S&P Global Ratings is forecasting a negative outlook for the pharmaceutical industry in 2020, citing higher leverage from mergers and acquisitions and the likelihood of a global opioid lawsuit settlement.
5 takeaways from S&P's report, released this week:
- While S&P predicts a strong pace of mergers and acquisitions in 2020, the financial services corporation expects the total dollar value of the deals to decline this year because of reduced desire for consolidation among large pharmaceutical companies.
- S&P also predicts a downward trend in ratings for the pharmaceutical industry because of the chance a broad opioid-related settlement will happen in 2020, causing the potential for significant legal liabilities.
- S&P doesn't expect legislation or regulation to influence pharma's 2020 ratings.
- For the generic drug industry, S&P said to expect more normal, mid-single-digit percent pricing erosion in the U.S. and a return to modest revenue growth for larger generic drugmakers.
- S&P said despite the negative outlook for 2020, the pharmaceutical industry still has several favorable characteristics, including good profitability even after high costs of research and development, strong barriers to competition and relative insensitivity to the business cycle.