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Executive Summary


AstraZeneca sees similarities with China in the Russian market and is hoping to replicate its success there, says global product and portfolio strategy head Mark Mallon.

 


"There is substantially more we can do in China," Mark Mallon tells Scrip in an interview. "It is being driven by the fact that the unmet need is so great. Sometimes it's hard to get your head around how big the opportunity is."

He also sees "a lot of similarities in Russia, and we're taking a similar approach."

In its full year and fourth quarter 2016 results, AstraZeneca PLC saw emerging markets grow 6% (Q4 2016: + 7%) to $5.79bn, with China up by 10% to $2.64bn. (Also see "Cancer Programs Critical For 'New AstraZeneca' As Price Pressure, Regulatory Changes Loom In 2017" - Scrip, 3 Feb, 2017.)

AstraZeneca is now the second largest pharmaceutical company in China, with Pfizer Inc. the largest. However, Pfizer reported a drop in its overall emerging market revenue from $11.14bn in 2015 to $10.42bn in 2016, although operationally, revenue grew by 7%.

Meanwhile, AstraZeneca has consistently delivered a double-digit growth rate in China, outpacing the market growth rate. So what are some of the factors behind its success in the country?

 

 

Secrets To Success

 

"Many companies see China as a priority and are making investments in commercial operations, in manufacturing, and in R&D," notes Mallon. "What distinguishes AstraZeneca is that, first, we're very focused on developing our local talent. We've got a great leadership team, a great team across the whole organization."


Indeed, Mallon sees investing in local talent as one of the company's long-term strengths ‒ "it really makes a difference."

A second distinguishing characteristic is "we're in this for the long haul, so as the China market goes up and down, we don't pause. There's been a couple of periods where the industry as an aggregate ‒ such as when there were some setbacks in 2013 ‒ stopped their medical education programs. They stopped, and we didn't. So in those periods we created quite a bit of an advantage for ourselves."

The last point is that AstraZeneca is positioning itself as a "local multinational," explains Mallon. "We've created the capabilities to do drug discovery, and Phase I through Phase III development, in China, with product manufactured from the earlier stages. In China there is a local pathway that allows for companies to get priority review and through regulatory processes, and even reimbursement processes. We've got a couple of medicines already in this local pathway.

“There are only a couple of other companies, if any, that have this same capability. And we can do this for both biologics and small molecules. That is a big differentiator for us."

AstraZeneca is hoping for potential approvals for both Tagrisso (osimertinib) and Forxiga (dapagliflozin) in China in 2017.

 

 

Russian Approach

 

The company is aiming to be able to apply the same formula for success in another key emerging market, Russia. “As in China, there is a big commitment to healthcare in Russia, even with the challenges they face, because it is a priority for the population," Mallon explains.

“Again the key for us is we've got a local team, we're really committed to being a ‘local multinational’ [in Russia]” – Mark Mallon, AstraZeneca
"So we have a strong commercial organization, with more than 1,000 employees. We are focusing on our growth platforms in our core disease areas and focusing on medical education, better patient diagnosis, and getting the country up to the standards of care,” Mallon says.

But it’s not just about commercial investments, the executive stresses. "We have just opened up a large manufacturing facility just outside of Moscow, which is probably the premier manufacturing facility in Russia across local and global companies. We do clinical research there. We are starting to do more partnerships with the local investigators and KOLs to support their own research.

“It's a big country, [with a] big commitment to healthcare and the value of innovation. And again, the key for us is we've got a local team, we're really committed to being a ‘local multinational’, so we're making investments in manufacturing and in clinical research, trying to make the biggest difference we can for Russian patients."

 

 

Remaining Challenges

 

There are also challenges to making a success of the Russian market, but Mallon says these are the same that are seen in many emerging markets.

"Wherever the government is paying for healthcare, they're putting pressure on pricing, they're expecting more local [involvement]. There are requirements for products to be manufactured locally, or they give more advantages to local companies, so we have to navigate that," the executive says.

In addition, "the regulatory review processes may not be as well established and mature [as developed markets] as they just don't have the resources, so timelines can be challenging, and of course there is a natural volatility in emerging markets."

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