AstraZeneca to build Chinese supply chain as US-Sino tensions increase

AstraZeneca is building a separate Chinese supply chain to try to circumvent increased US-China tensions, as chief executive Pascal Soriot said Chinese drug sales and innovation would help the company hit a new $80bn revenue target by 2030.

The drugmaker, the world’s largest seller of pharmaceutical products in China and in other emerging markets, has established a manufacturing plant in Qingdao that will only serve those regions, Soriot said on Tuesday.

“We hope for the best and plan for the worst,” he said, after the Biden administration announced new tariffs on Chinese imports to the US last week.

Drugs are not hit by the tariffs and the company said it would not be affected by the crackdown. But Soriot, speaking on the sidelines of an investor conference in Cambridge, said: “Planning for the worst means you have to consider there might be tensions in the supply chain. We are trying to build a supply chain that would be focused on China.”

Aradhana Sarin, the company’s chief financial officer, said the group was investing further in the factory in Qingdao, a city in eastern China, that supplies inhaled products for asthma and other diseases, with supplies destined only for China and emerging markets.

The comments came as AstraZeneca announced plans to almost double revenue to $80bn by 2030. The Anglo-Swedish group said it would expand its existing portfolio and launch 20 new medicines before the end of the decade, in areas including cancer care and rare diseases, to raise revenue from $45.8bn in 2023.

Soriot said the update marked a “new era of growth”. It was considered as the most significant update since AstraZeneca successfully fended off a takeover attempt from US rival Pfizer in 2014 with an aggressive target of delivering $45bn in revenue by 2023.

Twelve of the 20 new drug launches would have the potential to generate more than $5bn in peak year revenues, including five new cancer drugs, the company said.

Soriot added that the group’s strength in emerging markets would be central to hitting its growth targets. “As the world changes, [and] these countries grow, they become more able to pay for innovative medicines,” he said.

Soriot also made clear that Chinese innovation was a crucial part of future growth for the industry, referring to the company’s acquisition in December of Gracell, a Chinese maker of advanced cancer therapies known as Car-T cell therapy.

“Historically, innovation has been more and more driven in the US. In the last five, six years, China has become a great source of innovation,” he said.

The company’s antibody drug conjugates, a sophisticated form of chemotherapy that involves targeting cancer cells without killing surrounding healthy tissue, will also be vital to reaching its new $80bn goal.

AstraZeneca said on Monday that it would open a $1.5bn facility in Singapore dedicated to their production.

The company’s Enhertu ADC drug developed with Japanese company Daiichi Sankyo brought in more than $2.5bn in sales last year, and AstraZeneca is trialling the drug to expand its uses across breast and lung cancer. New trial data on Enhertu and another ADC are set to be presented at a cancer conference in Chicago next month.

However, Soriot acknowledged that the company faced “headwinds”, including patent expiries and regulation. “This is the nature of our industry. We will lose patent protection and a number of governments are trying to reassess the cost of healthcare.”

AstraZeneca’s best-selling drug in 2023, diabetes treatment Farxiga, will start to lose patent protection from 2026 while the company is also one of the most exposed in the industry to President Joe Biden’s Inflation Reduction Act reforms that will enable the US government to negotiate drug prices for the first time.

Shares in the company rose 2 per cent on Tuesday. The $80bn target had been “widely expected”, said Peter Welford, an analyst at Jefferies.