Animal Pharmaceuticals Engagement
Sales and Marketing Practices
Strategy, risk and reporting on antibiotics
A.1.1. Dechra acknowledges that future antimicrobial regulations pose a potential material risk to the business; however, it does not publicly recognise that AMR itself is an inherent risk. Failing to make the distinction between the two suggests that Dechra may not be adequately addressing the longer-term risks associated with the negative impacts of antibiotic misuse/overuse—such as reduced efficacy of its pharmaceutical products. A.1.2. In its reporting, Dechra does not include AMR as a material interest to any of its stakeholders. The company is aware that regulations restricting antimicrobial use could cause a reduction in antibiotic sales. It also acknowledges that failing to respond appropriately to government regulations or promoting irresponsible antibiotic use could lead to reputational damage. Despite this, Dechra does not disclose a strategy to reduce its exposure to antibiotics and has seen growth in its food-producing animal products (FAP) sales. Although there is a global downward trend in antibiotic sales, Dechra is expanding its FAP portfolio, which will include antibiotics: “We are consistently strengthening our FAP business both with new products and through international expansion. We are enhancing our range which includes our market-leading swine and poultry water-soluble antibiotics". The company has sixteen new FAP products in its pipeline, including three antibiotics, but does not specify whether these are animal-only or shared-class. Whilst it could be considered positive to increase the diversity of animal-only antibiotics available for treatment, the company does not acknowledge whether this expansion is a strategic decision to reduce the likelihood of AMR, and it has not disclosed detail on the types of antibiotics being explored. A.1.3. Dechra predominantly sells companion animal products (CAP), with FAP accounting for 11.6% of revenue in FY22. As such, Dechra’s exposure to livestock antibiotics is significantly lower than other companies in the engagement. In FY22, Dechra reported a FAP revenue of £78.8m ($106.6m), while its CAP portfolio generated more than six times that, at £508.4m ($688.0m). Providing a more detailed breakdown of these revenue segments, particularly for FAP antibiotics, would allow investors to understand and track the company’s exposure to antibiotics over time. Dechra largely operates in the European Union (EU) and North America (NA), which represent 49% and 40% of sales, respectively. The remaining 11% comes from international sales in 39 countries including Brazil, Australia, and some Asian geographies. Dechra does not disclose revenue breakdowns for its sales in South America and Asia. Dechra’s global distribution is mostly centralised in high-income countries with stricter governmental regulations around AMR, suggesting that its FAP antibiotic presence is subjected to a greater level of scrutiny than companies that have a significant presence in countries without such restrictions. Nevertheless, Dechra is one of the largest animal pharmaceutical companies in the world, and there is still a need for the company to significantly improve its antibiotics disclosure and AMR strategy, particularly in regions with limited antibiotic regulations. A.1. Recommendation: To improve its score to ‘Low’, Dechra should: (i) recognise AMR as a material risk to the business. To improve its score to ‘Partial’ Dechra should: (i) recognise AMR as a material risk to the business; and (ii) report a more granular breakdown of revenue from antibiotics.
Applying a consistent sales and marketing approach in line with best practice operating market
A.2.1. Dechra does not have a publicly available strategy for responsible antibiotic sales and marketing, offering only high-level statements about matching region-specific current best practice prescribing habits. The company does not publicly share its definition of responsible antibiotic use. Providing a definition would support the company’s claim to align with best practice prescribing habits. A.2.2. As Dechra primarily sells its products in the EU and US, it can be assumed that the company has removed indications for growth promotion in the US, and growth promotion and prophylaxis in the EU from the labels of its medically important antimicrobials (MIAs) to align with promotional policies in these regions which ban such labelling. However, Dechra does not disclose this in its reporting and does not confirm whether it has removed indicators for growth promotion and prophylaxis in countries where the practices are still legal. A.2.3. Dechra does not disclose who is responsible for senior oversight and enforcement of the company's strategy for the responsible sale and marketing of antibiotics, although it confirmed that AMR is not a key responsibility of the Board. Promotional compliance is monitored by the company’s country and regional sales managers; Dechra reports having an internal audit team that regularly conducts a review of compliance processes and implements corrective actions to address issues. It can be assumed that this review process includes promotional compliance around antibiotics, but as Dechra does not have a specific policy in place to dictate responsible antibiotic sales, it is unclear what consequences would be enforced. A.2.4. There is no information on sales incentives associated with the sale of antibiotics. A.2. Recommendation: Dechra could improve its score to ‘Partial’ or even ‘Good’ by setting a time-bound commitment to remove indications for growth promotion and prophylaxis from all antibiotics globally and disclosing more detail on its approach to the sales and marketing of antibiotics.
