There were positive signs for the world's pharma industry after Moody's upgraded the sector to stable from negative, saying it expects a rebound in its fortunes in 2013.
The ratings agency has been critical of pharma's prospects since 2007, when it downgraded both the US and European sectors because of their exposure to patent expirations, increasing levels of debt resulting from acquisitions and lacklustre new product pipelines.
Moody's says in a new report – entitled The Worst is Over – that it believes the sector will see a rebound in earnings next year 'as patent expirations ease from their peak'.
Some key industry players – notably Bristol-Myers Squibb and AstraZeneca – are still struggling with patent losses on big-selling products, however, and will still face year-on-year declines in earnings during the remainder of 2012 and into 2013.
BMS lost patent protection for antiplatelet drug Plavix (clopidogrel) in the US earlier this year, while AstraZeneca is now facing generic competition for schizophrenia treatment Seroquel (quetiapine). Both drugs have multi-billion-dollar revenues and are already losing market share rapidly to lower-cost generics.
"Although industry earnings will still be affected by very recent patent expirations, earnings for large, branded players will reach a trough point in late 2012 and rebound in 2013," said Moody's senior vice president Michael Levesque.
The ratings agency said the next 12 months will be 'less onerous' than the prior year, which saw a spate of major patent losses including Pfizer's Lipitor (atorvastatin), formerly the world's biggest-selling drug product.
Other massive products that have lost patent protection in the last year include Merck & Co's asthma drug Singulair (montelukast), Takeda's Actos (pioglitazone) for diabetes and Forest Laboratories' antidepressant Lexapro (escitalopram).
Despite the positive news on patents, the industry is still facing a challenging environment. Securing regulatory approval for new products is increasingly difficult, and there continue to be areas of research that are seeing limited success, such as Alzheimer's disease.
The industry is also pressured by global cost-containment efforts that seek to reduce healthcare spending.
The use of generic drugs is rising and will benefit generic companies such as Teva, Watson and Mylan, it says, although these too face 'on-going price erosion and stringent manufacturing compliance requirements that will cut into profits'.