AZ blames UK tax for Ireland API plant decision

By Ben Hargreaves

- Last updated on GMT

© Getty Images
© Getty Images

Related tags Astrazeneca Pharmacology Pharmaceutical industry API Active ingredient

The company’s CEO stated that a ‘discouraging tax rate’ was behind the decision to build a $360m API plant in Ireland rather than the UK.

The comments by Pascal Soriot, CEO of AstraZeneca, were made in light of the company’s fourth quarter financials, and drew attention to the current investment landscape in the UK.

Soriot was explaining the company’s decision, announced back in 2021, to build an active pharmaceutical ingredient (API) manufacturing facility for small molecules near Dublin, Ireland. The decision represents a $360m (€336m) investment for the company.

According to the Financial Times​, the CEO stated that the company had wanted to make the investment in the UK, where it already has an established presence with multiple manufacturing and R&D sites, as well as being the home of its headquarters.

However, Soriot cited the “discouraging tax rates” within the country as a disincentive to invest in the UK, leading to the decision to base the facility in Ireland instead.

In the most recent application details for the facility​, AZ revealed that it plans to build a five-storey API manufacturing building. The company also expects to build a two-storey chemical materials store, and a four-storey laboratory building, among other plans.

The API manufacturing building alone is expected to cover 10,000-square-meters, and is projected to create approximately 100 jobs.

On a fourth quarter call with investors, Aradhana Sarin, CFO of AZ, stated that the company’s capital expenditure in 2022 came to $1.1bn due to investment in manufacturing capacity, R&D equipment and the integration of Alexion. In 2023, the company expects this expenditure to be higher again.

Drug pricing raises its head

In further comments, the CEO outlined, “We really have invested a lot and the country was making a lot of progress building a life sciences sector. I have to say in the recent past [it] has not been as supportive as we would have hoped.”

The recent past refers to the voluntary scheme for branded medicines pricing and access (VPAS), which marked an agreement between the UK Department of Health and Social Care and the Association of the British Pharmaceutical Industry (ABPI) made in 2019.

The agreement is now a point of contention because it limited the price increases each year for branded drugs, but this did not take into account the increased demand for treating patients that occurred with the arrival of COVID-19. As a result, pharma companies in the UK are expected to pay back increasing amounts on drug sales. 

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