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Impact of the Tianjin explosion on the global pharmaceutical industry
The largest of several explosions, which were unleashed in a warehouse last week in China's port city of Tianjin, packed the same amount of firepower as 21 tonnes of TNT. Although the blasts occurred in an area home mainly to logistics firms, several pharmaceutical companies also have operations within the 2-kilometer radius of destruction and have been scrambling to gauge the damage.
Tianjin's BinHai New Area serves as a key pharmaceutical manufacturing hub in China. Pharma majors GlaxoSmithKline, Novo Nordisk and Servier have sites located within, or extremely close to, the blast's 2-kilometer radius.
GlaxoSmithKline has said its Tianjin operations, which focus on the production of medicines and consumer health products, has been affected by the explosion, though it is still too early to say how badly (as of August 14).
Novo Nordisk also has an insulin manufacturing plant approximately 3.5 kilometers from the blast site. The Danish company designated Tianjin as a major manufacturing site, after first setting up R&D in the city in 1994. In addition, domestic companies Tianjin Century Pharmaceuticals, Tianjin Shuangxuntang Pharmaceuticals, Zhongxin Pharmaceutical Industries have operations in close proximity to the blast site.
IHS Life Sciences expects the explosion to cause significant disruption to the shipment of non-time-sensitive pharmaceutical exports, given that time- and temperature-sensitive pharmaceutical products are typically transported by air. However, as the blast occurred in a central area of the Tianjin port, there is also the possibility of knock-on disruptions on surrounding port areas. Authorities say that port operations have resumed, though it is not yet clear to what extent.
Taking a wider view, IHS believes that the explosion will have only a limited impact on the local economy and is not likely to compound existing concerns over the impact of slower Chinese economic growth on earnings for multinational pharmaceutical companies. Given the speed and efficiency with which Chinese infrastructure is typically built, IHS believes the damage can quickly be repaired, especially since the rebuilding will likely be treated as a national priority.
However, since even the cause of the explosions still has not been definitively ascertained, there are still a lot of unknown variables in the matter. Much also depends on what shape containment and clean-up efforts will take, and whether this would necessitate the closing of certain areas while attempts are made to limit chemical contamination and handling of waste water.
Sophie Cairns is a senior life sciences analyst for IHS
Mark Hollis is a life sciences analyst for IHS
Posted 19 August 2015
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