Manufacturing and Production
Demonstrating effective management of antibiotic residues in manufacturing and production
B.1.1. In FY22, Dechra released its first standalone Sustainability Report. The report outlines the company’s approach to sustainability with a focus on energy use but does not address antibiotic residue in manufacturing or make any mention of AMR. Dechra does not disclose having an environment, health, and safety (EHS) strategy that addresses antibiotic residues in manufacturing. B.1.2. The company reports on an environmental commitment to minimise the impact of its operations on the environment; however, this predominately covers energy use. Waste is also a key focus area; however, antibiotics are not included in the waste disposal reporting. The company claims that where waste is unavoidably created it will "manage its disposal in the most appropriate manner giving full consideration to environmental issues” yet provides no definition for "appropriate manner" or "full consideration". This statement does not constitute a detailed manufacturing strategy that addresses antibiotic residue across all sites. In 2022, Dechra completed a Task Force on Climate-related Financial Disclosure (TCFD) risk assessment to identify key areas of concern. AMR was not included as a climate-related risk, despite growing evidence that rising temperatures exacerbate the spread of AMR. B.1.3. Dechra does not disclose how non-compliance is addressed for its owned and/or operated manufacturing sites. Dechra is hoping to increase the amount of manufacturing done in-house (from 40% to 50%) but it needs to disclose whether this will include the production of antibiotics. Increasing the percentage of manufacturing done in-house could allow for more supply chain visibility, as the company would be directly overseeing its own manufacturing operations. This could also lead to improved oversight of waste management, including antibiotic residues, so it would be a positive sign if the company is looking to bring more of its antibiotic manufacturing in-house. B.1.4. Dechra’s FY22 annual report identifies seven owned manufacturing sites, and the company is continuing a planned exit from its third-party contract manufacturers. To improve its score, Dechra should disclose where its largest suppliers are located and the proportion of antibiotics that are produced in-house versus by suppliers. B.1. Recommendation: To improve its score to ‘Low’, Dechra would need to disclose details on: (i) the standards it has in place to ensure wastewater discharged into the environment contains safe levels of antibiotic residues with best practice being to set PNECs. To improve its score to ‘Partial’, Dechra would need to disclose details on: (i) the standards it has in place to ensure wastewater discharged into the environment contains safe levels of antibiotic residues with best practice being to set PNECs; and (ii) how this applies to its CMOs and to third party suppliers.
Research and Development
Defining alternatives to antibiotics
C.1.1. Dechra does not specifically define alternatives to antibiotics, which limits investors’ ability to track the year-on-year growth of this segment. C.1.2. Nevertheless, Dechra offers some products that could reduce the need for antibiotics. Solacyl is a water-soluble anti-inflammatory product that improves calf health and reduces the risk of infection, thereby reducing the need for antibiotics. This use guidance was outlined in a 2018 Dechra white paper titled "Enhancing welfare and combating antimicrobial resistance while maintaining productivity on calf units" which describes Solacyl as a tool to reduce the need for prophylactic antibiotics. Dechra is also expanding its FAP vaccine product portfolio and has eleven new vaccines in its product pipeline – an increase of seven from FY21. Nevertheless, Dechra does not disclose if its vaccine expansion is part of a strategic plan to use vaccines as antibiotic alternatives. The company stated that it is not interested in moving to alternatives such as diagnostic tools like other animal pharma companies but would rather remain focused on its current business model. This choice could be considered a missed opportunity to expand its FAP portfolio while reducing exposure to high-risk antibiotics. C.1.3. Dechra’s product portfolio clearly includes items that could be classified as alternatives, such as anti-inflammatory medications and vaccines. However, as the company does not provide any detail about portfolio or revenue breakdown, it is not possible for investors to determine how exposure to alternatives is changing year-on-year. C.1. Recommendation: To improve its score to ‘Partial’, Dechra should provide a definition for alternatives to antibiotics and disclose the percentage of its portfolio or revenue for food-producing animals that is made up by alternatives to antibiotics. To improve its score to ‘Good’, the company should also disclose detail of how it assesses the efficacy of its alternatives at reducing antibiotic use.
