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China: AstraZeneca’s new engine for growth and innovation
AstraZeneca’s Mark Mallon talks to PME about how its long-term investment in China is paying off
AstraZeneca China’s HQ in Shanghai Zhangjiang Hi-Tech Park
Back in 2014, when AstraZeneca’s chief executive Pascal Soriot was fending off a hostile takeover bid from Pfizer, he pledged that the company could nearly double its revenues to $45bn by 2023.
Since then, the company has had mixed results in transforming its business, and it still looks doubtful that the company can hit this very ambitious target, as it has taken four years for AZ to return to top-line growth after the patent loss of blockbuster brands such as Nexium and Crestor.
But there’s no doubt that the company is now a contender once again in bringing innovative medicines to market. There are two stand- out good news stories for AZ in 2018 – the growth of its cancer medicines portfolio and industry-leading sales expansion in China.
In fact there is a great deal of crossover in these two drivers. In March 2017, AZ’s targeted lung cancer drug Tagrisso was one of the first medicines to gain approval through the Chinese Food and Drug Administration (CFDA)’s Priority Review pathway, getting it to China’s patients much faster than usual.
There is a good reason why Tagrisso was chosen for the fast track – the drug is for patients with epidermal growth factor receptor (EGFR) T790M mutation-positive non-small cell lung cancer (NSCLC). The EGFR mutation is particularly prevalent in Asian populations – 30-40% of patients compared to the 10-15% in the US and Europe.
Among foreign-owned pharma companies, only Pfizer comes close to the success of AstraZeneca in China: both saw revenues in the country rise an astonishing 24% in the last quarter compared to the same period last year. That was a sharp increase from last year’s growth of 15% and 16% respectively, and AZ is now recording $1bn in revenue per quarter in the country. AstraZeneca first established a presence in China in 1993 and its sites include a manufacturing and supply facility at Wuxi in Jiangsu province and a research centre in Shanghai. Mark Mallon is one of the chief architects of AstraZeneca’s current success in China. Today he is executive vice president of Global Product & Portfolio Strategy (GPPS), Global Medical Affairs (GMA) and Corporate Affairs (CA), but he spent many years creating a long-term foundation for the firm in China and the Asia Pacific region.
He joined AstraZeneca in 1994, and served as head of operations in China, and then as vice-president for the wider Asia- Pacific region from its base in Shanghai.
Mallon says AstraZeneca’s achievements in China to date are thanks to a combination of sustained investment, stretching back 25 years, and a long-term commitment to partnership with China’s government.
“To date, AstraZeneca has brought about 30 innovative drugs to China and has invested around three-quarters of a billion dollars in pharmaceutical innovation in the country. Much of what we achieve for patients in China is through strong partnership, enabled by supportive policies from the Chinese government.”
He says the company is “very confident” of sustaining growth in China, and says its broad portfolio of medicines across oncology, respiratory and cardiovascular, metabolic and renal will help it achieve that.
“China is at present AstraZeneca’s second- largest market globally, delivered growth of 25% at constant exchange rates for the first half of 2018, and accounts for nearly half of the company’s Emerging Markets revenue,” he says.
Even with the sheer size of its population – 1.37 billion, the largest in the world – China has an ageing population. Heart disease and cancer mortality rates have risen in recent years as more urban ‘westernised’ lifestyles take hold, along with major public health issues such as air pollution.
“Despite our success in partnering with hospitals and government to improve access to new medicines, there remains a significant unmet medical need across China.
“I don’t think any multinational company is close to serving that need in fullness,” he says.
Economic growth has enabled people to pay out-of-pocket, with regions and cities now funding some newer medicines. The central government has also updated its national reimbursement drug list (NRDL) to include more and more innovative treatments, although this list remains restricted and is not regularly updated.
So how long before China eclipses the European market as the second most important behind the US? Figures from IQVIA show that spending in the top five European markets reached $154.4bn in 2017, while China’s was $122.6bn. However IQVIA forecasts that China could exceed the size of the EU5 markets as early as 2022.
“Do I see it overtaking Europe by 2030? Yes, it certainly has that potential,” says Mallon. The ‘Healthy China 2030’ policy establishes health as a national priority, recognising the need for innovations that increase patient access to healthcare, and the vast majority of China’s citizens now have health insurance. This means the out-of-pocket cost for healthcare has fallen, just as the government is accelerating marketing approval and reimbursement for priority medicines.
Meanwhile the ‘Made in China 2025’ policy represents China’s efforts to develop a modern, intellectual property-based economy.
“I think China is evolving all the time. The changing demographics of the population and significantly improved access to healthcare insurance have been key over the past decade.”
New collaborative culture
There have also been new opportunities for collaboration in medical science. AstraZeneca has taken advantage of this by working closely with provincial and municipal government partners, which include Shanghai and Pudong, Nanjing, Wuxi and Taizhou.
One such project was set up with the Wuxi regional government in 2017, where AZ established a joint venture
with the State Development Investment Corporation (SDIC) to set up Dizal Pharma, a joint venture dedicated to the research and development of new medicines. Such partnerships, plus a new commitment to respect intellectual property, is reassuring foreign-owned pharma firms about investing in the country.
