Moody's Rates Japan Companies Facing Drug Spending Curbs

Government plans in Japan to drastically cut drug spending to containthe country's growing health care bill will probably have a negative effect on the credit quality of weaker drug companies, according to the USA-based Moody's Investor Service. However, it adds, stronger companies will be supported over the medium term by the steady launch of new products and also by expansion in international operations.

Of the nine pharmaceutical firms it has rated, Takeda Chemical Industries and Sankyo are the best positioned to deal successfully with the coming changes in the drug industry, Moody's said in a statement. These two firms, plus Eisai, should benefit from strong upcoming products and sound financial fundamentals, it added.

If domestic sales eventually do not cover R&D costs, some weaker companies may not survive or could merge with strong players, Moody's said. The nine Japanese drugmakers Moody's rated are Chugai (rated A3), Daiichi (A1), Eisai (A1), Fujisawa (A3), Sankyo (Aa3), Shionogi (A2), Takeda (P-1), Tanabe Seiyaku (A3) and Yamanouchi (Aa3).