The firm plans to increase its API outsourcing, following "the general trend within the pharma sector," Marc Jones, VP Global External Sourcing, AstraZeneca, told Outsourcing-Pharma.com.
China is set to play a starring role in this strategy, as the company pushes forward its current "in China for China" strategy towards an "in China for global" strategy.
As part of this it is planning to make its sourcing centre in China eventually account for 90 per cent of all its global purchases.
In addition to China, AstraZeneca also has a sourcing centre in Bangalore, India, although currently these two centres contribute to no more than 10 per cent of its global sourcing.
The firm set up a dedicated sourcing centre in Shanghai at the beginning of this year, which will source APIs and chemical intermediates, along with other outsourcing products and services (e.g. packaging materials, contract R&D services, laboratory equipment and chemicals, contract formulation and packing) for AstraZeneca's global business.
To clarify the nature of its sourcing centre, AstraZeneca told Outsourcing-Pharma.com that "outsourcing is when we have made a decision to source a material or product external to the company.
Sourcing is also an activity where we look for a source of the material or product.
There are normally several sources and we go through a process to establish which one best suits our needs."
"To establish these outsourcing contracts we need people to work on this and identify suitable contractors, draw up contracts, establish technical exchange etc.
We have set up small groups of staff in both China and India to do these tasks and we refer to these groups as sourcing centres - i.e. they source the products from contactors."
The company, which currently spends $9bn (€6.6bn) a year on purchasing, said it will use the China sourcing centre to make purchasing savings of 10 per cent over the next three years.
The centre, which has so far made $25m worth of purchases, will be ramped up to achieve total purchases valued at $100 million in 2010, the firm said.
Currently, AstraZeneca produces 85 per cent of its APIs at its own manufacturing sites and outsources the remainder, however, as part of its new Asia strategy, the firm will is now " moving to exit making APIs in our own plants over the next 5 to 10 years," said Jones.
"The first step will be to exit API production in the UK at Macclesfield and in Plankstadt in Germany, although we would still have manufacturing capabilities in the medium term in Sweden, which is being downsized, and Avlon, near Bristol, and Dunkirk."
The firm did not comment on what it would do with the sites where it was caesing API manufacturing.
What it did say was that: "Outsourcing for APIs will give us flexibility going forward.
Our plans in China and India are embryonic but we see this as the way forward."
AstraZeneca has been dipping its toes in Asian waters for some time.
The firm established an Asia Programme Team in early 2004 in India and China to identify and evaluate suppliers; provide support to local people on the ground; develop processes, agreements, make risk assessments and manage relationships; and identify, influence and execute projects.
However, until more recently, the company's sourcing from India and China was ad hoc, limited to specific (usually old) products, Steve Fishwick, director of API Projects and Asia Programme Global External Sourcing at AstraZeneca, said while presenting at a parenteral drug association (PDA) meeting in October last year.
"This was found to be an inconsistent and inefficient way of working, experiences were variable, and learning was not shared or acted upon," he said.
Now the firm is routinely sourcing APIs and intermediates from India, and from China to a lesser extent, although as the firm has indicated, this is set to change dramatically.
The company has already increasing its sourcing in China and recently signed an agreement with a manufacturer there for lactam, one of the APIs in Seroquel (quietapine).
Drivers for the gravitation towards China are the lower cost of goods, lower investment costs, shorter lead time and the access to the Asian talent pool, said Fishwick.
"Sourcing may reinforce AstraZeneca's position in emerging markets," he added.
In addition, improvements in intellectual property protection and the quality of manufacturing in China, as well as government and regulatory body attempts in the country to improve the business environment and conduct within the pharma industry, has also attracted the firm to cement itself there.
Although AstraZeneca has taken quite a large leap in the direction of outsourcing to Asia, it is one of a number of large pharma firms starting to adopt outsourcing strategies in the region, as they feel the squeeze from skyrocketing R&D costs and product price pressure.
Late last year Pfizer CentreSource decided to outsource the manufacture of some of its APIs to two Asian contract manufacturers, enlisting the firms, ScinoPharm of Taiwan and Shanghai Pharmaceutical of China to "enable more cost-efficient API production" and the two firms added manufacturing capacity to deal with the new contracts.
Pfizer said it would transfer the late-stage processing of 18 steroid API and intermediate products to the new manufacturing partners in three phases over the next four years, beginning with the commodity APIs that involve the less sophisticated chemistry first.
"Outsourcing these finishing steps will prove very beneficial for us as these steps are very costly to conduct currently in our US plant," spokesperson for Pfizer CentreSource global contract manufacturing division, Carlos Fernandez, told Outsourcing-Pharma.com at the 2006 CPhI show in Paris.
"We will soon be able to bring more competitively priced steroid APIs to the global market and we expect the first of these to be available on the market by early 2008," he said.
The firm said it will still continue to do the early-stage bioconversion operations at its US plant in Kalamazoo, Michigan.
"We wanted to keep the more technical and complex early-stage processes in-house," said Fernandez.