Europe's drive to cut drug prices as well as U.S. healthcare reforms are likely to dampen global pharmaceutical companies' growth outlooks for 2011.

Investors will look for more comments on how the changing landscape on both sides of the Atlantic will hit 2011 revenue after U.S. group Johnson & Johnson kicked off the earnings season by warning it was facing growing government pressure to keep a lid on prices.

A focus will be on the impact of the austerity measures in Europe and the healthcare reforms in the United States and whether companies will provide any more insight on that, Sarasin analyst David Kaegi said.

Prices have been under pressure across Europe as governments fight record budget deficits, and analysts are watching to see what happens as it could set the tone for other parts of the world, such as Canada and Japan.

Swiss company Roche has said European measures and reforms in the United States were likely to knock sales by 2 percent in 2010 and 2.5 percent in 2011.

U.S. players, yet to give detailed forecasts for 2011, have said pricing pressures could hit sales by 2 to 3 percent in 2010. Wall Street is assuming a similar impact this year.

STICKY PIPELINES

Product setbacks and worries about how companies will deal with competition from cheaper copies of lucrative drugs shook investor confidence last year, and some analysts expect the sector to trail broader indices in the first half of 2011.

J&J, reported to be interested in buying British group Smith & Nephew, has said it was cutting bonuses after a disappointing performance last year, while a number of companies have embarked on cost-cutting programs highlighting tough times in the industry.

Investors are fretting that new products coming to the market are not enough to offset the sales drop as drugs go off patent, and will look for more insight into the strength of pipelines during the reporting season.

Despite an improvement in the industry's R&D productivity since 2007, the additional sales from newly launched products will not completely fill the sales gap emerging from the accelerating patent cliff, Fitch Ratings said in a note.

Novartis, the first European drugmaker to report on January 27, has had one of the most productive pipelines recently and eyes will be on the uptake of recently launched multiple sclerosis pill Gilenya as the Swiss company seeks to offset the generic threat to No.1 drug Diovan.

Analysts will also be keen to see how Anglo-Swedish AstraZeneca -- reporting shortly after Novartis -- will cope with generic competition to breast cancer drug Arimidex and big-seller stomach acid pill Nexium in much of Europe.

Investors will also eye results from Bristol-Myers Squibb

and Eli Lilly, due later on Thursday, for more clues into the health of the pharma industry.

Sales at Astra, as well as GlaxoSmithKline, Novartis and Roche, are likely to have been dented by a lack of sales from products related to pandemic flu compared with a year ago.

French group Sanofi-Aventis, seeking to boost its revenue stream with the acquisition of U.S. biotech group Genzyme, is likely to give a cautious outlook as it battles generic pressure on key drugs Lovenox and Taxotere when it reports next month.

SHARE BUYBACKS

Investors are hopeful some groups will opt for further share buybacks, thanks in part to a dearth of quality M&A targets and to strong cash generation within the industry.

The market is banking on further chunky share buybacks at AstraZeneca, with many analysts expecting a figure of around $3 billion after $2 billion in 2010. This could also be a focus for GSK when it posts results at the start of February.

But hopes that GSK will resume repurchases in 2011 have dimmed following news of a 2.2 billion pounds ($3.5 billion) legal charge that will wipe out fourth-quarter profit, with some analysts now reckoning a buyback could first come in 2012.

U.S. company Merck & Co, which posts earnings on February 3, may also expand its share repurchase program over the next several years, according to Deutsche Bank analysts.

Merck could also increase its dividend, a move that could be echoed by U.S. rival Pfizer which is seeking to shore up sales with the buy of King Pharmaceuticals.

(Additional reporting by Ben Hirschler in London, and Lewis Krauskopf and Ransdell Pierson in New York; Editing by Jon Loades-Carter)

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