pipeline assessment has recently tended to move downward due to higher hurdles to develop blockbuster drugs, such as increasing competition in a number of therapeutic categories and the US Food and Drug Administration’s (FDA) more cautious approval stance. Moody’s pipeline assessment of a peer group of large pharmaceutical companies has eroded to 16% at June 2009 from 20% in 2006.”
More positively, Moody’s notes that several interesting drugs have been approved since its June 2009 Industry Outlook was published, both in the US and Europe. These include Onglyza (saxagliptin), a DPP-IV inhibitor for the treatment of Type II diabetes co-developed by Bristol-Myers Squibb (BMY) and AstraZeneca (AZY) (as of 30 September 2009, Moody’s peak sales estimate for Onglyza is US$2 billion) and Effient (prasugrel), a blood-thinning drug for the prevention of heart attack and stroke co-developed by Eli Lilly (LLY) and Daiichi Sankyo (US$2 billion peak sales estimate).
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