Innovation drives growth in global big pharma & biotech
Fitch Ratings expects the global pharmaceutical & biotech industry to build upon its strong innovation momentum displayed in its Covid-19 response.
Partnership models established across key parts of the industry’s value chain, such as research & development (R&D), supply and manufacturing, will accelerate.
A neutral sector outlook reflects our assumption of a stable operating environment in 2022, although greater scrutiny of access and pricing models remains a medium-term risk.
The sector’s defensive qualities are underpinned by its strong innovation pipeline, combined with still significant unmet medical needs, steady demand from growing and ageing populations and improving healthcare access globally.
The pandemic has intensified debates about the industry’s economic innovation model, particularly the balance between research incentives and vaccine accessibility, as well as patent protection and tiered, affordable pricing.
Fitch estimates that vaccine supply shortages will abate from 2Q22, shifting the focus in the global vaccination effort to the efficient delivery and administration of vaccines in weaker emerging-market healthcare systems.
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The rating Outlooks of two leading Fitch-rated vaccine manufacturers, Pfizer (A/Stable) and AstraZeneca (BBB+/Positive), will be influenced by how the companies incorporate continued vaccine efforts into their different economic models.
We project healthy free cash flow generation that will improve for many companies as recent innovations achieve critical mass and mature, while generics business models benefit from recent investments in scale and lower-cost production.
We do not expect immediate pressure to increase shareholder returns in the sector, but this may build for some issuers over time if there are no suitable investment opportunities for external growth.
