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Global drug industry profits set to slow, says Moody's

The credit rating agency has changed its outlook on the sector to stable from positive
Global drug industry profits set to slow, says Moody's
Moody's blamed lower pricing flexibility, the stronger US dollar and slower adoption of some new products

Profit increases in the global drug industry are likely to slow due to tougher pricing and the stronger US dollar, according to Moody's.

The credit rating agency has changed its outlook on the sector to stable from positive as a result of an expected "modest reduction" in earnings growth.

Moody's blamed lower pricing flexibility, the stronger US dollar and slower adoption of some new products for its revised expectations.

Moody's senior vice-president Michael Levesque said: "We now expect growth of 3%-4% versus our previous expectation of 4%-5%."

The agency said the changes to its forecasts were partly due to the controversy over high drug prices in the US, forcing manufacturers into reductions.

Pressure on prices in Europe and Japan was also a factor as drug patents expired and manufacturers faced competition from copy-cat producers.

Moody's said the stronger US dollar was likely to hit large US-based companies with overseas operations, but help non-US drug manufacturers.

It also noted that adoption rates for some products from large pharmaceutical companies had been slower than the agency expected.

But growth was still strong for cancer drugs, especially those in immuno-oncology like Bristol-Myers Squibb's (A2 stable) Opdivo and Merck's (A1 stable) Keytruda.

Levesque added: "Pharmaceutical companies will remain active in the M&A market as they try to cut costs, achieve greater scale and diversification and acquire pipeline drugs with high potential."

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