In this article, we will be taking a look at the top 10 drug companies in USA and their China reliance. To skip our detailed analysis of the pharmaceutical sector, you can go directly to see the Top 5 Drug Companies in USA and Their China Reliance.
The US has long been reliant on China for the upkeep of several industries. The most notable of these industries are the semiconductor and healthcare sectors. With the outbreak of the coronavirus pandemic, America’s widespread reliance on China became increasingly evident because of a sharper light being shed on US-Chinese manufacturing and supply chains. With the pandemic first breaking out in China and reducing exports from the Asian country to others, shortages of critical medical supplies in the US made the latter’s heavy reliance on the former clearer than ever.
Top US drug producers such as Johnson & Johnson (NYSE:JNJ), Pfizer Inc. (NYSE:PFE), and AbbVie Inc. (NYSE:ABBV) were found to be just as heavily reliant on China as smaller medical companies. Many American drug companies have manufacturing and supply chain infrastructure set up in China, causing this reliance. According to a report published by the Economic Commission for Latin America and the Caribbean in 2021, the US imported about $105.32 billion worth of medical products and equipment, including medical imaging, diagnostic, and oxygen therapy equipment, in 2019 alone. China was recorded as the second-largest supplier of these products and equipment. During the first nine months of 2020, pharmaceutical imports from China to the US increased by 46%, with 69% of the imports being active pharmaceutical ingredients and 27% of the imports being pharmaceutical preparation products.
President Biden has been taking steps to curb the US reliance on China when it comes to the healthcare sector and elsewhere. In September 2022, Biden signed an executive order to boost domestic manufacturing in the biotech sector to increase American self-sufficiency in this area. However, it is unclear how this objective can be attained since China is a major manufacturer of active pharmaceutical ingredients to India, which is conversely a major supplier of generic drugs to the US. Ever since China acceded to the World Trade Organization in 2001, it began focusing on economic growth through the expansion of its pharmaceutical industry. As a result of this, the country devoted itself to producing basic chemicals and active pharmaceutical ingredients. Consequently, it is unsurprising that the country today is a lead supplier of these ingredients by volume in the global market. In some markets specifically, China has increased its share of the US import markets. For instance, the market for penicillin saw an increase in the Chinese share from 1% to 51%, while the antibiotics market saw an increase of the country’s share from 15% to 37%. This increase occurred over the 10 years preceding 2021. As the situation currently stands, it will be difficult for the US to disengage itself from the Chinese manufacturing and supply chain infrastructure. Hence, many major American companies have a huge stake in the Chinese pharmaceutical market, leading to their increased presence in the country.
Photo by Christina Victoria Craft on Unsplash
Let’s now take a look at the top 10 drug companies in USA and their China reliance.
Our Methodology
We have selected pharmaceutical companies in the US with the highest revenues in the sector as of 2021 and a strong reliance on China. They are ranked based on these revenues, from the lowest to the highest. These companies are heavily reliant on China since they source a variety of their raw materials from the country. They also have a large presence in the Chinese market, making China one of their most profitable consumer markets to date. We have also mentioned analyst price targets and ratings for the stocks of these companies. In our list below, we go over key business fundamentals for these companies as well, such as their latest profit margins.
Top Drug Companies in USA and Their China Reliance
10. Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN)
Total Revenue in 2021: $16.07 billion
Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) specializes in developing and commercializing drugs for the treatment of medical conditions such as cancer, eye diseases, and inflammatory disorders. Its top-selling drugs include Dupixent and Eylea.
On January 31, Tyler Van Buren at Cowen upgraded Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) shares from Market Perform to Outperform. The analyst also placed an $875 price target on the stock.
Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) expects its Dupixent sales to reach almost $11 billion in 2023, representing an increase of about 30% compared to 2022 numbers. Dupixent is one of the company’s top products recently approved in China for adults with moderate-to-severe atopic dermatitis. This approval will likely increase Regeneron Pharmaceuticals, Inc.’s (NASDAQ:REGN) Dupixent sales significantly, making the company heavily reliant on continued Chinese use and approval.
