The prospects of the pharmaceutical industry appear to be brightening. The annual EBITDA for the industry will be between 4% and 6% over the next 12 to 18 months, according to Moody’s projections.

When COVID-19 first appeared, the pharmaceutical sector seemed to be one of the industries best poised to battle the pandemic. But while the pharmaceutical industry has fared better than many in 2020, falling medical procedure volume has cut into pharma margins.

Opportunities

The prospect of COVID-19 vaccines from Pfizer (NYSE:PFE), Moderna (NSDQ:MRNA), AstraZeneca (LON:AZN) and others could help bolster growth after they win emergency use authorization (EUA).

FDA has already granted EUAs for COVD-19 therapies from Regeneron Pharmaceuticals (NSDQ:REGN), Eli Lilly(NYSE:LLY) and Gilead Sciences (NSDQ:GILD).

There are more than 425 candidates for COVID-19 therapeutics in development, according to the analyst firm McKinsey.

While several U.S. states are reinstituting lockdowns and social distancing in the near-term, Moody’s is optimistic about the prospect of those measures easing in 2021. Such easing is necessary to restore growth to nonessential medical treatments such as Botox from AbbVie Inc. (NYSE:ABBV).

Other factors driving continued growth include the market for oncology, immunology and diabetes drugs as well as expanding healthcare coverage in countries such as China.

Also boding well for the industry is the fact that there are few patent expirations outside of biotech products in the next 12 to 18 months.

Threats

A principal threat to the industry is continued political pressure to curb drug prices in the U.S. The country continues to be the world’s biggest pharmaceutical market, but drug pricing reform has bipartisan support.

Pending opioid resolutions are another considerable potential expense for companies such as Johnson & Johnson (NYSE:JNJ) and Teva Pharmaceutical Industries (NYSE: TEVA), as well as smaller firms such as Indivior Solutions (LON:INDV). Medical supply firm McKesson (NYSE:MCK) alone could pay $8 billion to settle opioid lawsuits.

While the next patent cliff will not begin until around 2023, the industry will see greater biosimilar pressure in the next 12 to 18 months.