“It means China is a good place for innovation and investing in healthcare,” says Mallon.
Growing confidence in China as an R&D centre
While some companies have pared back their investment in China research and development in recent years (such as GSK and Lilly), AstraZeneca has maintained its presence. Mallon says its long-term investment in China as a major R&D centre allows it to contribute to the development of the local pharmaceutical innovation ecosystem and to develop new medicines more “effectively and efficiently”, a nod to the country’s lower costs and availability of well-trained workforces.
A drug which can take development of China’s R&D base to the next level is roxadustat, a potential first-in-class medicine that AstraZeneca is developing in partnership with FibroGen in China for patients with anaemia in chronic kidney disease.
“Roxadustat is under accelerated review and, if approved, would also be the first locally- developed medicine to hit the Chinese market even before Europe and the US,” says Mallon.
“That could even be a first for the global life sciences industry. We are currently developing several innovative molecules locally that have the potential to be approved in China before any other market globally.”
AstraZeneca has an innovation centre in Wuxi where it pilots new approaches, often in partnership with other companies. It aims to try out these new approaches by creating centres of excellence in hospitals in Wuxi, and later around China; and then potentially for export to the rest of the world.
The company has what it calls a ‘patient-centric’ Commercial Innovation Strategy for China, which focuses on therapy areas where Chinese patients have the most urgent demand, such as respiratory diseases, cardiovascular diseases, metabolic disorders, oncology and digestive diseases.
“We’re working with a cross section of partners from the government, industry, academia, research institutes and medical institutes to develop complete disease solutions that integrate diagnosis and treatment based on the health IoT,” says Mallon. “AstraZeneca’s goal is to realise complete disease management, covering prevention, screening, diagnosis, treatment and follow- up. If we can do that, we can help create an open, collaborative and innovative healthcare ecosystem, and increase the accessibility and efficiency of healthcare services in China.”
Digital health
So how important will innovations digital health going to be in China? “Extremely important, is the short answer; and not only within China, as really China is leading the way in digital health for the rest of the world to follow,” he says.
In September, Wuxi hosted the Internet of Things (IoT) World Expo, which AstraZeneca will attend to increase its knowledge as well as to showcase some of the latest thinking in healthcare connectivity. For example, in China if you have diabetes and you go into a hospital to get treated, the patient might need to visit five or six different departments within a hospital to get their glucose, cardiac and renal tests done.
Mallon says the IoT allows the currently fragmented hospital departments to be brought together digitally, connecting the different diagnostic tests so that physicians can have everything in one place and make it mobile.
AstraZeneca is just one of several multinational pharma companies working with China’s homegrown tech companies. Earlier this year, it unveiled new partnerships with tech giants Alibaba and Tencent to increase the accessibility of the ‘patient-centric’ disease management process, from prevention to diagnosis and treatment through to recovery, by applying more cutting-edge technologies.
The next phase in its partnership with Alibaba will further integrate AZ’s IoT- based health innovations into the country’s emerging ‘smart cities’ infrastructure.
The company is working with Tencent and its instant messaging platform, and is now expanding this collaboration to harness the power of big data-driven tech to crack down on the online sale of counterfeit medicines, as well as an online medicine safety management programme, as part of a larger smart healthcare push.
Understanding China’s culture
I asked Mallon what’s the one thing about China – its culture and its healthcare – that outsiders most commonly do not fully understand at first contact?
“Perhaps some people, on their first visit at least, would be surprised to see how quickly China has reached the forefront of the digital revolution, particularly when it comes to mobile devices and the IoT.
“There is a very high degree of connectivity and China has created an environment where technology companies, digital companies, healthcare companies, hospitals and physicians can come together to leverage all of those capabilities.”
The success of AstraZeneca has inevitably seen others looking to emulate the company, whether they are foreign-owned or home-grown companies. In June, AstraZeneca’s oncology sales leader in China, William Liang, left to join Zai Lab as chief commercial officer. Liang had been instrumental in building up the company’s China sales force to 2,000 people and oversaw the successful launch of Tagrisso in the country.
Nevertheless, there is no doubt the company is on a roll in China, led by the experienced Leon Wang, executive vice president for the International region at AstraZeneca, who has been leading its growth in China and the wider region since 2013.
One of its latest launches in the country is Farxiga, its contender in the SGLT2 inhibitor diabetes market.
While it didn’t make the cut onto the revised China’s national reimbursement drug list earlier this year, the company has secured reimbursement in seven provinces, with discussions continuing in a number of other regions.
Other key launches will include Lynparza, its ovarian cancer treatment, now co-marketed globally with MSD. AZ isn’t a frontrunner overall in lung cancer immunotherapy – MSD consolidated its global lead by gaining a groundbreaking approval of Keytruda in China in July – but AZ has an ace up its sleeve. Its Imfinzi has secured the first-ever US and EU approval in locally- advanced, unresectable non-small cell lung cancer – a potentially game-changing early use which could have enormous potential in China.
Finally, a data readout for roxadustat is expected by the end of 2018, and regulatory submission in the first half of 2019.
To conclude, there is no doubt that the US, Europe and Japan remain the lead launch markets. But this could change gradually over the coming decades – and AZ will be among the best-placed to take advantage of this major shift.
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