Yahoo Finance AstraZeneca CEO on US-China tensions: 'We have established a very resilient supply chain'
AstraZeneca's (AZN) stock is up following its latest earnings report Thursday after the company reported $12.7 billion in revenue, beating consensus estimates of $11.8 billion in the first quarter of 2024.
The beat was driven by oncology treatments, which grew 26% and contributed $5.1 billion of the total revenue for the quarter. The top drug, Enhertu, an antibody-drug conjugate (ADC) to treat breast cancer and sold in partnership with pharma company Daiichi Sankyo, recorded sales of $423 million in the US.
AstraZeneca CEO Pascal Soriot told Yahoo Finance the company was most excited by 19% growth achieved in the first quarter, which was the result of strong product sales in every region around the world where the company operates. In emerging markets, excluding China, the company saw 40% growth.
"It really shows that we are bringing our medicines to lots and lots of patients around the world," he said.
AstraZeneca has the attention of investors as it joins a number of large pharmaceutical firms looking for ways to boost their pipelines with new products, as some of their biggest blockbusters face patent cliffs this decade.
Leerink Partners analyst Andrew Berens said in a note in February that investors are focused on AstraZeneca's R&D day in May, when the company is expected to reveal its plans for the next 10 years, including a "focus on new technologies/platforms, such as [antibody-drug conjugates], bi-specifics, and cell therapy. The company's mid-term pipeline strategy will be important, as some investors remain concerned about LOE [loss of exclusivity] for key products, including Farxiga, Soliris, and Lynparza, while competition pressures other key franchises such as Calquence."
The loss of exclusivity, aka patent cliffs, is one of the biggest headwinds for Big Pharma companies. AstraZeneca's Farxiga, for example, is one of the drugs Medicare is negotiating a price for as part of the Inflation Reduction Act (IRA) — it's also losing its patent protection in 2025.
Medicare claims it is used by nearly 800,000 enrollees and cost the government nearly $3.3 billion from June 2022 to May 2023.
"Those pricing discussions come on the back end of the life cycle of Farxiga in the United States," Soriot said, adding that the company is looking to leverage discussions to ensure the product is more affordable and more patients can use it.
US-China impact
Like other large pharma companies, AstraZeneca is walking another political tightrope as the US looks for various ways to cut ties with China.
The latest strategy is a bill in Congress, the Biosecure Act, that puts a microscope on China's WuXi Biologics, which many pharma companies have partnered with in recent years. The fears that spurred the bill mirror those seen in other sectors: concerns about national security risks and the potential for intellectual property to be stolen to benefit China.
AstraZeneca is among those companies partnering with WuXi. It has a commitment with WuXi from 2019 that includes raising a $1 billion fund to help support manufacturing and R&D initiatives in China — through AstraZeneca-owned and Chinese-owned entities.
Soriot said that while China is a very important country, as it's a market of 1.4 billion people, it is also important because of its increased focus on drug R&D. There are now more locally funded R&D efforts, which could edge out market share gains made by US and European pharma companies in recent years.
"We have considered all these geopolitical tensions, and we have established a very resilient supply chain. We have manufacturing sites in China for China, ... and of course, we have a supply chain that is dedicated to the Western world," he said, noting a new site being constructed in Maryland.
US-based Biotechnology Innovation Organization, known by its acronym BIO, is one of the industry's biggest trade groups. It forced WuXi to end its membership when it announced its agreement with the US government's concerns. This means WuXi can no longer rely on broad support from the pharmaceutical industry to grow its business with US-based companies — but companies can still choose independently to retain their ties.
BIO president and CEO John Crowley said in his announcement that as a former Navy Intelligence Officer he understands the dangers of biotechnology getting into the hands of the US adversaries.
"Biotechnology is a vital strategic asset that is essential to strengthen and protect our public health generally, and as well in response to future pandemics and the potential for bioterrorism. It is also an essential element of our ability to project abroad the principles and benefits of a free and democratic society," Crowley said.
Lawmakers wrote in a February letter that "WuXi AppTec and WuXi Biologics are rapidly becoming a global pharmaceutical and research-services giant that threatens U.S. intellectual property and national security. Both companies have close ties to the CCP [Chinese Communist Party] and have worked at its behest, in multiple instances."
Anjalee Khemlani is the senior health reporter at Yahoo Finance, covering all things pharma, insurance, care services, digital health, PBMs, and health policy and politics. Follow Anjalee on all social media platforms @AnjKhem.
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