London: AstraZeneca reported on Wednesday that its China president, Leon Wang, has been detained by Chinese authorities. While the Anglo-Swedish pharmaceutical giant has not been informed of the reason behind Wang’s detention, it stated that it does not believe his custody is related to an ongoing health insurance fraud investigation that has implicated others in the industry.
The company initially revealed Wang’s detention last week, noting that it would fully cooperate with authorities. Wang, a long-standing executive with AstraZeneca, has been with the company for over a decade and has played a central role in its China operations.
To address concerns about the potential expansion of the fraud probe, AstraZeneca’s Chief Financial Officer Aradhana Sarin held a briefing with sell-side analysts on Wednesday. This action followed a report by the financial media outlet Yicai, which suggested that multiple AstraZeneca executives could be implicated, causing the company’s shares to plummet over 8%. AstraZeneca’s investor relations team also provided updates to shareholders, seeking to clarify the situation.
AstraZeneca’s Strategic Position in China
AstraZeneca has heavily invested in China, the world’s second-largest pharmaceuticals market, and considers the region essential to its long-term revenue goals through the end of the decade. With around 12,000 employees in the country, China currently accounts for 13% of AstraZeneca’s global sales.
According to Yicai, the insurance fraud probe could be the largest in China’s pharmaceutical sector in recent years, potentially involving senior figures in the industry. However, AstraZeneca affirmed that, as far as it is aware, none of its current executives are implicated in the insurance fraud case. Tuesday’s Yicai report triggered AstraZeneca’s worst share performance since March 2020, slashing its market value by approximately $14 billion.
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The investigation reportedly centers on sales of AstraZeneca’s popular lung cancer drug, Tagrisso, which has shown strong performance in China, where lung cancer rates are elevated due to factors like air pollution and smoking.
Multiple Investigations Unfolding
In addition to the insurance fraud probe and Wang’s detention, AstraZeneca revealed a third, separate investigation involving two current and two former senior executives in China. This inquiry pertains to the importation of AstraZeneca cancer medications, Imjudo and Enhertu, from Hong Kong into mainland China. AstraZeneca clarified that this investigation targets individuals, not the entire company.
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Following an investor briefing on Wednesday, a participating shareholder described AstraZeneca’s tone as reassuring, though acknowledged the company seemed limited in what it could disclose about the investigations and their potential impact. Given the sensitive nature of the case, the shareholder requested anonymity.
Despite the volatility, Barclays analysts observed that the recent share sell-off appeared “far overdone” and identified current share levels as an “attractive entry point” in anticipation of major clinical trial data set to release by 2025.
