Moody's cuts pharmaceutical sector outlooks to stable

Moody's Investors Service has reduced its outlook from positive to stable for the pharmaceutical industry, according to Yahoo Finance

Moody’s said that earnings growth for rated European pharmaceutical (pharma) companies in 2016 is likely to be less healthy than initially expected, primarily because the uptake - particularly from the US market - for many of their' key drugs has slowed dramatically.

Moody's report, titled "Pharmaceuticals - Europe 2015 Earnings Are In Line with Expectations, but 2016 Outlook Is Less Rosy" highlights companies such as AstraZeneca and GlaxoSmithKline (GSK).

The report said that AstraZeneca will face a challenging 2016 as its best-selling drug Crestor, an anti-cholesterol statin, loses market exclusivity in the US in May 2016.

GSK had a difficult year in 2015, according to the report, with pro-forma revenues up just 1%, but expects core earnings per share to grow in the low double-digits in 2016. It has also brought forward its £6bn revenue target from new products to 2018 from 2020 .

Novartis forecasts flat revenues and core operating income in 2016 due to pressure from the expected genericisation of Gleevec/Glivec in February in the US and December in Europe ($4.7 billion total revenues in 2015) and continued weak performance at Alcon in H1 2016, according to the report.

"The very slow uptake in recent quarters of certain European pharma companies' flagship drugs mean earnings growth will suffer in 2016. This slowdown has been most noticeable in the US market where time frames for gaining access to primary care patient populations have become increasingly lengthy," said Stanislas Duquesnoy, Moody's vice president and author of the report.

Although most rated European pharma companies' operating performance in 2015 was in line with expectations, the fortunes of individual players varied substantially, with pressure persisting on AstraZeneca and GSK, while Roche, Novartis and Sanofi recorded solid financial performances.