Danish company Xellia Pharmaceuticals has announced the closure of its flagship plant in Copenhagen, the last major facility in Europe that makes ingredients for a range of life-saving antibiotics. Part of the production will be moved to China, which calls into question the EU’s efforts to reduce dependence on Asian suppliers.
The decision by the company, which is owned by the Novo Holdings fund (which also controls the pharmaceutical giant Novo Nordisk), threatens to lay off 500 workers. Production will partially remain in Budapest – the site there is the cheapest to maintain.
«We talk a lot about returning production to Europe, but it is equally important to preserve what is left“, he said in an interview Financial Times Xellia CEO Michael Kosher. According to him, without systemic changes — primarily financial support from states — European manufacturers will not be able to compete with cheaper Asian counterparts.
Xellia makes active pharmaceutical ingredients (APIs) for drugs such as vancomycin hydrochloride, a key antibiotic for the treatment of severe bacterial infections, including sepsis. Half of the company’s products are included in the list of critically important medicines of the EU, as well as in the list of the World Health Organization.
Currently, about 80% of all APIs used in the European Union are imported from China. If the trend continues, this figure could reach almost 100%, warns the head of Xellia. Healthcare systems in EU countries, not wanting to raise prices for generics, actually encourage the transfer of production outside of Europe.
Despite the fact that the European Commission has already presented proposals for the “Critical Medicines Act”, which provide for an increase in the production of more than 200 drugs (from penicillin to morphine), market participants criticize the initiative for being too slow and insufficiently ambitious. In particular, the idea of joint public procurement and preferences for producers from the EU is being considered, but so far these measures have not stopped the wave of deindustrialization.
«We are not asking for special treatment. We’re asking for commitments that will keep life-saving production going», — emphasized Kosher.
The heads of the pharmaceutical giants Novartis and Sanofi recently sent letters with similar appeals to the European Commission. They warn: undervalued drugs in Europe are forcing investors to refocus on the US and China, where profits are higher and politics more predictable. Although Xellia has no plans to expand in North America yet, further reductions in production in the EU appear inevitable without government intervention.
The company emphasizes that its drugs are critical to fighting diseases such as meningitis. “Without our product portfolio, we could face challenges larger than even the Covid-19 pandemicKosher said.
European dependence on Asia: systemic vulnerability
In recent decades, Europe lost a large part of its own production of active pharmaceutical ingredients (API). While the EU accounted for 53% of global API production in 2000, this share fell to 25% by 2020, with China and India becoming the dominant suppliers. Currently, more than 80% of APIs used in the EU are imported from Asia.
This concentration of production outside of Europe poses critical risks to security of supply, especially in times of geopolitical instability or global crises such as the COVID-19 pandemic. In addition, China’s new anti-espionage laws make it more difficult to conduct inspections at Chinese factories, which could lead to the loss of GMP certification and further supply disruptions.
The closure of the Copenhagen plant of Xellia Pharmaceuticals is not an isolated case. In Germany, one of the manufacturers of thrombolytics stopped operations due to quality problems, and in Austria the government was forced to financially support the last antibiotic manufacturer to avoid complete closure.
In the Netherlands, a manufacturer of anti-epileptic drugs also announced a shutdown, leading to a shortage of vital drugs. These examples indicate a systemic problem: European manufacturers cannot compete with Asian suppliers due to lower production costs in Asia and rigid pricing policies in the EU healthcare systems.
The EU’s response: the Critical Medicines Act and strategic initiatives
In March 2025, the European Commission presented project Critical Medicines Act, aimed at reducing dependence on external suppliers and strengthening domestic production. Key elements of the initiative include:
- Support of strategic production projects in the EU.
- Promotion of joint procurement between member countries.
- Use of security of supply and environmental impact criteria in public procurement.
- Creation of strategic reserves of critical importance medicines.
In addition, in January 2024, the “Critical Medicines Alliance” was created, which was joined by Ukrainian manufacturers, in particular Farmak company. The purpose of the alliance was to coordinate efforts to ensure uninterrupted supply of life-saving medicines in Europe.
At the same time, experts warn that without a significant increase in funding and revision of the price policy in the EU health care systems, these measures may prove insufficient to achieve real autonomy in pharmaceutical production.
“We gave them everything ourselves” – Europeans react emotionally to the loss of the plant
The news of the closure of Denmark’s last major plant for the production of active ingredients for antibiotics caused a wave of indignation among European users. In the comments, people directly say: The West itself created the conditions under which China was able not only to become the “factory of the world”, but also to start overtaking Europe in terms of quality and technology. “We moved everything to Asia, remained in the role of managers, consoled ourselves that we had knowledge left. It suddenly became clear that they were already better than us“, one of the commentators writes. Many admit that the relocation of production is a direct consequence of decades of focus only on cheapness, profits and non-interference of states.
Many commentators emphasize that China simply correctly used the weaknesses of the European model — lack of strategic planning, focus on immediate profit and trust in the private sector. “They didn’t just become cheaper. They became better“, users note. Some Europeans directly accuse consulting companies such as McKinsey of destroying Europe’s industrial base through outsourcing models and increasing top management salaries while cutting costs for everything else. There were even comparisons with the times after the Second World War, when the state purposefully supported the agricultural sector, and this is exactly the policy being offered for pharmaceuticals today.
Commentators discuss three main approaches: forced localization of production (risk of bankruptcy of companies due to non-competitiveness); introduction of customs duties and tariffs on imports from China; government subsidies or full government production of critical drugs – this is the option most call the “least bad”. Some people are convinced that private companies should not be responsible for the supply of strategic resources, and that the state should take it upon itself. Others, on the contrary, believe that state intervention harms the market and scares away investors. But even among liberal-minded voices, there is an argument that critical infrastructure should be considered a “public service,” like water or energy.
«We spend trillions on defense but can’t guarantee the supply of antibiotics?– one of the users is indignant. Others emphasize: if Europe really wants independence in strategic areas, it will have to abandon the policy of cheapness and start paying a real price for security.
China as the center of API production
It is no secret that China plays a key role in the global pharmaceutical industry, especially in the production of active pharmaceutical ingredients (API) and the development of biotechnology.
China has long been a leading producer of APIs, which are key ingredients for many pharmaceuticals. By data Financial Times, about 80% of APIs used in the European Union are imported from China. This addiction became particularly evident during the COVID-19 pandemic, when global supply chains were disrupted, resulting in shortages of life-saving medicines.
China is also actively developing its biotechnology sector. Companies such as WuXi AppTec and WuXi Biologics have become important partners for Western pharmaceutical companies, providing research and manufacturing services. However, recent legislative initiatives in the US to limit cooperation with some Chinese biotech firms due to national security concerns, forced Western companies look for alternative suppliers.
It is clear that dependence on China for pharmaceutical production has significant implications for global health care. Any disruptions in supply chains or geopolitical tensions can lead to shortages of critical medicines in different countries. This highlights the need to diversify sources of supply and invest in local API production to ensure sustainability and security of drug supply.
In light of these challenges, countries, including Ukraine, should consider strategies to reduce dependence on API imports and strengthen their own pharmaceutical production.
