LONDON – On Wednesday, AstraZeneca (NASDAQ: AZN) said its China president Leon Wang had been detained by Chinese authorities and, although it did not know the reason, it did not believe it was linked to a large health insurance fraud case involving the company.
One week ago, the Anglo-Swedish drugmaker said that Wang was under investigation and that the company would cooperate with authorities. Wang grew up in China and has been with the company for more than a decade.
AstraZeneca said its Chief Financial Officer Aradhana Sarin had briefed sell-side analysts on the subject on Wednesday to quell concerns about the fraud probe expanding following a report by financial media company Yicai a day earlier that led its shares to plunge more than 8%.
The company’s investor relations team also briefed shareholders on Wednesday on the issue.
The company has invested heavily in China, the world’s No. 2 pharmaceuticals market, and positioned operations there as core to its annual revenue targets through the end of this decade.
The Yicai report on Tuesday said that dozens of the drugmaker’s senior executives in China could be implicated in the largest insurance fraud case in the country’s pharma sector in years.
But AstraZeneca (NASDAQ: AZN) said on Wednesday that to its knowledge the insurance fraud case did not involve any current AstraZeneca executives.
AstraZeneca shares, which on Tuesday had their worst day since March 2020, ended Wednesday down 1.9%. Tuesday’s drop wiped some $14 billion off of the company’s market value.
It had previously been reported that Chinese authorities had summoned AstraZeneca officials over an investigation of suspected medical insurance fraud by its employees, and had ordered the drugmaker to tighten its marketing activities.
But on Wednesday the company said the ongoing probe had begun three years ago and initially involved a small number of employees. It later escalated and some 100 now former employees were sentenced to jail time, the company said.
That probe involves the company’s sales of its blockbuster lung cancer medicine Tagrisso. Sales of the medicine have been strong in China, where lung cancer rates are high due to air pollution and the prevalence of smoking.
MULTIPLE INVESTIGATIONS
In addition to the insurance probe and the Wang investigation, there is a third investigation underway in China involving two current and two former senior executives, the company said on Wednesday.
This relates to the importation of AstraZeneca (NASDAQ: AZN) cancer drugs Imjudo and Enhertu from Hong Kong into mainland China, the company said. The individuals are under investigation, not the whole company, it added.
An AstraZeneca shareholder who participated in the investor relations briefing told Reuters that the tone was reassuring but the company appeared limited in what it could say and what it knows.
It is difficult to know if the issue will escalate, the shareholder said, declining to be identified due to the sensitivity of the matter.
AstraZeneca says it has about 12,000 employees in the country. China sales make up 13% of the company’s overall sales.
Barclays analysts said in a note that the share sell-off “feels far overdone” and current share levels represent a “very attractive entry point” ahead of 2025 when a number of highly anticipated clinical trial data readouts are expected.
(Source: Reuters)
