Pharma Profits Bottoming Out, Moody’s Forecasts
Yes, indeed. Moody’s Investor Services this morning revised its outlook for the global pharmaceutical industry to stable. Why? The ratings agency believes earnings should rebound next year as the deluge of patent expirations on big sellers finally slows down. Since 2007, Moody’s has, in fact, maintained a negative credit rating on the industry, but now believes the worst is over.
“The stable outlook reflects our view that the worst of the industry’s blockbuster patent expirations has passed,” says Michael Levesque, a Moody’s senior vp, in a statement. “Although industry earnings will still be affected by very recent patent expirations, earnings for large, branded (drugmakers) will reach a trough point in late 2012 and rebound in 2013.”
A little certainty on future earnings might help the industry’s PE ratio.
Some global drugmakers, however, are not expected to fare as well as others. For instance, he cites Bristol-Myers Squibb (BMY) and AstraZeneca (AZN), which still face “year-over-year” declines in earnings during the rest of this year and into 2013. Just the same, the next 12 months “will be less onerous than the past 12 months, when blockbuster drugs like Lipitor and Plavix” began facing lower-cost generic competition.
But while the worst may be over, that is not the same thing as saying happy days are here again. Levesque believes the industry “remains challenged by a difficult regulatory approval environment for new products, and by areas of research that are still seeing limited success.” Alzheimer’s is cited as an example, which is not surprising, given the recent setback experienced by Pfizer (PFE) and Johnson & Johnson (JNJ), and mixed showing by Eli Lilly (LLY) (read Pharma news and more Pharma news).
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