AstraZeneca’s China chief detained amid insurance probe
Drugmaker says Chinese authorities haven’t given reasons for apprehending Leon Wang
06 November 2024 - 20:17
by Maggie Fick
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London — AstraZeneca said on Wednesday its China president Leon Wang had been detained by Chinese authorities and, though it did not know the reason, it doesn’t believe the action was linked to a 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 co-operate with authorities. Wang grew up in China and has been with the company for more than a decade.
AstraZeneca said its CFO Aradhana Sarin had briefed analysts on the subject on Wednesday to quell concerns about the fraud probe expanding after 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 the issue on Wednesday.
The company has invested heavily in China, the second-biggest 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 dozens of the drugmaker’s senior executives in China could be implicated in the biggest insurance fraud case in the country’s pharmaceutical sector in years.
AstraZeneca said on Wednesday that to its knowledge the insurance fraud case didn’t involve any AstraZeneca executives.
AstraZeneca shares, which on Tuesday recorded the worst performance since March 2020, shed a further 1.9% on Wednesday. Tuesday’s plunge wiped out about $14bn of the company’s market value.
Previous reports said Chinese authorities had summoned AstraZeneca officials regarding an investigation of suspected medical insurance fraud by its employees, and had ordered the drugmaker to tighten its marketing activities.
On Wednesday the company said the ongoing probe had started three years ago and initially involved a small number of staff. It later escalated and about 100 now former employees were sentenced to jail, it said.
That investigation involves sales of the company’s lung cancer medicine, Tagrisso. Sales have been strong in China, where lung cancer rates are high due to air pollution and the prevalence of smoking.
Multiple investigations
Besides the insurance probe and the Wang investigation, a third investigation is under way in China involving two current and two former senior executives, the company said on Wednesday.
That relates to the importing of AstraZeneca cancer drugs, Imjudo and Enhertu, from Hong Kong to the mainland, the company said. The individuals are under investigation, not the whole company, it added.
An AstraZeneca shareholder who participated in the investor relations briefing said 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 China and the country accounts for 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.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
AstraZeneca’s China chief detained amid insurance probe
Drugmaker says Chinese authorities haven’t given reasons for apprehending Leon Wang
London — AstraZeneca said on Wednesday its China president Leon Wang had been detained by Chinese authorities and, though it did not know the reason, it doesn’t believe the action was linked to a 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 co-operate with authorities. Wang grew up in China and has been with the company for more than a decade.
AstraZeneca said its CFO Aradhana Sarin had briefed analysts on the subject on Wednesday to quell concerns about the fraud probe expanding after 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 the issue on Wednesday.
The company has invested heavily in China, the second-biggest 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 dozens of the drugmaker’s senior executives in China could be implicated in the biggest insurance fraud case in the country’s pharmaceutical sector in years.
AstraZeneca said on Wednesday that to its knowledge the insurance fraud case didn’t involve any AstraZeneca executives.
AstraZeneca shares, which on Tuesday recorded the worst performance since March 2020, shed a further 1.9% on Wednesday. Tuesday’s plunge wiped out about $14bn of the company’s market value.
Previous reports said Chinese authorities had summoned AstraZeneca officials regarding an investigation of suspected medical insurance fraud by its employees, and had ordered the drugmaker to tighten its marketing activities.
On Wednesday the company said the ongoing probe had started three years ago and initially involved a small number of staff. It later escalated and about 100 now former employees were sentenced to jail, it said.
That investigation involves sales of the company’s lung cancer medicine, Tagrisso. Sales have been strong in China, where lung cancer rates are high due to air pollution and the prevalence of smoking.
Multiple investigations
Besides the insurance probe and the Wang investigation, a third investigation is under way in China involving two current and two former senior executives, the company said on Wednesday.
That relates to the importing of AstraZeneca cancer drugs, Imjudo and Enhertu, from Hong Kong to the mainland, the company said. The individuals are under investigation, not the whole company, it added.
An AstraZeneca shareholder who participated in the investor relations briefing said 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 China and the country accounts for 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.
Reuters
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