Pfizer courts AstraZeneca – Can their supply chains cope?

The pharmaceutical industry continues to undergo changes as it faces rising cost pressures thanks in part to patent expirations and regulatory changes. As such, unprofitable divisions are being shed while many companies expand capabilities and move further into new geographies.

To achieve these goals, companies are participating in what is one of the most active life science mergers & acquisitions environments in quite some time. According to one news source, On April 22 alone, pharmaceutical manufacturers unveiled $74bn worth of potential deals. In addition to this, US-based Pfizer confirmed its intention to acquire UK-based AstraZeneca. If successful, this acquisition would be valued at almost $100bn and the combined entity would become the largest pharmaceutical manufacturer.

According to Pfizer CEO, Ian Read, the combined company would not only create the world’s largest drug company but it would also bolster Pfizer’s portfolio of drugs as well as its presence in emerging markets and delivering “significant cost synergies”. “This is something that society is requesting of the pharmaceutical industry: They want products faster, and they want more products, and they want value,” he said.

In order to achieve more products quicker and at a value agreeable to consumers, the supply chain will need to be in alignment to meet these needs. Is it possible? Both companies have made significant cost reductions through closing and relocating manufacturing facilities while expanding into emerging markets. China is seen as a strategic emerging market for both companies. Among its activities in this country, Pfizer and China’s Zhejiang Hisun Pharmaceuticals created a joint venture, Hisun-Pfizer Pharmaceuticals, to manufacture and sell generic drugs – branded generics account for 70% of the domestic market. Meanwhile, AstraZeneca is considered the largest multinational pharmaceutical company in China with sales consistently increasing in the double-digits.

Both companies have also stressed simplification by reducing the complexity of operational structures, outsourcing, realigning divisions and adopting technology improvements. A combined entity managing these strategic moves is certainly a daunting task but an achievable one.

However, despite the possible synergies, AstraZeneca continues to turn down Pfizer’s acquisition discussion and in fact the possibility of such a merger has dawn concerns in the UK where AstraZeneca employees 7,000 and accounts for 2.3% of the country’s goods exports.

For logistics providers that offer healthcare logistics solutions the possibility of such a merger would certainly mean one less pharmaceutical company, but also perhaps additional opportunities in not only emerging markets but also within mature markets in Europe and the US.

Ti’s latest report, Global Healthcare Logistics, looks at the changes and trends within the healthcare industry and their effects on the logistics market. To learn more, please contact Ti’s Sales Manager, Leon Morris at [email protected].