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AstraZeneca’s sales in China have been hit by the arrest of the country’s chief, company insiders say, as local hospitals avoid purchasing the company’s drugs.
Executives at the British pharmaceutical company expect a “marked” decline in sales in China in the wake of the arrest of President Leon Wang and several other senior executives, according to two people familiar with the matter. Sales of oncology products – which are at the center of the Chinese authorities’ investigation – have been particularly affected, insiders said.
AstraZeneca declined to comment on the ongoing investigations or the extent to which they would impact sales.
The detention of China’s most prominent pharmaceutical executive has sent shockwaves through the industry. Wang’s arrest came after dozens of senior hospital officials were detained as part of a broader anti-corruption campaign that Beijing says targets egregious medical care costs.
Wang’s arrest marks a dramatic turnaround in AstraZeneca’s fortunes in China, where it is the largest foreign drugmaker by sales. Wang was praised by state media for his contributions to strengthening the domestic pharmaceutical and biotech sectors through seed investments and building manufacturing capacity and research facilities.
It is currently unclear how big AstraZeneca’s sales hit will be. The figures will appear in the company’s next financial report. But one executive told the Financial Times: “The impact on sales is already very clear.”
AstraZeneca achieved sales of $5.9 billion in China in 2023, 13 percent of the total. Last month it raised its full-year expectations for global sales and profit growth.
“Doctors are unwilling to communicate with our salespeople and prescribe our medications. They will say that our company has had too many problems and will opt for other choices, especially Chinese-made medicines,” the AstraZeneca director added.
There are early signs that the cancer drugs Tagrisso and Imfinzi have been particularly hard hit, they said. The company hopes Enhertu sales can weather the crisis, one of the people familiar with the company’s position said, because it is considered the best drug on the market for certain types of breast cancer.
In recent financial reports, AstraZeneca has reported “strong adoption in China” following the commercial launch of Enhertu early this year. Chinese authorities announced at the end of November – after Wang’s detention – that the drug would be included in the state health insurance.
Wang’s arrest caught AstraZeneca off guard. Britain’s leadership initially blamed the scandal on low-level workers in China, following news reports that several salespeople had been arrested for illegally importing the cancer drug Imjudo.
CEO Sir Pascal Soriot said in an interview with Bloomberg News in September that it only affected a “small number of employees” and that the company has a “strong compliance policy.”
But then, in late October, Wang was arrested as authorities began investigating how much senior management knew about alleged wrongdoing related to his sales practices.
“At first Soriot thought it was just a few of the thousands of sellers who were rogue. But he realized it was more complicated when Leon was detained,” said a person close to the CEO.
AstraZeneca executives have not received a formal explanation from Chinese authorities and have been unable to contact Wang, people familiar with the matter said. The company has concluded that the investigation concerns the sale of Imjudo in China – where the drug is not approved – because authorities have also detained AstraZeneca’s former head of oncology, Yin Min, who was in charge during the alleged violations the department.
“We have not received any explanation. We can only guess that it is related to Imjudo because of the other people involved,” one person said.
In addition, AstraZeneca has also faced a PR crisis after dozens of vendors were convicted of health insurance fraud over the past two years. The courts ruled that they had tampered with genetic test results to ensure lung cancer patients were eligible for Tagrisso under a National Insurance reimbursement scheme.
AstraZeneca shares have fallen more than 8 percent since the company announced Wang’s detention at the end of October.
Emily Field, an analyst at Barclays, said investors were particularly shocked because they knew Wang, who participated in the earnings calls. But now she believes there is consensus that there was an overreaction. “Nobody thinks AstraZeneca will be kicked out of China. They may be fined several billion dollars,” she said.
Rival FTSE 100 group GSK was fined £297 million by Chinese authorities in 2014 following a bribery scandal.
AstraZeneca has appointed Iskra Reic to lead its Chinese operations through the crisis, which Pascal sees as a “troubleshooter”. When she led Europe for AstraZeneca, she faced a disgruntled EU over vaccine production issues during the Covid-19 crisis. Soriot sees her as someone he can trust and hopefully a “new face” in China, the person close to the CEO said.
But company insiders in China have cast doubt on a foreign executive’s ability to handle political sensitivities at a time when the company is under such intense scrutiny from authorities.
Company insiders are concerned about whether the company can function normally again. One said: “It is very difficult to see a way out of this for AstraZeneca.”