Big Drugmakers Warn About Coronavirus Impact on Business

Some of the world’s biggest drugmakers have begun warning that their businesses could be affected by the spread of the coronavirus.

Source: WSJ | Published on March 3, 2020

Cropped shot of a pharmacist using a digital tablet in a chemist

AstraZeneca PLC, Merck & Co. and Pfizer Inc. are among the companies that said recently the epidemic could affect supplies for certain drugs or sales, depending on how long the epidemic lasts.

To get ahead of any disruptions to supplies from China, some pharmaceutical companies have begun looking for alternative sources of drug ingredients and supplies, according to industry officials and experts.

Drugmakers have begun discussing the potential impact after saying for weeks they were monitoring their distribution lines and had sufficient supply. Companies typically avoid discussing their supply chains, but they have been under pressure from Wall Street to provide more information as the epidemic spreads, especially since it started in China, a major source of drug ingredients and a fast-growing market for medicines.

“Our whole industry is in one way or other way connected with China, but you would expect us to be much better placed,” Mylan NV President Rajiv Malik said Thursday on a conference call with analysts and investors.

Some Mylan products could be in short supply if “the situation persists” for another few months, Mr. Malik said. He said Mylan’s top 25 products don’t depend on China, however, and expressed confidence in the company’s ability to employ alternative sources for drug ingredients.

Pfizer said in a filing on Thursday that the virus could hurt its operations, including manufacturing and supply chain, and could negatively impact its financial results but that it depends on future developments of the outbreak.

Pfizer said the majority of its products and raw materials are sourced from countries besides China, but some does come from China, though the company said it hasn’t seen a disruption to supplies so far.

Teva Pharmaceutical Industries Ltd. bases its manufacturing network for its drug ingredients, known as active pharmaceutical ingredients or API, out of Europe and India, not China, according to Chief Executive Kare Schultz.

“We do use some raw materials and APIs that come out of China [but] in some cases we have dual supply so if we can’t get materials from China we can get them from somewhere else,” he said in a recent interview.

The threat that the novel coronavirus poses for prescriptions has renewed a cause for concern because of China’s role as a big supplier of drug ingredients.

“There is no such thing as a simple supply chain anymore,” said Steven Lynn, a former FDA official who consults with drugmakers on quality and compliance. “Things are coming from all over the world. If one part of that breaks down, then you’re scrambling.”

The Food and Drug Administration said Thursday a drug has gone into shortage because of difficulties obtaining an ingredient from a site affected by the coronavirus. It didn’t disclose which drug or its manufacturer.

How much multinational drugmakers depend on China-sourced ingredients is unclear. Policy makers often cite a figure that 80% of drug materials are imported overseas, but the FDA said it can’t track how much is from China.

China has also emerged in recent years as one of the biggest markets for some major drugmakers. Drug sales in China totaled $137 billion in 2018, and are expected to rise 3% to 6% annually for the next several years, according to health-care data firm Iqvia.

AstraZeneca generated 21% of its sales in China last year. Releasing its forecast for 2020 performance, the company said last month it expects an unfavorable impact from a slower China business lasting up to a few months due to the novel coronavirus.

Merck said in a securities filing Wednesday its first-quarter sales will suffer due to the epidemic in China, although not enough to be material. It said it was unclear if the outbreak will affect sales for the rest of the year.

Merck also said the epidemic has had a limited effect on its supplies of raw materials coming from China and ability to ship medicines into the country.

The pharmaceutical supply chain potentially faces additional disruption in other countries given how global the industry has become, industry officials said.

Some Chinese firms stopped shipping to manufacturers in India because of the outbreak, the Journal has reported. The Indian generic-drug industry, which the FDA says supplies 40% of U.S. generic drugs, relies on China for much of its active ingredients.