[July 29, 2014]

Fitch: Biologics Driving Revenue Gains for U.S. Pharmaceutical Companies

Fitch Ratings expects that revenues from biologic therapies as a percentage of total pharmaceutical sales will continue to increase over the intermediate term as companies increase their prominence in their drug portfolios, according to a report published today.

Biologics drug sales for the six major U.S. pharmaceutical companies increased to approximately 36% from 27% over the last three years, as the number of FDA approvals has outpaced traditional small molecule approvals.

Fitch believes that biologics will fare better than small molecule drugs after patent expirations. The price discounts and market share gains of biosimilars will be less than those in the traditional generic market, because most approved biosimilars probably will not be automatically interchangeable with the original reference biologic early on. Nevertheless, Fitch believes biosimilar manufacturers, pharmacy benefit managers and drug distributors will have financial incentives to take share from the originator therapy.

Furthermore, the number of biologics in branded pharmaceutical companies' pipelines has and should continue to account for a greater portion of the number of total pipeline projects.

From a credit perspective, biologics are supportive for the credit profiles of the branded pharmaceutical industry by offering opportunities for growth, support for profitability and greater operational stability in the inermediate term.

The full report 'Biologics on the Rise' is available at 'www.fitchratings.com.'

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research: Biologics on the Rise (A Tailwind for Branded Pharmaceuticals)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=753172

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