AstraZeneca's star China business slows on Tagrisso price cut, but Alexion may come to the rescue

AstraZeneca
AstraZeneca CEO Pascal Soriot said the company still believes its China business could turn in high single-digit growth in the next four to five years. (AstraZeneca)

China has delivered enviable growth for AstraZeneca in the past. But in the third quarter, the country became the main drag on AZ’s performance, thanks to a price cut to the company’s top-selling drug.

AstraZeneca’s China business only increased sales by 2% in constant currencies for the third quarter, in stark contrast to the double-digit growth it has routinely posted in recent years.

EGFR lung cancer med Tagrisso struggled in China with sales down 10% in the first nine months, curtailing its worldwide sales growth to 13%—to $3.7 billion—for that period. Because of China, Tagrisso even suffered a 4% sequential sales decline in the third quarter. 

AstraZeneca CEO Pascal Soriot said the company still believes China could turn in high single-digit growth in the next four to five years. “It is clear that China is slowing down, but it remains a very important market for us,” Soriot said during a conference call Friday.

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To hear Soriot tell it, the sales volume for key medicines is expanding in China, but it’s not fully compensating for lower prices, at least for now.

For Tagrisso especially, the drug’s indication for newly diagnosed lung cancer was added to national reimbursement in March. After that, Tagrisso enjoyed an inventory build-up and a “bolus” of sales, thanks to first-line switches from earlier-generation therapies, Dave Fredrickson, AZ’s oncology business chief, told investors on the call. Those factors helped in the second quarter but weren’t at play in the third quarter.

Still, AZ expects growing Tagrisso sales volume in China to compensate for the price reduction it took to gain national coverage, Fredrickson said.

As AZ has a history of moving more quickly than its peers in introducing novel medicines to China, the company is now looking to new products for the country. These could come from AZ’s newly bought Alexion.

Alexion, which is now AZ’s rare disease unit, has already established a dedicated team in China and is in talks with local drug regulators to gain market access, Alexion CEO Marc Dunoyer said on the call. The company hopes to have its first approval in 2022 and a possible launch in 2023, he added.

After AZ wrapped up the Alexion acquisition in mid-July, rare blood disorder therapies Soliris and Ultomiris brought in sales of $1.1 billion for the rest of the third quarter. Alexion has converted more than 70% of paroxysmal nocturnal hemoglobinuria patients from Soliris to the newer Ultomiris, whose $297 million haul during the period marked a 31% increase year over year.

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But as Wolfe Research analyst Tim Anderson pointed out during the call, competitors are on the horizon. Most notably, Novartis’ oral iptacopan is in development for PNH and other territories now held by the Alexion antibodies, with first FDA filings expected in 2023.

Beyond its existing business units of oncology, biopharmaceuticals and rare disease, AZ is creating a new department to manage its COVID-19-related products, including its COVID vaccine Vaxzevria and antibody product AZD7442.

Vaxzevria’s haul in the third quarter reached $1.05 billion, bringing the nine-month total to $2.22 billion. As for AZD7442, the company expects an FDA emergency use authorization decision this year for what would be the first long-acting COVID antibody prevention therapy.