“The lights of European antibiotic production are going out”

Business News

The generic giant is talking about a cheap glut from Asia – and wants to soon supply the US Army with antibiotics.

Pascal Michel / ch media

Richard Saynor is known for clear statements. When presenting the annual figures, the Sandoz boss followed his call. He warned that “the lights of European antibiotic production are slowly going out.” He referred to Roche’s recent decision to sell its antibiotics plant in Kaiseraugst AG. “This is an early warning sign,” says Saynor. Roche had explained that an antibiotics factory in Switzerland was simply no longer profitable.

The Basel-based generic giant Sandoz, with its factory in Kundl, Austria, is one of the last companies in Europe that still produces the vital penicillin from scratch. Penicillin is one of the most important antibiotics. Saynor said they were aware of their responsibility. But in the long term you can’t produce a product without spending money on it. “There is therefore a need for an honest debate about pricing in order to secure supplies in Europe.”

Dumping wave from Asia

The antibiotics business has been under pressure for a long time. This is due to low prices and competition from Asia. Recently the situation has become even more serious. Chinese producers are currently flooding the European market with antibiotics at dumping prices. This is a result of US tariffs on Chinese products.

Since then, China has been redirecting its flow of goods and, in particular, is throwing the important penicillin base ingredient onto the European market at massively lower prices. This affects Sandoz directly because the company also sells this basic product to corporate customers. Sandoz CFO Remco Steenbergen estimated last year’s loss at $100 million, or 1 percent of sales.

While Europe is sleeping here from the industry’s perspective, the Trump administration seems to have recognized the urgency. There is a solid reason for this: the US armed forces get the majority of their antibiotics from Asia. If, for example, China stops deliveries due to a conflict, the US Army will be missing a vital medicine.

That’s why the USA is now examining alternatives, including from Europe. As Saynor said, Sandoz is offering to supply the Americans with the penicillin base ingredients from the Austrian plant. In this way, the US military could reduce its dependence on China and India. “We are having good discussions,” said Saynor, without giving further details.

Aside from the penicillin problems, the Sandoz boss can look back on a positive year. The generic giant had sales of $11.08 billion. This corresponds to an increase of 5 percent after adjusting for currency effects. The majority of revenue came from generics. Biosimilars are becoming increasingly important for Sandoz. Sales there grew by 13 percent. Biosimilars are copies of drugs produced using biotechnology. Sandoz estimates profit before taxes (Ebitda) at $2.4 billion (+13 percent). For the current year, the company expects sales growth in the mid to high single-digit percentage range and a further Ebitda margin improvement of one percentage point. (aargauerzeitung.ch)