Shares of AstraZeneca fell by more than 8% on Tuesday, erasing roughly £14 billion ($17.5 billion) from the market value of the UK’s largest drugmaker.
The plunge followed reports that senior executives within AstraZeneca’s China unit may be implicated in an investigation into insurance fraud in China’s pharmaceutical sector.
The decline, which marked the company’s worst trading day since March 2020, comes as AstraZeneca faces dual pressures. Alongside the reported probe in China, recent data on the company’s experimental weight loss drug, published on Monday, was described as “underwhelming” by analysts from Deutsche Bank, who maintained a “sell” rating on AstraZeneca’s stock. The negative reception added to investor concerns, contributing to the sharp drop in share value on the FTSE 100.
The investigation into AstraZeneca’s Chinese operations has reportedly expanded to include several national agencies, including the public security bureau and China’s supervisory commission, according to Chinese financial media outlet Yicai. It follows the recent decision of AstraZeneca’s China president, Leon Wang, to step aside as he cooperates with Chinese authorities on the ongoing probe. The company has since appointed Michael Lai, general manager, to lead its China business.
While AstraZeneca declined to comment on what it called “speculative media reports,” the company affirmed its commitment to cooperating fully with Chinese authorities and stated that its operations in China remain ongoing. Wang, an influential figure who has driven AstraZeneca’s substantial growth in China, is thought to be cooperating as investigators examine allegations of fraud related to medical insurance. The investigation follows previous legal actions against AstraZeneca employees for allegedly tampering with patient data to secure insurance coverage for a lung cancer drug.
China is a crucial market for AstraZeneca, accounting for 13% of its overall revenue and representing its second-largest market after the United States. AstraZeneca has been expanding its presence in the country over the past decade, recently announcing a $450 million investment in a new manufacturing plant and acquiring local biotech Gracell Biotechnologies in a $1.2 billion deal. However, the recent probes highlight the challenges AstraZeneca faces in China, where it is navigating a highly regulated environment and intense scrutiny of foreign companies.
China’s crackdown on corruption and tightening regulations in the pharmaceutical industry have put added pressure on foreign companies, particularly those accused of practices that may contravene national insurance and data privacy laws. A previous high-profile case involving GlaxoSmithKline led to significant fines for the company a decade ago. AstraZeneca’s own legal difficulties are now casting a shadow over its ambitious growth strategy in the country.
Reuters, the Guardian and Financial Times contributed to this report.
