AstraZeneca CFO Talks Tariffs, Forward Guidance, Earnings

AstraZeneca is a posterchild of the UK stock market as Britain's largest listed company. So it's telling that it too is warning that there is a risk a trade war could damage both its bottom line and its drug development Bloomberg's Caroline Hepker and Stephen Carroll spoke to the pharmaceutical giant's CFO Aradhana Sarin as the company posted its first quarter earnings figures.

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Episode Transcript

Speaker 1 (00:00):
The medicines that we provide are essential medicines, whether it's
an ecology or rare diseases or cardiovascular So there is
a public health element here and drug shortages and things
like that that one needs to take into account, you know,
if any tariffs were to be to be implied. And

(00:22):
then also one has to take into account the fact
that manufacturing and supply chains are not a lift and shift.
You know, these are highly complex manufacturing supply chains and
they need to be regulated and quality controlled and approved
by the FDA, etc. So there's also a time element

(00:45):
to moving supply chains.

Speaker 2 (00:47):
President Trump there has repeatedly said that TE plans to
apply levies to the pharmaceutical sector, although it seems to
seems to be paused for the moment. If there are
US tariffs on imputed meds into the US, who pays?
Is it companies? Is it US consumers? You just mentioned
how complex it would be for firms like Astra Zeneca.

Speaker 1 (01:08):
Yeah, so I would say, you know, again, every company
is different. We're actually in a very fortunate position for manufacturing,
so we have thirty one manufacturing slits globally. Over the
last several years, we've actually been manufacturing, investing in manufacturing
separately in China, you know, in the US, in Europe

(01:32):
and our manufacturing is fairly segregated. So the product we
manufacture in China is for China and emerging markets, and
we have eleven of those thirty one manufacturing sites in
the US. The vast majority of the product that we
that we sell in the US is actually manufactured domestically.

(01:52):
There is a minority of product that we do import
from Europe into the US. However, as you know, for
pharmaceutical product, we always maintain dual sources of supply, so
that will require you know, if there were caraffs put
on Europe, that would require some sort of measure of

(02:15):
changing those supply chains. But that's a process that we've
already started to rebalance the amount that comes from Europe
versus the US for those minority of products.

Speaker 2 (02:27):
Pascal Soyo, who was speaking to Bloomberg, also talked a
bit about the innovation in your sector, the innovation being
mostly paid for by America, Europe and mitture countries have
to invest more in farmer innovation. Was his message that
the model is unbalanced. Too much funding in the United States.
Do you expect more investment in drug innovation in Europe. Now,

(02:50):
President Trump's push in the defense sector move the needle
significantly on spending. Will it do the same in the
farmer industry.

Speaker 1 (02:59):
Well, that's our hope, but obviously it's not for me
to comment on. I think Pascal has also talked about
this concept of health sovereignty, and it's both from making
sure that patients in Europe have access to the best medicines,
the best innovation in a timely manner, and that's important

(03:22):
for the patients and the citizens of that country, but
also that Europe maintains and spends more on innovation and
innovative drugs, and that will attract more investments in R
and D and more investments in manufacturing and so forth.
So I think it is in the best interest of Europe,

(03:43):
but obviously that's a policy matter and budget matter that
they'll need to consider.

Speaker 2 (03:48):
As to drop to plan four hundred and fifty million
pounds investment here in the UK at the start of
this year, Chance of rahel Reeves then called Astra one
of the great companies. You said that in January as
she was setting out her plans to try to kickstart
the UK economy saying she was determined to make Britain
the best place in the world to invest. Are you

(04:09):
seeing any benefits at all that you could point to
of this attitude from the government, the need for more
economic growth, of focus on growth as the Labor government
has talked about.

Speaker 1 (04:20):
Uh not yet, So we haven't really seen any of
that yet. I think bescal And has often mentioned an
example of this, which it relates to in her two
which I would say, you know, has one of has

(04:40):
been one of the key innovative drugs in breast cancer,
probably the best innovation in the last twenty years as
it relates to breast cancer, and that is not reimbursed
in the UK. So, you know, it's industrial policy is
obviously one thing, but obviously access to medicines is also

(05:03):
important because you know, if you think about where we
do our studies and where we invest R and D investment,
you know, eventually at the end of all of that,
we do want patients in that country to have access
to medicine. So you know, if we spend all the
money in research and then patients don't benefit in that country,
that's very disappointing.

Speaker 2 (05:25):
Yeah, So perhaps NHS patients in the UK missing out
on that. In terms of vaccines, the takeup of important
vaccines also is falling in the US and here in
the UK and worldwide. I want to ask you about
the MMR vaccine, the measles, mumps and Rebella vaccine. Are

(05:47):
you concerned at astra about the decline in vaccine take
up in the US and the UK.

Speaker 1 (05:53):
So we don't actually supply vaccines, either childhood or adult vaccines,
so we're not really in the vaccine business. So from
a business standpoint, we we don't really have any concern.
I know it's a public health issue obviously that needs
to be addressed.

Speaker 3 (06:15):
Coming back to some of the diversification of your supply
chains that you mentioned earlier as well from a cost
point of view, At a financial point of view for
the company, what is the added cost of producing in
a siloed sort of fashion that you described versus the
more integrated global supply chains.

Speaker 1 (06:32):
You know, it's hard to say, you know, which is
more efficient because again every product is different. Components for
manufacturing do come from from different places. But you also
have reduced shipping costs for example, you know when you
have more segregated supply chains. But I also when I

(06:56):
talked about moving some of the supply and manufacturing from
Europe to the US. We already have, as I said,
eleven manufacturing sites, and many of them actually have additional capacity.
So it would be, you know, some incremental investment for US,
but you know, very from a marginal standpoint, it would
not be a lot of investment.