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4 Healthcare Stocks Attractive on Valuation and ESG Risk

Morningstar's Karen Andersen explains how ESG issues affect Big Pharma and biotech companies.

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Karen Andersen: The investor community is increasingly interested in incorporating environmental, social, and governance risks into their decision-making. Morningstar is working with ESG research firm Sustainalytics, which is 44% owned by Morningstar, to delve deeper into the issue.

When our healthcare team at Morningstar incorporated ESG factors into our valuation analysis for Big Pharma and biotech firms, we focused on ESG issues in the social realm, including pricing and litigation risk, which we think are the two most material issues. Pricing remains a major headline risk for branded drug firms, particularly those with larger exposure to the U.S. market. If major U.S. drug pricing reform is signed into law, we assume an average 11% hit to U.S. branded drug sales starting in 2023, when changes could be implemented.

Karen Andersen does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.