AstraZeneca plans to spend about $450 million building a factory in China making inhalers to treat "smoker's lung", doubling down on the world's No.2 pharmaceuticals market as the drugmaker predicts only "minimal" sales of its COVID vaccine this year.
China is home to about 100 million patients with chronic obstructive pulmonary disease (COPD), the third leading cause of deaths in the country, the Anglo-Swedish company said.
Smoking and air pollution are the main causes of the illness, sometimes also called emphysema or chronic bronchitis, according to the World Health Organization.
"It's incredibly common in China as people smoke ... but it's not very well diagnosed or treated," said AstraZeneca CEO Pascal Soriot on a call with media following the release of first-quarter results.
In addition to the site in Qingdao, in the eastern province of Shandong, AstraZeneca is also setting up a research and development centre in Guangzhou with an academic centre to boost diagnosis and treatment of chronic respiratory diseases.
The news comes after Beijing lifted COVID restrictions late last year, reviving demand for healthcare as patients sought treatment and medicines after prolonged lockdowns.
The company has forecast revenue from China, which accounted for 13% of total sales in 2022, will grow by a low single-digit percentage this year.
French rival Sanofi said on Thursday sales in China decreased 14% to 755 million euros ($833 million), reflecting a COVID-driven slow start to the year.
For AstraZeneca, the investment also reinforces its focus on core areas of cancer, rare and respiratory diseases, after its foray into developing and making the COVID vaccine with Oxford.
The vaccine became its second best-selling product in 2021, but the business has quickly fizzled as it struggled to compete with the dominant shots made by rivals Pfizer and Moderna.
First-quarter sales of its COVID vaccine and therapy plunged to just $155 million from $1.5 billion over the same period last year.
Soriot just returned from a more than two-week trip to China, where he saw signs the world's second-largest economy was recovering.
"The economy is restarting. Demand in our industry has been recovering rapidly actually and we see growth across all our products," he said.
AstraZeneca recently signed three licensing deals with Chinese companies, he said, a sign that China was increasing access to foreign companies.
"We definitely could make acquisitions," he said, adding that he didn't see geopolitical tensions between China and Western countries as a challenge for the industry.
He said the government was very clear last month, at both the China Development Forum and the Boao Forum, that it is open for collaboration with companies in the country and abroad.
He didn't elaborate, but the Chinese government typically prefers foreign companies to do joint ventures with local firms.