Zacks analysts view pharma industry outlook

The pharmaceutical industry continues to witness major challenges like sluggish prescription trends, European Union pricing pressure, intensifying generic competition, pipeline failures and limited late-stage catalysts. The next five years are expected to reflect a significant imbalance between new product introductions and patent losses, comment analysts at Zacks Equity Research.

According to IMS Health, this is the main reason global pharmaceutical market growth will be restricted to the mid-single digits (5%-8%) through 2014. Over the next five years, products that currently generate more than $142 billion in sales are expected to face generic competition, including Lipitor, Plavix and Zyprexa. In fact, 2011 itself will see products worth more than $30 billion losing patent protection. This includes products like Lipitor, Plavix, Zyprexa and Levaquin. These products generated more than $15 billion in sales in 2010. The effect of the genericization of these products will be felt mostly in 2012, which will be a challenging year for several companies.

At the same time, new products are not expected to generate the same level of sales as those losing patent protection. With revenue growth stalling or slowing down, companies have been resorting to cost-cutting and share buybacks to drive bottom-line growth.