Bronte Capital, an investment management company, mentioned Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) in its third-quarter 2022 investor letter. Here’s what the firm said:
“There have been some bright spots in our long book. Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN), a major position and a stock we wrote up in our June 2021 letter, has been one of the best performing stocks in the S&P 500 this year. Alas it has not been enough to offset some of our weaker stocks, let alone our overweight exposure to the UK (and Europe) which have suffered from both stock and currency weakness. We do not think we are bad at picking stocks on the long side and hope – reasonably we think – for better relative results in the future. Prior to COVID, our longs were markedly better than the index. Unfortunately, if you look at our long book this quarter and since the onset of the COVID pandemic, there is scant evidence that we have added any value by picking stocks to go long.”
9. Amgen, Inc. (NASDAQ:AMGN)
Total Revenue in 2021: $25.98 billion
Amgen, Inc. (NASDAQ:AMGN) is a biopharmaceutical company based in Thousand Oaks, California. Its top-selling drugs include Neulasta, Enbrel, and Prolia. These are used to treat a variety of medical conditions, such as cancer, rheumatoid arthritis, and osteoporosis.
An Overweight rating was reiterated on Amgen, Inc. (NASDAQ:AMGN) shares on January 19 by Piper Sandler’s Christopher Raymond. The analyst also holds a $293 price target on the stock.
Amgen, Inc. (NASDAQ:AMGN) is considered a top drug company due to its consistent earnings growth and positive cash flows. The company generated a net total of $2.1 billion in cash flows during the third quarter. As of January 17, the company’s stock also outperformed the SPDR S&P 500 Trust ETF by 18.75% during the past 52 weeks. Amgen, Inc. (NASDAQ:AMGN) is heavily reliant on its manufacturing facilities in China, where some of its top-selling drugs are produced. These include Enbrel, a treatment for rheumatoid arthritis, and Prolia, a treatment for osteoporosis.
8. Gilead Sciences, Inc. (NASDAQ:GILD)
Total Revenue in 2021: $27.31 billion
Gilead Sciences, Inc. (NASDAQ:GILD) is a biopharmaceutical company that specializes in the development and commercialization of medicines for various diseases. It was founded in 1987 and is headquartered in Foster City, California. Gilead has a strong presence in the antiviral and oncology drug markets and is best known for its HIV/AIDS treatments, such as Truvada and Atripla.
On January 19, Piper Sandler’s Do Kim reiterated an Overweight rating on Gilead Sciences, Inc. (NASDAQ:GILD). The analyst also raised the firm’s price target on the stock from $104 to $111.
In the fourth quarter, Gilead Sciences, Inc. (NASDAQ:GILD) beat analyst revenue estimates by $900 million, or 15%. Its revenue for the quarter stood at $7.04 billion. The company has been a stable dividend payer for seven years now, and its yield currently stands at 3.5%. Gilead Sciences, Inc. (NASDAQ:GILD) also has a significant presence in China, where a growing market for its drugs exists. As such, it is reliant on the country for a significant portion of its sales. The company also has a manufacturing and supply chain infrastructure established in the country for efficient production and distribution of its drugs.
Ariel Investments, an investment management company, mentioned Gilead Sciences, Inc. (NASDAQ:GILD) in its third-quarter 2022 investor letter. Here’s what the firm said:
“At the stock level, biopharmaceutical company Gilead Sciences, Inc. (NASDAQ:GILD) was the top contributor in the quarter based on positive data released in a study evaluating Trodelvy versus comparative chemotherapy in patients with metastatic breast cancer. The detailed findings increased investor confidence the drug would receive incremental approvals for a broader range of breast cancer treatments. Shares also received a boost on news the TAF patent portfolio for HIV drugs will be extended from the middle of this decade through the early 2030s, thereby lengthening the company’s long-term opportunity in the virology market.”
Gilead Sciences, Inc. (NASDAQ:GILD), like Johnson & Johnson (NYSE:JNJ), Pfizer Inc. (NYSE:PFE), and AbbVie Inc. (NYSE:ABBV), is among the most successful American drug companies with high revenue generation.
