ESG CASE STUDY: NOVARTIS
Given these disparities, in the past, pharma companies have often decided to focus on getting their medicines approved first in commercially attractive markets such as the US, Europe and Japan, neglecting access strategies for LMICs. “The unfortunate reality is that there has historically been a massive gap between when new drugs get admitted in these markets and in the LMICs,” says Bohr.
Novartis is looking to reduce the launch time lag between developed and developing markets for its innovative therapies by systematically integrating these access considerations into its launch process. Specifically, it is implementing affordability strategies and health system strengthening programmes and pursuing adaptive research and development for LMICs. In addition, it is using e-commerce and online pharmacies to lower distribution costs.
Measuring target relevance Novartis received second-party opinions on its bond from the Access to Medicine Foundation and from ESG ratings and benchmarking consultancy Sustainalytics to validate the robustness and relevance of the bond’s KPIs and targets based on the ICMA SLB principles.
Lili Hocke, Product Manager, Sustainable Finance Solutions at Sustainalytics, shares insights on how these principles were applied to the KPIs. “As an independent party, we assess if the bond is aligned with market expectations; that is, how well it is aligned with the relevant principles that have been put in place in the market by the buy side and the sell side. The alignment with the principles forms the common denominator of what we can consider to be relevant to assess.”
In the first part of the assessment, Sustainalytics considered whether the patient access targets on which the KPIs were based were material, relevant and ambitious (i.e. whether they build on business as usual) and linked to the issuer’s sustainability strategy. Hocke explains: “Since access-to-medicine targets are reported differently by each company, we based our assessment of ambitiousness on the comparison of the target with Novartis’s historical performance on the KPI. We assessed whether the current target goes beyond the historical performance trend.” In an ideal scenario, a KPI is also comparable to peers’ performance and to system boundaries.
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Figure 1: Patients reached with innovative and generic Novartis therapies Year ended 31 December 2018
2017
Strategic innovative products patient reach: Flagship programmes patient reach:
238,021 39,589,335 382,714 28,509,151 2019 547,664 15,069,483
2020 696,669 43,912,162 Source: The Novartis in Society ESG Report 2020
In addition, since the SLBs are a performance-based instrument, issuers need to link the bond’s financial or structural characteristics to the achievement of the targets: “It’s about what we can expect when they achieve these access to medicines targets, and what happens should they fail.” While the bond runs to 2028, Novartis will increase the coupon by 0.25% if the company fails to meet both 2025 patient access targets.
The second part of the assessment is focused on what Sustainalytics deems relevant in enabling investors to decide whether to invest in Novartis’s bond beyond the alignment with the relevant market principles. “Here we look at the strength of the sustainability strategy of the issuer, where the company is in its sustainability journey, how well it is managing overall risks that are related to sustainability, and how important these medicines are in the areas that are targeted by Novartis,” says Hocke.
Resetting pharma’s reputation Novartis’s passion to deliver medicines to LMICs saw it carving out a specific role for itself during the Covid-19 crisis. Vas Narasimhan, CEO of Novartis, noted the general effects of Covid-19, which affected patient visits, and that some therapeutic areas were more impacted than others. During a CNBC interview in January 2021,8
he observed that “there’s a second pandemic ongoing, or a syndemic,9
so to
speak, that’s really impacting patients’ ability to get non-communicable disease treatments in a timely manner.”
He added that “the pandemic has been a reset for pharma’s reputation”. Here, the company is doing its job of supporting LMICs in achieving herd immunity by expanding access to medicines. Instead of developing its own vaccine (having sold its vaccines unit to GlaxoSmithKline in 2015), Novartis is helping other companies to
make them, and signed an initial agreement in January 2021 to provide manufacturing capacity for the Pfizer-BioNTech vaccine.10 It will take bulk mRNA active ingredients from BioNTech and fill vials under aseptic manufacturing facilities at its site in Stein, Switzerland for shipment back to BioNTech for distribution to healthcare system customers around the world.
In March 2021, Novartis signed an agreement to manufacture the mRNA and bulk drug product for the Covid-19 vaccine candidate CVnCoV from CureVac, and it will supply up to 50 million doses by the end of 2021, and up to a further 200 million doses in 2022.11
Delivery from its manufacturing
site in Kundl, Austria is expected to start in summer 2021. In addition, Novartis is making 15 drugs that treat key symptoms of the virus available to LMICs at zero profit until a vaccine or curative treatment becomes available.
Going forward, with the confluence of Covid-19 and other diseases, Novartis is seizing the moment to build trust with society as countries race towards recovery. And, with its patient access targets aligned to its core business and ESG objectives, it aims to ensure that in that race, no patient gets left behind.
Sources 1
See
https://bit.ly/2NIRBnC at
who.int 2 See
https://bit.ly/395aPuS at
who.int 3 See
https://bit.ly/3vOsFwa at
novartis.com 4 See
https://bit.ly/3lG6wvl at
novartis.com 5 See
https://bit.ly/2OWT4XZ at
icmagroup.org 6 See
https://bit.ly/2OP9mCo at
novartis.com 7 See
https://bit.ly/314T4b1 at
novartis.com 8 See
https://bit.ly/3c7YaJC at
youtube.com
9
A synergistic epidemic (or syndemic) is the aggregation of two or more concurrent or sequential epidemics or disease clusters in a population with biological interactions
10 See
https://bit.ly/3vSgJcD at
novartis.com 11 See
https://bit.ly/3cT6YT6 at
novartis.com
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