In November, Jefferies hosted its annual Global Healthcare Conference in London. The event gathers leading healthcare, pharmaceutical, and medical technology executives from around the globe, joined by institutional, private equity, and venture capital investors, to discuss near- and long-term investment opportunities and key themes in global healthcare.
The following article is adapted from "ESG and Healthcare: Governing in an Era of Diverging Viewpoints", a panel discussion hosted by Luke Sussams, Head of Sustainability and Transition Strategy, EMEA.
As in other industries, there is a growing consensus that Healthcare companies with better Environmental, Social, and Governance (ESG) risk profiles tend to outperform their competitors.
- E: Energy efficiency and reduction of emissions remain critical to the industry’s longer term sustainability goals.
- S: Social priorities include access and affordability (particularly drug pricing concerns) as well as reliability of supply.
- G: Business ethics, product quality and safety remain top of mind when considering improved governance.
However, the umbrella acronym of ESG can fail to account for the challenge of reconciling the often-conflicting demands of ESG concerns. This complex interplay is particularly evident when balancing the need for an affordable and reliable supply of medicine against the imperative of environmental sustainability.
A panel discussion at the recent Jefferies 2023 Healthcare Conference called for a nuanced approach, blending innovation, collaboration, and carefully orchestrated funding strategies.
Environmental Sustainability vs. Access to Medicine
The healthcare industry, historically characterized by high energy consumption and significant waste generation, faces increasing pressure to reduce its environmental footprint. Initiatives like reducing greenhouse gas emissions and managing pharmaceutical waste are essential in combating climate change and environmental degradation. However, these initiatives often come with higher costs and operational complexities, which can inadvertently impact the affordability and accessibility of healthcare.
The Cautionary Tale of the Weight-Loss Miracle Drug
Amid the noise and excitement around the GLP-1 market, attendees of the November conference struck a note of caution. In our annual research report, the Jefferies Healthcare Temperature Check, 33 percent of the 600 senior leaders and investors expressed the view that substantial risks remain in the GLP-1 market. And they were proven right.
On the first day of the conference, November 14, Belgium banned the use of Ozempic for weight loss purposes, a decision set to last until the summer of 2024. The drastic action was taken in response to a global shortage of the diabetes drug, driven largely by its off-label use for weight loss. This shortage – affecting pharmacies not just in Belgium but also in the US, Canada, and other parts of Europe – necessitated the consideration of alternative medications to meet the needs of patients relying on Ozempic for its intended purpose: the treatment of diabetes. This action highlighted that national and supranational regulators are not afraid to take drastic action to protect reliability of supply.
Innovative Solutions for Sustainable Production
Innovation in manufacturing processes and supply chain management presents a viable solution. The adoption of renewable energy sources in production, coupled with efficient waste management systems, can significantly reduce environmental impact. Pharmaceutical companies are exploring ways to minimize their carbon footprint without compromising the efficacy and availability of medicines. We expect that technology will play a pivotal role in streamlining supply chains, making them more sustainable and efficient. With firm expectations of higher M&A levels, after two years of muted activity, identifying and executing strategic acquisitions and partnerships can also play a role in bolstering firms’ ESG credentials.
Bridging Financial Gaps for ESG Goals
The evolving landscape of ESG concerns in the healthcare industry presents both challenges and opportunities. Availability of capital has been a critical theme over the last 18 months and, once again, it is high on the agenda.
Over two thirds of conference attendees surveyed believe that the economic environment and outlook is having a ‘major adverse impact’ on the ability of healthcare companies to raise capital. Healthcare companies, both private and public, often face significant financial constraints when attempting to navigate the complexities of integrating ESG principles into their operations. However, with most predicting the slow resurrection of Debt and Equity Capital Markets in 2024, companies that continue to make the effort to integrate ESG will find capital most accessible.