Moody's Investors Service issued a negative opinion on the pharmaceutical industry Thursday, saying drugmaker credit ratings will be under pressure until early 2012 because they won't be able to fully replace revenue from best-sellers that go off-patent.
Over the 12 to 18 months, billion-dollar drugs like Pfizer's cholesterol drug Lipitor and Sanofi-Aventis and Bristol-Myers Squibb's blood thinner Plavix will lose patent protection, paving the way for the entry of less expensive generic versions.
Moody's noted that drug companies are already trying to offset the lost sales through acquisitions, and it expects similar — but smaller — deals to continue. The agency said that cash burn could put their credit ratings under pressure.
The largest recent deals include Pfizer Inc.'s $68 billion purchase of Wyeth, and Merck and Co.'s $41.1 billion acquisition of Schering-Plough Corp.
Moody's said it has a more positive view on companies that focus on generic drugs, as the launch of new drugs will cancel out the "intense" competition in that business, and steady price cuts.