S&P Global Ratings lowered Diplomat Pharmacy Inc.'s issuer credit rating to B from B+, citing higher expected leverage in 2019.
The outlook on the rating is negative, signifying that Ratings may further downgrade the company's credit profile.
Flint, Mich.-based Diplomat Pharmacy operates as a specialty pharmacy and pharmacy benefit manager, or PBM. It is the fifth-largest specialty pharmacy in the U.S.
Ratings said the downgrade reflects its expectations that Diplomat Pharmacy's EBITDA will decline sharply in 2019, with financial leverage to exceed 6x from the previous projection of about 4x.
The rating agency is skeptical that Diplomat Pharmacy will have a material recovery beyond 2019 due to its moderate scale, higher-than-expected competition and significant management turnover which increases strategic and financial uncertainties. There is also a significant regulatory risk in the PBM sector that could hurt the company's profitability, Ratings noted.
S&P Global Ratings said the negative outlook shows the elevated potential for downgrade if the company's operating metrics continue to deteriorate materially beyond its guidance and the rating agency's current expectations.
This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.