Why AstraZeneca CEO Pascal Soriot Is Facing Chinese Burn

Pharmaceuticals giant AstraZeneca has reported double-digit sales growth on higher demand and said it remains committed to China despite the detention of its head of Chinese business. 

Total revenue for the global pharma giant rose 19% to US$39.2bn (£30.6bn) in the first nine months of the year.

The London-listed group has subsequently upgraded its full-year guidance to “high teens” percentage growth from mid-teens previously.

Cancer care revenue rose 22%, while revenue from heart care was up 21% and research revenue up 24%.

Sales reached US$1.7bn in China, an increase of 15% compared with the same quarter last year. 

CEO Pascal Soriot has overseen AstraZeneca’s rapid growth in China over the past decade, which has helped propel the group’s wider transformation. 

The company said it remained “committed to delivering innovative life-changing medicines to patients in China” despite multiple investigations by the Chinese authorities into current and former AstraZeneca employees.

Allegations include medical insurance fraud, illegal drug importation and personal information breaches.

Soriot said the company took the detention of its China president Leon Wang “very seriously”.

“If requested, we will fully cooperate with the authorities.”

Why AstraZeneca is under scrutiny in China

Last week, AstraZeneca confirmed that Wang had been detained, and that two former and two current executives were under investigation in China over allegations of illegally importing oncology medicines. 

Separately, about 100 former employees have been sentenced over a separate alleged medical insurance fraud investigation dating back three years. Patient test results were allegedly falsified to qualify them for reimbursement for its blockbuster cancer drug Tagrisso.

The Chinese authorities are also investigating the alleged illegal importation of unapproved medicines from Hong Kong into mainland China and the inappropriate collection of patient data. This relates to three other cancer drugs: Enhertu, Imjudo and Imfinzi.

Impact on share price

The investigations have cast a shadow over AstraZeneca, the largest overseas drugmaker in China, which made almost US$6bn of sales there last year. 

Its shares have fallen by more than 10% since the company first disclosed that Wang was under investigation on 30 October.

It remains unclear what impact these investigations will have on AstraZeneca’s trading in what has become the Cambridge-based company’s second-largest market.  

About £17bn was wiped off AstraZeneca’s market value last week, and it lost its position as the most valuable company on the FTSE 100 to Shell, as details emerged of the investigations in China.

The scrutiny of its Chinese business comes after Soriot set an ambitious target this year to almost double global annual sales from US$46bn in 2023 to US$80bn by 2030.

According to The Times, there has been speculation in the China pharma industry that the AstraZeneca case “is political” and that detained China president Leon Wang is “politically connected and politically ambitious”. 

Wang has publicly waved the flag for the Chinese Communist Party. Marking AstraZeneca’s 30th anniversary in China in May last year, Wang said AstraZeneca should be a patriotic company in China that “loves the Communist Party and loves the country”.

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