Moody’s believes industry revenues are threatened by a raft of patents due to expire on drug developers’ blockbuster products later this year or next year, while their pipelines of new drugs are weak.
“Moody's expect earnings growth to continue to slow in 2011 for most of the industry's major players as they come up against the patent cliff," said Moody’s vice president Marie Fischer-Sabatie.
"Downward pressure on earnings is likely to increase in 2012, when the impact of many other patent expirations will be more heavily felt, which could result in pressure on some ratings and/or outlooks.”
The report added: “despite several recent high-profile successes and other products awaiting approval, the overall quality of late-stage pipelines remains mediocre”.
It said it was also concerned about European governments putting pressure on drug companies to reduce their prices in the current austerity climate.
It said it saw a positive outlook for companies focused on producing generic copies of branded products – because they look set to benefit from the negative trends affecting patented drugs.
And it tempered the warning by saying global pharma “remains solidly profitable and lowly leveraged compared with other industries.”