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Moody's upgrades pharmaceutical industry to stable

WASHINGTON (AP) -- Moody's Investors Service upgraded its outlook for the global pharmaceutical industry on Monday, saying the multiyear wave of drug patent expirations that have squeezed profits should subside next year.

The ratings service upgraded drugmakers' outlook to "stable" from "negative," with earnings expected to rebound next year. Moody's issued the "negative" outlook in 2007.

Drug companies like Pfizer, GlaxoSmithKline and Merck have been tightening their belts for years, shedding jobs and outsourcing manufacturing, to deal with what's been dubbed the "patent cliff." Most of the top drugmakers have seen at least some of their blockbuster drugs lose patent protection, allowing cheaper generic versions to grab most of those sales. Drugs that have gone generic in the last year include two of the most profitable prescription medicines ever, Pfizer's cholesterol pill Lipitor and the blood thinner Plavix, co-marketed by Sanofi and Bristol-Myers Squibb.

While there will still be more patent expirations in the coming years, Moody's says they will not be as severe as those of the past twelve months.

"The stable outlook reflects our view that the worst of the industry's blockbuster patent expirations has passed," said Michael Levesque, a Moody's Senior Vice President. "Although industry earnings will still be affected by very recent patent expirations, earnings for large, branded players will reach a trough point in late 2012 and rebound in 2013."

That said, Moody's notes that the industry still faces headwinds from efforts to limit health care spending worldwide. Government and other health plans, particularly in debt-laden Europe, continue to push drugmakers to lower prices. The weak global economy has many consumers delaying treatments or looking for cheaper alternatives.

Shares of Pfizer Inc. added 18 cents to $24.69 in late morning trading. GlaxoSmithKline PLC's U.S.-traded shares added 6 cents to $46.81. Merck & Co. Inc. slipped a penny to $44.90.

Sanofi shares dipped 30 cent to $44.31. Bristol-Myers Squibb Co. stock gained 89 cents to $33.69.