7. Eli Lilly and Company (NYSE:LLY)
Total Revenue in 2021: $28.3 billion
Eli Lilly and Company (NYSE:LLY) is among the largest global healthcare companies. It is based in Indianapolis, Indiana. Some of its products include Alimta for non-small cell lung cancer and malignant pleural mesothelioma, and Cyramza for metastatic gastric cancer.
An Overweight rating was reiterated on Eli Lilly and Company (NYSE:LLY) shares on January 3 by Carter Gould at Barclays. The analyst also placed a $400 price target on the stock.
In the third quarter, Eli Lilly and Company (NYSE:LLY) generated about $1.7 billion in operating income. In 2022, the company’s shares returned 35%, and as of this January, its stock price is up by over 300% since 2018. Eli Lilly and Company (NYSE:LLY) is dependent on China not only for manufacturing its medicines, but also for research and development and access to patients. The company has established an R&D center in China for the development of new drugs for the Chinese market. Since it has a significant presence in the country, it also relies on Chinese patients for its clinical trials which help bring new medicines into the market quickly.
Baron Funds, an investment management company, mentioned Eli Lilly and Company (NYSE:LLY) in its fourth-quarter 2022 investor letter. Here’s what the firm said:
“Eli Lilly and Company (NYSE:LLY) is a large-cap pharmaceutical company. Shares increased on investor optimism about Lilly’s new product pipeline, which includes Mounjaro for diabetes and obesity and Donanemab for Alzheimer’s disease. We continue to think Lilly has a healthy base business with limited near-term patent expirations, a strong pipeline, and potential for significant margin expansion, which should translate to strong revenue and earnings growth over at least the next five years.”
6. Abbott Laboratories (NYSE:ABT)
Total Revenue in 2021: $43.08 billion
Abbott Laboratories (NYSE:ABT) is a healthcare company based in North Chicago, Illinois. It operates through its Established Pharmaceutical Products, Diagnostic Products, Nutritional Products, and Medical Devices segments.
Matt Miksic at Barclays holds an Overweight rating on Abbott Laboratories (NYSE:ABT) shares as of January 27, alongside a $125 price target.
Abbott Laboratories (NYSE:ABT) generated huge revenues during the COVID-19 pandemic. In 2020 and 2021, the company brought in $3.9 billion, and $7.7 billion, respectively. In 2022, it generated about $5.6 billion through the second quarter and $1.7 billion in the third quarter. Its revenues are further aided by its existing infant formula manufacturing facility in Jiaxing, China. Abbott Laboratories (NYSE:ABT) is also reliant on China for its medical device sales. In the fourth quarter of 2021, the company’s medical devices sales came in at $3.75 billion, missing analyst estimates of $.84 billion because of China’s COVID-19 curbs at the time.
Stewart Asset Management, an investment management firm, mentioned Abbott Laboratories (NYSE:ABT) in its third-quarter 2022 investor letter. Here’s what the firm said:
“We also need to point out one global consequence of the rapid rise in interest rates: an irrepressibly strong dollar. This hurts the reported earnings of U.S. companies who sell their goods and services overseas. Foreign currency earnings translate into fewer dollars and thus lower earnings. Most of the companies in your portfolios gain a notable amount of earnings from their international operations. While the strength or weakness of a currency doesn’t change the quality of a business or its longer-term earnings power, it can change the reported earnings of a company over short periods of time. It is difficult to forecast this effect accurately because many of our companies manufacture where they sell, which to some extent dulls the sharp negative effect of a surging dollar. Abbott (NYSE:ABT), among others, is a good example.”
Abbott Laboratories (NYSE:ABT), like Johnson & Johnson (NYSE:JNJ), Pfizer Inc. (NYSE:PFE), and AbbVie Inc. (NYSE:ABBV), is a medical company with significant earnings and profitability today.
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Disclosure: None. Top 10 Drug Companies in USA and Their China Reliance is originally published on Insider Monkey.