Moody’s still thinks the credit ratings of the world’s big drug companies are likely to get worse in the coming months. But Moody’s does find a few good things to say about the industry. A sampling of findings from the company’s latest industry outlook: Mega-mergers by Pfizer, Merck and others is providing “increased scale and a somewhat better balance” between the companies’ expiring patents and their product pipelines, Moody’s says. The “unprecdented” M&A binge is expected to slow but activity is likely to continue with smaller, bolt-on deals. Vaccines and treatments for H1N1 flu are “providing a nice boost to earnings in 2009 and also possibly in early 2010” for players that include GlaxoSmithKline, Roche and Novartis. But Moody’s adds the swine-flu business is unpredictable and the upside may prove temporary. Generic makers are an industry bright spot and should remain one of health care’s most recession-resistant sectors, Moody’s says.

Teva, Mylan and Watson in particular are benefiting from acquisitions. We hardly need to note that the same blockbusters going off patent to the joy of generic makers spell tears for branded makers. Pharma companies look like they have dodged the worst-case scenarios under the U.S. health-care overhaul. While the costs to the industry are still being sorted out, “we currently do not believe reform measures will be extremely onerous for the industry,” Moody’s says. Put it all together and the rating company says the overall outlook for the industry’s credit fundamentals is negative over the next 12-18 months. Of course, Moody’s in the past few years has been anything but cheery on various segments of the health-care world, as can be seen here , here and here . Image: iStockphoto

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Moody’s on Pharma: Outlook Is Negative, But it Could Be Worse