ABP, USS in warning over global drugs industry

Two of Europe’s largest pension
funds, Stichting Pensioenfonds
ABP and the Universities Superannuation
Scheme, have warned of
continued “downward valuation”
of the global pharmaceutical
And they’ve called for a new
acknowledgement of the “mutual
inter-dependence” between drugs
firms and shareholders.
The comments come in a new
report called ‘Pharma Futures’
which was convened by ABP, USS
and the Ohio Public Employees
Retirement System.
Funding also came from drugs
firms GlaxoSmithKline and
“As long-term owners of pharmaceutical
companies, these and
other pension funds have a substantial
interest in the continued
profitability of a sector that created
considerable shareholder
value in the 80s and 90s,” the
report states.
The 34-page report says that
“fundamental change in the pharmaceutical
industry is inevitable to
meet society’s changing healthcare
“If new science does not bring
innovative therapies to market
quickly the risk of downward valuation
of the industry and societal
pressure for change are likely to
Investors must also play their
part – by providing market-based
incentives to reward behaviour.
“All stakeholders need to work to
re-establish an equilibrium that
acknowledges mutual inter-dependence.”
Speaking on a conference call,
Raj Thamotheram of USS said the
schemes, worth a combined
$280bn (€211bn) have around 7%
of their equity allocations in the
pharma industry. “We see this sector
as a natural sector for us,”
he said.
And he said schemes would have
to engage with asset managers and
investment consultants on the
issues raised in the report.
ABP’s Martin Eijgenhuijsen said:
“We are planning to ask our external
asset managers what they think
about this report, to see how they
would deal with it.”
He added that there “may be
other sectors” to which the model
could be applied.
Project director Sophia Tickell
said there had been a generally
“very positive” response to the
report from the pharmaceutical
Asked about whether schemes
should be involved in such a project,
Thamotheram argued: “This is
about doing our day job but doing
it more intelligently.” Eijgenhuijsen
agreed: “Managing a portfolio
is about getting a high return. This
could also be seen as an additional
research tool.”

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