The outlook for the global pharmaceutical industry remains negative as any potential revenue over the next 12-18 months is likely to be offset by losses from the upcoming expirations of major patents - known as the patent cliff - according to a new industry report by Moody's Investors Service.
In its report, "Global Pharmaceutical Industry: Outlook remains negative as patent cliff pressures are set to peak in 2012," Moody's says a number of rated players' earnings will shrink as newly launched drugs and other growth areas will not be sufficient to offset the financial losses from patent expiries.
With patents recently expiring or about to expire on a number of blockbuster name brand drugs, including Lipitor, Seroquel, Plavix, Lexapro and Singular, Big Pharma is set to take a hit to the bottom line, as indicated in Moody’s report.
The rating agency anticipates that Eli Lilly and Company, Bristol-Myers Squibb and AstraZeneca will see the largest decline in revenues and profits because these companies have the steepest patent cliffs and are expected to only mitigate the related impact to a limited extent.
As a result of the upcoming patent cliff, Moody's projects that the aggregate EBITDA of rated branded pharmaceutical companies will decline by approximately 2 to 3 percent in 2012. The rating agency expects the negative pressure on earnings to bottom out in 2012 and that the industry will return to positive earnings' growth in 2013.
AstraZeneca, Novartis AG and Takeda Pharmaceutical Company Limited have stepped up cost-cutting initiatives in response to the approaching patent cliff or to extract synergies following an M&A transaction notes Moody's.
Industry winners in 2012 will be generic manufacturers, which are poised to benefit from consumer and provider willingness to switch to generic alternatives as soon as they become available.
Another growing segment in the pharma industry is the biosimilars market. Biosimilars is a term used to describe officially-approved versions of innovator biopharmaceutical products produced by a different manufacturer after patent expiry. Biological products are therapies used to treat diseases and health conditions, including vaccines, blood and blood components, gene therapies, tissues and proteins.
In Europe, the European Medicines Agency is expected to issue final guidelines soon for biosimilars containing monoclonal antibodies, which are more complex biotech drugs, but also some of the largest-selling. In the U.S., the FDA released guidance information for biosimilars in mid-February.
[See also: Drug prices to see modest increase]