PRESS RELEASE: Fitch Pharma R&D Quarterly: Laying the Pipeline for the Future

Fitch Pharma R&D Quarterly: Laying the Pipeline for the Future

CHICAGO & LONDON--The Fitch Ratings global pharmaceutical team today published its 'Quarterly Global Pharmaceutical R&D Pipeline' report for the second quarter. The overview details the most current key late-stage R&D brand name pharmaceutical projects in addition to long-term goals for the R&D programs set by a number of drug developers. Potential new sources of revenues and earnings need to emerge from within the late-stage R&D pipelines in the intermediate-term and from mid-stage developmental programs in the near-term, in order to mitigate exposure to potentially dramatic intellectual property losses facing many industry participants after the end of the decade.

The complexity of developing new therapies is further compounded by more cautious environments at governmental regulatory bodies. The FDA had approved only 7 new molecular entities in the first six months of 2007, down from 9 in the same period last year. Fitch anticipates that heightened safety issues, particularly with the heart and liver, may continue to play into regulatory decisions granting marketing authorization of new pharmaceuticals.

The industry benefits from full FDA marketing approval during the quarter for notable product line extensions, including Pfizer's Lyrica for the treatment of fibromylagia and Merck's Janumet (combining Januvia with metformin) for Type-2 diabetes. However, generic drug makers increasingly pressure brand name manufacturers before and upon drug patent expiry. Recently, a deluge of generic versions immediately followed the U.S. patent expirations of Novartis' Lamisil, and Sanofi-Aventis' immediate-release formulation of Ambien. Further generic competition is likely to occur in the second half of the year for the blockbuster drugs, Pfizer's Zyrtec and GlaxoSmithKline's Coreg.

The large pharmaceutical sector names followed by Fitch reported global sales by 7.0% year-over-year in the second quarter, declining from 9.5% growth in the first quarter. Roche led all large pharmaceutical manufacturers with sales growth of approximately 16% in the second quarter followed by Lilly (14%). Pfizer saw a sales decline of 5% from its drug product portfolio.

Consolidation and focus on the core pharmaceutical business continued in this quarter, while the industry returned a tremendous amount of value to shareholders through dividends of $10 billion and share repurchases totaling more than $11 billion. During the quarter, GlaxoSmithKline announced a GBP7.7 billion increase to its share buy-back authorization to GBP12 billion and Sanofi-Aventis initiated a EUR3 billion repurchase program, signaling moves to more shareholder-friendly stances.

The full 'Quarterly Global Pharmaceutical R&D Pipeline - Second Quarter 2007' can be found on the Fitch Ratings web site www.fitchratings.com. The report incorporates three year periods (two years for European companies) as it looks forward to calculate revenues potentially subject to generic competition as well as a historical presentation of sales from market introduction. The Fitch team will continue to issue this report on a quarterly basis following earnings reporting.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

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