The rise and rise of AstraZeneca

Remember AstraZeneca? They were the superheroes of the pandemic, coming to the rescue with their relatively safe and uncontroversial vaccine in the depths of the second lockdown of winter 2020-21, simultaneously justifying the Government’s serendipitous investment right at the start of the coronavirus outbreak. If there was a British success story among the general failures, it was “AZ”.

Since 2020, the firm has only grown, and is now one of the biggest in Britain by market capitalisation. Indeed, AZ enjoys an ever stronger position among the American-dominated giants of Big Pharma. This one’s not based in Connecticut or Cincinnati, but in Cambridge (UK). Its suave CEO, Pascal Soriot, was paid nearly £15 million last year. The company took in just over $54 billion last year; executives aim to take revenues to $80 billion by 2030. We shouldn’t forget about AZ, despite their esoteric medical acumen and strangely-named drugs.

What’s behind the success? Cancer care is the primary source of growth in revenue. Total oncology sales last year rose 21%, to around £18 billion. This is, naturally, driven by great strides in research and development (R&D). Improved results for its breast cancer drug Enhertu drove up revenue for that product: sales hit almost $2 billion, up 54% last year. Those at the top of the business insist that this is ahead of expectations for the market as a whole. Shareholders are happy.

Success during the pandemic also led to some important acquisitions. AstraZeneca took over the huge American firm Alexion Pharmaceuticals in July 2021 – they specialise in treatments for rare diseases, often providing extremely expensive treatments. The next year they took over Teneo Two, a firm developing treatments for hematological cancers. This diversifies their sources of revenue, and their attractiveness to investors. This expansion, with great ambitions in store, makes AstraZeneca a British behemoth. This matters, for three reasons.

The first is legal. AstraZeneca has been very successful at maintaining its monopolistic hold over certain markets in emerging treatments. Last week, I had a day in court listening to a case between AstraZeneca and a number of its competitors at the Intellectual Property and Enterprise Court (IPEC) in London. The case concerns the patent which AstraZeneca had held over a drug for treating type 2 diabetes, the attractively-named dapagliflozin. In corporate terms, it’s called Farxiga, and is one of AstraZeneca’s most highly valued drugs. In 2023, the firm reported almost $6 billion in revenue for the drug; in Britain alone, its is worth over £200 million per year. The general market for drugs treating type 2 diabetes is growing rapidly. Competition is fierce, from firms such as Glenmark and Teva.

At the hearing, those two latter firms were represented by a panoply of lawyers, whereas AstraZeneca’s team was a much smaller crew. Why was this? Confidence, it seems, as AZ were on a successful run. Their case against Teva and Glenmark concerned the monopoly they hold, until 2028, over Farxiga: their competitors want to introduce a “generic” product into the market. Judges have had to decide whether this would constitute “irreparable harm” to both AZ’s profits and to their relationships with the community pharmacies and wholesalers upon whom their trade relies.

At the end of the day’s hearing I attended, the verdict was that such competition would do just that. Moreover, AZ accused their competitors of “jumping the gun” in pressing their case and failing to give their monopolistic competitor due notification of their attempts to break the monopoly. In March, AstraZeneca lost, as Judge Michael Tappin dismissed their case for an interim injunction against their competitors. Only a few weeks later, the appeal was heard; this time AZ was successful. Until the “revocation proceedings” are heard, the status quo will be maintained. Thus far, one of the biggest of “Big Pharma” is winning. Its status, though, is heavily contested.

The second reason why AZ’s rise matters is a global one. The firm has epic ambitions for its expansion into China, geopolitical risks notwithstanding. There has been talk of up to $10 billion of investment, with $2.5 billion already declared. This comes in the face of compliance problems in the country: a former senior executive in China, Leon Wang, was arrested for alleged insurance fraud late last year. However, President Trump’s tariff wars have not left it untouched, either. Production of medicines sold in the American market is being moved to the United States. Big Pharma is usually protected from tariffs generally; in 1995, the World Trade Organisation agreed a scheme by which global medicine could be kept relatively affordable. However, it is clear that the focus of AZ’s research and development programmes, as well as its manufacturing investment, is now more polarised. The very different regulatory environments of the US and China are where that investment is going. And that leaves Europe somewhat stranded.

This leads us on to why AZ’s unusual success matters for Britain. If there was a sector in which British government policy has worked over the last forty years, it’s in the nexus of scientific research and Big Pharma. Cambridge and Oxford are international hubs of research, which should be better linked together to maintain high levels of investment. AZ’s biggest British competitor is GlaxoSmithKline, a slightly smaller company. They are, however, better tuned in to the state-funded R&D programmes pushing this money out of London. In January this year, GSK announced a collaboration with Oxford on an £50 million project for preventing cancer by vaccination. In the same month, AZ declared that it was scrapping plans for a £450 million investment in a Merseyside plant for the manufacture of vaccines. They blame the government for reneging on a funding pledge. The decision came two days after Rachel Reeves’ latest lacklustre attempts to harness “further and faster” economic growth.

If AZ gets anywhere close to its $80 billion target by 2030, it will be one of the biggest players in the world economy based in Britain. It still employs around 10,000 people in this country, and seems happy to keep using the UK’s well-regarded courts to uphold their hegemonic position. But in the increasingly polarised global markets, there is a choice to be made between America, Asia and Europe. And, somewhat isolated from those three and at the mercy of geopolitical calls from Beijing and Washington, the UK can easily lose out. Perhaps the Labour Government should be more honest about its qualms on Big Pharma. There are legitimate concerns. If the Government is true to their relentless lust for growth, however, they will have to put them aside. Britain loses too much from letting these firms out the back door. Voters, too, shouldn’t be allowed to forget AstraZeneca and the complicated but undeniable importance to the economy of Big Pharma. Perhaps dapagliflozin should be as big a talking point as drones.

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