CORRECTED - Moody's weighs ratings as drug-patent lapses near

(Corrects paragraph 11 to describe Cozaar and Hyzaar as hypertension instead of diabetes drugs)

By Ransdell Pierson

NEW YORK, July 10 (Reuters) - Moody's Investors Service on Tuesday said a wave of patent expirations on blockbuster drugs between 2010 and 2012 could lead it to begin lowering its credit ratings on a number of large U.S. drugmakers several years before then.

Eli Lilly and Co. (LLY.N), Pfizer Inc. (PFE.N) and Bristol-Myers Squibb Co. (BMY.N) are particularly vulnerable to the downgrades because the top-selling drug of each expires in that period.

Merck & Co. (MRK.N) could also be adversely affected as two of its important drugs face patent expirations.

"Lilly is among the most exposed to blockbuster patent expirations in the 2010 to 2012 period," Moody's said, because sales of its widely used Zyprexa schizophrenia treatment will be threatened when the drug's U.S. patent lapses in 2011.

Zyprexa had global sales last year of $4.36 billion, accounting for almost 28 percent of the Indianapolis-based drugmaker's overall revenue.

Moody's said it would start considering lowering a rating three years before a patent actually expires.

"Negative pressure on Lilly's rating or its outlook could increase as we near the inclusion of Zyprexa into our three-year forward view of patent exposures," Moody's said in its second-quarter Industry Snapshot of large U.S pharmaceutical companies.

Lilly currently has a "stable" Moody's rating outlook, meaning no immediate change to the agency's current credit rating is contemplated.

Michael Levesque and other Moody's analysts noted in their report that the U.S patent on Pfizer Inc.'s (PFE.N) best-selling product, its $12 billion-a-year Lipitor cholesterol fighter, lapses in June 2011.

Consequently, the agency said it could lower its rating outlook on Pfizer to "negative" from its current "stable" rating outlook on or before June 30, 2008, particularly if the world's largest drugmaker fails to "significantly improve" the quality of its lineup of drugs in late-stage testing.

Moody's said its current "negative" rating outlook of rival U.S. drugmaker Merck is due in part to the slated February 2008 patent expiration on its Fosamax osteoporosis drug. It noted that the U.S. patents on the company's hypertension drugs Cozaar and Hyzaar lapse in June 2010.

"As these events near, rating pressure may escalate, unless Merck is able to continue its recent success of launching new products and advancing compounds" through clinical trials, Moody's said.

Moody's said Bristol-Myers Squibb Co.'s (BMY.N) ratings could be adversely affected during 2008, in the countdown to the slated 2011 U.S. patent expiration on its blockbuster Plavix drug to prevent blood clots.

In contrast to "traditional" pharmaceutical companies, Moody's said biotechnology companies face much lower exposure to the threat of generic products, and therefore have better growth prospects.

That is because there is no mechanism in the United States by which U.S. regulators can approve copycat forms of most biotech drugs, which tend to be large proteins that are hard to manufacture and must be injected.