The world of multinational pharmaceutical companies is often filled with both promise and peril, and in recent months, AstraZeneca has found itself navigating a stormy sea of controversies and challenges.

On December 4, 2024, AstraZeneca announced the appointment of Iskra Reic as Executive Vice President and Head of International BusinessThis role encompasses vast regions including China, Asia, the Eurasian market, the Middle East, Africa, Latin America, Australia, and New Zealand.

AstraZeneca commented that Reic would succeed Wang Lei, who has temporarily left his position due to an investigation in China.

Having joined AstraZeneca in 2001, Reic has since climbed the corporate ladder, becoming the Executive Vice President in 2017 and taking charge of AstraZeneca's Vaccine and Immune Therapy Business.

“Iskra is an accomplished leader with extensive international experience across multiple disciplines,” said Pascal Soriot, AstraZeneca’s Global CEO. “Her expertise in building partnerships will be crucial for the rapid advancement of our international business.”

In tandem with Reic's appointment, AstraZeneca also named Lin Xiao as General Manager of AstraZeneca China and Guan Dongmei as General Manager of AstraZeneca's Oncology Business in China

The former general manager of AstraZeneca China, Lai Minglong, is now heading the Global Oncology Business for Dato-DXd and lung cancer.

The Chinese market holds enormous significance for AstraZeneca, with the company reporting $5.049 billion in revenue from this region in the first three quarters of the fiscal year, accounting for nearly 13% of its global income.

In a briefing following the quarterly earnings report, Soriot stated, “We are not privy to the specifics of these investigations; however, if the Chinese authorities require our cooperation, we will assist as we have in the past.” He later affirmed, “We will do our utmost to address the current issues.”

The repercussions echoed throughout the industry as well

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At the recent China International Import Expo, AstraZeneca exhibited for the seventh consecutive yearUnlike previous years, the event saw fewer visitors, a reflection of the changing public opinion regarding the pharmaceutical giant.

AstraZeneca's troubles in China are far from resolved, and the new leadership's ability to heal internal wounds and regain external trust will be pivotal as the company seeks to expand its Chinese market presence by 2025.

A series of negative developments has plagued AstraZeneca in China over the past couple of months.

For starters, a prolonged insurance fraud case that has dragged on for nearly three years has started to yield verdicts in multiple cities

This has led to discontent among certain employees and their families.

Furthermore, shortly after former Global Executive Vice President Wang Lei’s announcement of an investigation, updates indicated he had been detainedThe CFO remarked, “We do not have specific charges against him.”

Additionally, on November 6, during an investor communication event, AstraZeneca disclosed that some employees were facing investigations for illegally importing drugs and privacy breaches.

Specifically, reports emerged that employees were under scrutiny for the unlawful importation of certain oncology drugs, involving two current and two former senior managers.

It was revealed that a former head of AstraZeneca’s product line was taken away in July due to smuggling allegations; in October, the former general manager of AstraZeneca’s Oncology Division was confirmed to be assisting in investigations.

AstraZeneca's key operations span oncology, rare diseases, along with biopharmaceutical domains including cardiovascular and metabolic, respiratory, and immunological

In 2023, AstraZeneca reported nearly $6 billion in revenue within China, roughly 13% of its total global income.

Concerning the investigations over drug smuggling, it was noted that these might involve oncology medications just like the insurance fraud casesAstraZeneca believes this is largely related to drug circulation between Hong Kong and the Mainland, focusing on medications approved in Hong Kong but not yet launched in Mainland China, as well as associated tariff issues.

It is not uncommon for some patients to seek treatment in areas outside Mainland China, including Hong Kong, to access the latest medications that have been approved locally

This practice has raised awareness among industry professionals, as some have regarded it as a gray area that facilitates access to life-saving drugs not authorized for sale domestically.

On October 30, AstraZeneca publicly announced that Wang Lei was assisting in an investigation in China.

Wang Lei was once viewed as one of the most knowledgeable executives regarding the Chinese market within multinational pharmaceutical firms

Graduating from Shanghai International Studies University, he entered the pharmaceutical industry in 1996, initially with Roche in China, and joined AstraZeneca in 2013, quickly ascending to the position of President of AstraZeneca China in 2014.

