PREVIEW-Big Pharma faces tougher 2010 despite US boost

* Big drugmakers' fourth-quarter and full-year earnings

* Boosted by one-off flu gains, but 2010 looks less rosy

* Impact of U.S. healthcare reform to be key topic

* Time to rethink in-house drug research?

By Sam Cage and Ben Hirschler

ZURICH/LONDON, Jan 22 (Reuters) - Big Pharma faces a tougher time in 2010, following windfall profits in 2009 from a swine flu pandemic that has turned out to be less deadly than feared.

Uncertainties over sales of flu products and generic competition will probably cloud drugmakers' forecasts for the year and may deter investors, even though fourth-quarter numbers are likely to shine at first glance.

U.S. healthcare reform will continue to be a hot topic, following this week's Republican win in the U.S. Senate race in Massachusetts, which makes major changes that would hit drugmakers less likely. [ID:nN20139843]

"While the news makes the (U.S. healthcare reform) process more risky again, it also improves the outlook for the pharma industry," said Kepler Capital Markets analyst Tero Weckroth.

Record sales of H1N1 vaccines and drugs will boost fourth-quarter earnings at GlaxoSmithKline (GSK.L), Sanofi-Aventis (SASY.PA), Novartis (NOVN.VX), Roche (ROG.VX) and AstraZeneca (AZN.L).

But these may prove to be a one-off bonus and provide a tough comparison. In any case, this year will be more difficult for many companies as more blockbuster medicines tumble over the industry's well-flagged patent "cliff".

U.S. groups Pfizer (PFE.N) and Merck & Co (MRK.N) have tried to address those problems with multibillion dollar buys that bring substantial cost savings, a strategy that Credit Suisse analysts believe helps to make them attractive investments.

For company earnings forecasts click on [ID:nLDE60H1RS]

DRY PIPELINES

While there are some signs that drug pipelines are starting to deliver, the industry as a whole is still not generating enough new products to make up for the loss of past multibillion-dollar sellers.

Analysts at Morgan Stanley argued in a note this week it was time for Big Pharma to give up research into conventional "small molecule" pills and switch to simply licensing in drugs for a better return on capital.

Prescription drug data firm IMS Health expects global pharmaceutical sales to grow 4 to 6 percent in 2010, but it estimated the pace would be only 3 to 5 percent in the all-important U.S. market.

The U.S. healthcare package overall looks likely to be less damaging to drugmakers than initially feared and the issue has now been further clouded by the stinging Democrat setback in the Senate, which has left the party divided on how to proceed.

SWISS STAR

Swiss manufacturers look set to do better than their rivals and Novartis, the first big European drugmaker to report on Jan. 26, should post a sharp increase in profit thanks to swine flu vaccines and strong sales of both old and new medicines. [ID:nLDE60J1YS]

Investor focus is more likely to be on its lowball bid to buy out minority shareholders in eyecare group Alcon ACL.N, part of a strategy that Novartis and others are following to diversify and insulate against pressure on their core prescription drugs businesses.

Diversified healthcare group Johnson & Johnson (JNJ.N), due to report the same day, will likely provide more backing for this thesis with another set of strong earnings.

U.S. drugmakers Pfizer, Merck & Co, Bristol-Myers Squibb (BMY.N) and Eli Lilly (LLY.N) are expected to benefit from the weaker dollar against the euro, which lowers costs compared with selling prices in Europe.

Switzerland's Roche, now tagging itself the world's biggest biotech company after its $47 billion Genentech buyout, remains the star of the sector thanks to its promising new medicines, though some analysts have questioned how much higher its stocks can go.

"While reimbursement and generic risks continue to rise, we continue to view Roche as structurally more robust than its peers," Morgan Stanley analysts said in a note.

"Management increasingly appreciates the need to explain its R&D investment to investors in light of alternative business models being pursued by competitors Pfizer, Novartis and GSK."

For a list of consensus forecasts from Thomson Reuters I/B/E/S on fourth-quarter earnings, double click on [ID:nLDE60H1RS] (Editing by Karen Foster)