Moody's to drug makers: Be mindful of your credit rating

NEW YORK Drug makers could see a dip in their credit ratings as they pile on debt amid a wave of patent expirations, one of the country’s top credit-rating agencies said Thursday.

Moody’s Investors Service said in a report that rated pharmaceutical industry debt rose by 117%, to $270 billion, at the end of 2009, from $124 billion at the end of 2006. Still, strong profit margins and cash flow have left the pharmaceutical industry’s credit in a stronger position than that of other industries, according to the report.

“The rise in industry debt leaves reduced cushion in credit metrics, making pharmaceutical ratings vulnerable to ongoing downward pressure,” Moody’s SVP Michael Levesque said.

Levesque said this would mean drug companies’ ability to buy up other companies without hurting their credit scores would be reduced, but acquisitions will likely increase as drug companies seek to make up for lost profits from expiring patents for their drugs, a trend that will accelerate starting late next year.