Increasing availability and use of alternatives to antibiotics
C.2.1. Dechra reported £32.4m ($43.84m) spend on pharmaceutical research and development (R&D) in both FY22 and FY21. This equates to 4.8% of consolidated revenue for FY22. Dechra’s recent acquisition of the CAP company Piedmont Animal Health in July 2022 is expected to increase R&D spend to 7-8% of revenue in FY23, FY24, and FY25. Dechra does not disclose what portion of its R&D spend is directed towards CAP vs FAP, however, this new acquisition and predicted R&D increase suggests that Dechra devotes at least 2% of its R&D spend to CAP, however, FAIRR estimates that this figure is higher. Dechra does not provide a breakdown that identifies R&D spend on alternatives to antibiotics. C.2.2. In FY22 Dechra made two acquisitions: Piedmont Animal Health and Med-Pharmex. As previously mentioned, Piemont Animal Health is a CAP company and will expand Dechra’s CAP presence. Med-Pharmex has both a CAP and a FAP segment. The company’s FAP segment contains six antibiotics, including a water-soluble powder containing neomycin—a critically important antibiotic. Neither acquisition discloses a focus on developing alternatives to antibiotics. C.2.3. Dechra does not disclose its marketing spend but does report training its employees so that they “have sufficient product and disease knowledge to enable them to present information accurately and responsibly.” The company also discloses that it works closely with veterinarians and provides them with technical support to maintain and improve their product knowledge. FAIRR recommends that Dechra disclose whether this support includes training on responsible antibiotic use, and provide a definition for responsible use. C.2. Recommendation: To improve its score, Dechra should (i) disclose the percentage of R&D spend dedicated to alternatives to antibiotics and (ii) provide greater insight on marketing spend on alternatives to antibiotics.
Stakeholder Engagement and Lobbying
D.1.1. Dechra does not disclose its involvement in any stewardship activities specifically designed to reduce antibiotic use in animal agriculture. D.1.2. Dechra does not disclose any stewardship efforts to improve AMR surveillance. The company offers veterinary training and support to encourage proper pharmaceutical use, however, it is unclear if AMR prevention is part of this curriculum. Dechra claims to provide “accurate, fair and objective information on its products and medicines to support their safe and effective use.” However, it is unclear how this applies specifically to antibacterial products, for example, the company does not disclose whether it has removed indicators of prophylactic use from antibiotics across all its regions. The company states that it does not make “false or misleading” claims about its products, however, this leaves room for irresponsible use as claims around antibiotics can be true while still posing serious AMR risks. D.1. Recommendation: To improve its score, Dechra should provide greater insight into its stewardship initiatives to demonstrate whether it is looking to support a reduction in non-therapeutic antibiotic use.
Lobbying and political expenditure
D.2.1. Dechra only discloses its lobbying spend where legally required and does not publish this in its annual reporting. The company discloses making modest fee-for-service payments to key opinion leaders who help it develop and deliver educational materials to veterinarians involved in clinical trials. It is unclear what this entails, we recommend that Dechra disclose more details about which key opinion leaders it employs and what educational materials they are developing on Dechra’s behalf. D.2. Recommendation: To improve its score, Dechra should disclose its approach to lobbying on issues related to AMR and antibiotics.
Level of company engagement with the coalition
E.1. Dechra did not respond to the investor coalition’s formal letter sent in July 2022 and declined to attend an engagement call with investors. The company provided written feedback to the preliminary assessment on 3 January 2023, and the clarifications have been incorporated. The company did not provide feedback on its final assessment sent in May 2023.
22 May 2023
Dechra Pharmaceuticals PLC Assessment
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Investor Briefing Pack
Key Findings Report
Engagement Progress Report Webinar Video
Sample Engagement Letter
Animal Pharmaceuticals Engagement