The initial flare-up of AstraZeneca’s insurance fraud case was sparked by a public report being submitted in July 2021, which led Shenzhen to form a joint task force comprising multiple government departments, resulting in the dismantling of a fraud ring accused of manipulating tumor patient gene testing results to exploit insurance funds, culminating in the arrest of 17 individuals who faced criminal charges.

Following the case, in 2022, China’s National Healthcare Security Administration collaborated with the Ministry of Public Security to interview AstraZeneca China’s relevant personnel, emphasizing the need for strict compliance with laws and regulations, as well as immediate internal auditing to pinpoint and rectify issues in marketing oversight.

However, ongoing investigations revealed continued legal repercussions for AstraZeneca personnel across various regions, with over twenty individuals involved in the Fuzhou area alone.

As of now, judgments made public indicate that the insurance fraud case has implicated over a hundred individuals

From various sources, it's reported that several former regional directors and managers firmly assert their innocence, highlighting the vulnerability of mid-level employees within the sales structure.

On September 28, 2024, family members of accused AstraZeneca employees publicly expressed their grievances, stating, “The company profits while our loved ones serve time?” They claim that the majority of funds unjustly acquired via fraudulent insurance claims primarily benefited the company and demanded accountability from AstraZeneca for its policies that led to employee repercussions.

Even former employees are not exempt from difficulties

On October 25, rumors emerged of former AstraZeneca senior official Yin Min being taken by regulatory authorities for cooperation in investigationsBeiGene, where Yin now works, stated the event was unrelated to the companyYin previously served for over 15 years at AstraZeneca, including the position of General Manager for the Greater China region’s oncology business.

Headquartered in London, AstraZeneca is a pharmaceutical powerhouse valued at over $200 billion, employing around 12,000 individuals in China.

The news regarding Wang Lei's cooperation with investigations triggered significant market reactions, as evidenced by a drop of over 5% in AstraZeneca's share price on the day the news broke

By day's end, the shares still closed down over 3%.

Following the news of Wang's detention, AstraZeneca shares dipped more than 7% on November 5. To soothe investors, AstraZeneca held an investor communication event the next day, emphasizing that the investigation into Wang is solely personal and does not involve the company at largeFurthermore, they asserted that the broad investigation surrounding the insurance fraud commenced three years ago and had previously implicated over a hundred former employees without engaging current executives.

On November 12, AstraZeneca released a quarterly report that exceeded market expectations, announcing a dramatic $3.5 billion investment in expanding its research and manufacturing capabilities in the United States

Furthermore, the company updated its earnings forecast.

Data indicated that AstraZeneca achieved $39.182 billion in revenue in the first three quarters of 2024, showing a 19% annual growth; the third quarter yielded $13.565 billion, reflecting a 21% increase year-on-yearAnalysts attribute this growth primarily to key drugs in its oncology portfolio.

In China, the segment reported revenues close to $5.049 billion for the first three quarters, marking a 15% increase year-on-year; the third quarter alone produced $1.671 billion, also a 15% year-on-year increase.

Based on the revenue figures from the first three quarters, the Chinese segment constitutes almost 13% of AstraZeneca's global revenue.

However, perceptions among investors concerning these results seem divided

On November 20, UBS raised AstraZeneca's rating from "sell" to "neutral," while investment bank Berenberg downgraded its rating on AstraZeneca’s stock.

Berenberg analysts expressed in a report that AstraZeneca’s stock price had recently retreated, losing all gains from the previous year, which they attributed to disappointing data concerning the lung cancer treatment drug Dato-DXd and increasing anxiety among investors over the investigations involving their employees in China.

An analysis published on the investing platform InvestingPro indicated that UBS acknowledges the investigations may impact AstraZeneca’s operations

Nonetheless, it posits that recent approval actions by the National Medical Products Administration (NMPA) in China might signify ongoing support for AstraZeneca's presence in the Chinese market in the long run, potentially alleviating some risks related to the current challenges.

During the earnings release, CEO Pascal Soriot for the first time publicly addressed the status of Wang Lei, stating that Wang is consulting with his lawyer and that the company does not possess any new information regarding the situation.

Despite a downturn in revenue from China, AstraZeneca remains optimistic about achieving its long-term revenue target of $80 billion by 2030. Recent advancements within the company further indicate a strong focus on bolstering its oncology product lineup and extending its market share.

In a notable development, AstraZeneca's non-executive chairman Michel Demaré, along with CEO Pascal Soriot and other independent board members, recently made substantial stock purchases, signaling confidence in the company's outlook