Biopharma ESG Rankings Are Hamstrung by Drug Pricing, Litigation

At a time when Covid-19 is highlighting drug and vaccine developers’ potential value to society, Barclays in new research this week found many biopharma companies tend to be surprisingly average or less so when it comes to criteria tracked for ESG investing.

Drug pricing and accessibility issues as well as litigation over opioids, glyphosate and generic-price fixing manifest the challenges faced by the industry, according to a special July 9 report from Barclays analysts based in New York and London. Balancing the aim of running their businesses ethically “with the desire for stronger profitability is an unenviable challenge and one that will take time to address,” the analysts wrote.

The global race to find pills and shots to stem the pandemic creates a quandary for investors who screen for environmental, social and governance (ESG) factors. Barclays asks: “What if a company that is viewed negatively from an ESG perspective, perhaps due to prior product governance or business ethics issues, now successfully develops the treatments and vaccines needed to help people globally return to a way of life free from lockdowns and concerns of infection?”

Biotechnology companies as a group have “very low average scores” across all three of the ESG pillars, the Barclays analysts found. Governance scores were “particularly poor” for U.S. and biotech firms, while questions around “ethical pricing and marketing practices” weigh down drugmakers in the social category.

As companies look to bolster their ESG credibility, Barclays predicts “we are likely to see interest and issuance in the previously unloved social and sustainable bond market grow.” Pfizer in March issued an industry-first sustainability bond in a $1.25 billion deal that won the imprimatur of ESG consultant Sustainalytics.

Of 57 companies reviewed for the Barclays report, only one had a best-in-class environmental rating: Amgen Inc. The maker of such medicines as Enbrel, Prolia and Otezla ranked above-average versus peers for its social and governance pillars.

While Gilead Sciences Inc. has been ranked just average in the social category, Barclays projects that may change over the next 12-24 months after the company’s remdesivir won approval as the first approved Covid-19 therapy. That development is likely a “net positive” even as Gilead faces “pressure from stakeholders on the pricing of remdesivir and accusations of profiting off a pandemic.”

Read more: Gilead Urged to Cut Virus Drug’s Price if It Fails to Save Lives (Bloomberg Law)

©2020 Bloomberg L.P.

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