Pharma Times
| World News | December 15, 2011
By Kevin
Grogan
Ratings agency Fitch has
issued a report saying the pharmaceutical sector will "continue to
experience significant operating challenges" in 2012 but while issuing a
negative outlook, it will still be one of the highest-rated industries.
The new analysis says that the
15 global pharmaceutical companies covered by Fitch will suffer during 2012 as
they contend with "an unprecedented period of patent expiration",
plus increasing government cost-containment and demand pressures,
"stemming from relatively high unemployment and low consumer
confidence". The industry will feel the effect of the loss of market
protection for four of the 10 leading medicines in 2012, with a value of more
than $50 billion, affecting Eli Lilly, Bristol-Myers Squibb and Pfizer the
most, through patent losses on Zyprexa (olanzapine), Plavix (clopidogrel) and
Lipitor (atorvastatin), respectively.
Fitch goes on to say that 2011
was "extraordinarily productive in terms of late-stage R&D, with the
majority of the new treatments anticipated to reach blockbuster status",
although this will not be enough to offset the sales declines faced by the
industry. Five of the 13 large, rated pharmaceuticals companies will report
sales declines in 2012, and four of them (Pfizer, B-MS, Lilly and AstraZeneca)
could see high-single-digit to double-digit declines.
Small to medium M&A and
more share buybacks
To compensate for upcoming
sales and profit losses, Fitch expects big pharma to pursue small- to
medium-sized mergers and acquisitions in 2012. and indulge in more in-licensing
and collaborations, although it notes that Abbott and Pfizer are divesting or
spinning-off major parts of their businesses. In the absence of large
acquisitions, share buybacks should continue in 2012. and apart from Bayer,
Roche, Lilly and Sanofi, all Fitch-rated big pharma companies have activated
repurchasing programmes.
As governments are looking
more to reduce drug costs and are "not willing to reimburse drugs with
uncertain clinical evidence at the launch", pharmaceuticals companies are
likely to continue responding by offering conditional pricing deals, the report
suggests, while emerging markets, particularly China, will continue to
drive sales. Nevertheless, "despite
the continued operating headwinds in 2012, global pharmaceuticals is expected
to remain one of Fitch’s highest-rated industries", the analysis notes.
This is due to its superior cash flow generation, large cash balances, strong
liquidity and solid growth prospects; these are driven by "high unmet
medical need, favourable demographics, technological advances and the
persistence of chronic diseases".
Of the 15 companies rated by
Fitch in the USA and Europe, three have a negative outlook (Sanofi, Abbott and
B-MS) and only one is rated positive - Roche. Over the past four years, the
median industry rating has deteriorated to ‘A+’ from ‘AA−’
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