As geopolitical tensions threaten to disrupt pharmaceutical supply chains, AstraZeneca is making plans to manufacture drugs for the U.S. and China markets independently from one another.
“We have a very large supply chain, and we are organizing ourselves so that we can actually supply the United States and Europe independently,” AstraZeneca CEO said in an interview with Bloomberg on the sidelines of the Boao Forum for Asia in China. “And we also are building our presence here in China, so we can actually supply Chinese patients independently.”
Soriot pointed to AZ’s recently announced $300 million cell therapy facility in Rockville, Maryland, following the company’s $1 billion acquisition of Chinese CAR-T biotech Gracell Biotechnologies.
“The fact that a product is invented here doesn’t mean it would be manufactured and supplied out of China,” Soriot said.
Before the Boao Forum event, the AZ chief attended the China Development Forum in Beijing along with several other Big Pharma CEOs. During a meeting last week in Beijing organized by the Chinese Ministry of Commerce, Soriot touted AZ’s investments in China as part of its global manufacturing footprint, according to Bloomberg.
In April of last year, the British drugmaker announced plans to invest about $450 million to build an inhaler factory in the Chinese city of Qingdao. In August, the company added another $250 million to the investment mix.
It's probably unrealistic to expect AZ—or any large pharma company—to fully split its supply chains given the specialized nature of the industry and shared suppliers of starting materials and ingredients. But companies are likely to continue planning manufacturing investments in both major markets.
Meanwhile, AZ’s decision to build a cell therapy plant in the U.S. may have cost and logistics considerations, given that production turnaround times are key for the personalized therapies.
Still, calls for standing up independent supply chains for the U.S. and China have escalated not just within the pharma industry. In recent years, the pandemic and the worsening relationship between the two superpowers have sparked concerns of supply disruptions.
As one example of the diverging supply chains, Merck KGaA has tried to limit imports of important raw materials into China, especially from the U.S., the company’s then-chief financial officer, Marcus Kuhnert, said during a press call in May 2023. The German company operates in semiconductor and life sciences, two high-stakes battlegrounds between China and Western countries.
The German Merck was “creating a China-for-China approach so that also the vast majority of products we are going to produce in China is actually supposed to be for the Chinese market,” Kuhnert said at the time.
Few biopharma companies have directly spelled out such a strategy. But there are clues that some companies are making plans to operate independent supply chains, including a swell of investment into Singapore and South Korea
“[A]s the global medicine supply becomes a national security issue for the United States and other countries, it’s conceivable that they may eventually require a company’s supply chain be independent from China—or at a minimum, require supply chain diversity for key medications, critical compounds and raw materials,” PwC analysts wrote in a post about pharma’s China strategy.
As the U.S.-China rivalry showed no signs of abating, a Financial Times report last year indicated that AZ was making plans to spin its China operations off into a separate company to protect the parent firm from geopolitical tensions.
In his Boao interview with Bloomberg, Soriot declined to directly comment on the issue, but he said AZ is “very happy with the way we are organized in China." The company's focus is “developing and bringing new medicines to patients here in China and around the world.”