S&P finds second quarter uneventful for Big Pharma outside Merck's Vioxx verdict

By Ronda Fears

Nashville, Aug. 29 - Second quarter was relatively uneventful for the major U.S. pharmaceutical companies with the exception of Merck & Co. Inc., which faced the start of the first of many trials contending damage from its withdrawn drug, Vioxx, Standard & Poor's analysts said in a report Monday.

Issues still lingering with uncertain outcomes for the industry, S&P said, are Medicare and repatriation plans.

"The industry is now less than half a year away from the implementation of the Medicare Part D prescription drug benefit," adds S&P credit analyst Arthur Wong, lead analyst in the report.

"The long-term impact is still unknown. Benefit plans will be focused on acquiring new members. We believe that the impact will probably not be significant until several years out, when benefit managers gain more experience with the benefit and can bring their increased negotiating leverage to full bear."

All the major U.S. pharmaceutical companies, with the exception of Wyeth, have announced their repatriation plans in regard to the American Jobs Creation Act, S&P analysts observed.

The report notes that while the execution of the plans will result in higher absolute debt balances at some of the players, the benefit of having increased access to the cash at a much lower tax rate outweighs that negative.

Merck had a solid performance in the quarter, though it was overshadowed by the Vioxx trial, the analysts noted in the report.

Bristol-Myers Squibb Co. and Schering-Plough Corp. continued with their turnaround plans, and although both companies continue to carry negative rating outlooks, S&P said it believes they have made significant strides since second-quarter 2004.

Bristol-Myers has resolved a major portion of the legal fallout from its inventory channel-stuffing fiasco, S&P said, and its research and development program has been one of the more productive in the industry over the past three years.

Meanwhile, Schering-Plough is still working to revive its R&D productivity, S&P said, but is benefiting from the strong launch of Vytorin, as well as the stabilization of its PEG-Intron franchise.

© 2015 Prospect News.
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