AstraZeneca shareholders say they need clarity on China investigations

Astrazeneca Pharma India

05/02/2025 06:00

By Maggie Fick
       LONDON, Feb 5 (Reuters) - AstraZeneca  AZN.L  investors
will look past another strong set of quarterly results on
Thursday to focus on the main issue overhanging shares: an
investigation of a top executive by authorities in China, one of
its key markets.
    The group said on Oct. 31 that its China head Leon Wang, who
also led its international business as an executive vice
president, had been detained by the Chinese authorities. It said
it did not know what the investigation was about.    
    Unless the company discloses fresh information about the
probe and arrest at the release of fourth-quarter results,
investors are likely to resume selling the stock even though the
company's drug pipeline is viewed as strong, four healthcare
investors and four analysts told Reuters.
    "This blindsided the company," said AstraZeneca shareholder
Lucy Coutts at investment firm JM Finn, noting the "void" of
information about the probe. 
    "We don't have visibility on how or when this will be
resolved," said Redburn Atlantic analyst Simon Baker. "This is
the focus at the moment. It shouldn't be, but it is."
    Wang's arrest was followed by other revelations, including
that more than 100 former sales staff in China had been
sentenced to jail time in a large and ongoing medical insurance
fraud case. 
    In November the company reported a third investigation in
China involving two current and two former senior executives,
relating to the import of AstraZeneca cancer drugs from Hong
Kong. It said the probe targeted only the individuals, not the
company. 
    AstraZeneca declined to comment for this article ahead of
results. 
    China has long been a key market for the drugmaker, the
crown jewel of its international business that accounted for 13%
of total sales in 2023.
    The Anglo-Swedish group announced plans in 2023 to build a
$450 million factory in China. It signed several licensing deals
with Chinese companies that year, and bought a
China-headquartered biotech company.
    Chief Financial Officer Aradhana Sarin told investors at the
JPMorgan Healthcare Conference last month the company
anticipates some revenue impact on its China business in the
fourth quarter and into 2025. Investors are hoping for more
information on Thursday.

    
    SMALL RECOVERY
    AstraZeneca shares have recovered after the initial news of
Wang's detention wiped around $18 billion off their value. They
are up about 2% since early November.
    In December, AstraZeneca replaced Wang with senior executive
Iskra Reic as executive vice president for international, based
in Shanghai. 
    Several investors said it may be tough for an executive who
does not speak Mandarin and has never lived in China to navigate
such a complicated market at a very sensitive time. 
    Barclays analysts said in a recent note they believe
AstraZeneca may pay a penalty to resolve the Wang investigation.
In 2014, British drugmaker GSK  GSK.L  was fined nearly 300
million pounds ($372 million) by a Chinese court for bribery.
    "Whilst there could be some commercial impact coming from
lack of promotion whilst the investigation is ongoing, we view
this as digestible given the momentum elsewhere in the
business," Barclays said.
    ($1 = 0.8054 pounds)

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AZN shares recover from initial hit on China probes    https://tmsnrt.rs/4aSklR2
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 (Reporting by Maggie Fick; Editing by Josephine Mason and Jan
Harvey)
 ((maggie.fick@thomsonreuters.com; +44 7890 916706;))