[HONG KONG, LONDON] Ever since AstraZeneca shocked investors in October with news its China chief was under investigation, the British pharmaceutical giant has tried to maintain a business-as-usual stance in its second-biggest market.
While the Cambridge-based company is still waiting for the outcome of the probes into alleged illegal data and drug-import activities, a planned US$2.5 billion research hub in Beijing is a clear sign chief executive officer Pascal Soriot’s efforts to get on the right side of the government are paying off.
The new R&D centre, poised to be AstraZeneca’s second in China and sixth globally, represents Soriot doubling down on a key market in which his company has already invested heavily. He’s long talked up the scientific promise of China, and knows the competition for its innovation is intense.
But the deal is also a much-needed win for China when investment into the world’s second-largest economy is slowing, as trade tensions shift the global focus to the US – AstraZeneca’s biggest market. It came a day after Beijing touted itself as a meditech hub worth one trillion yuan (S$184 billion).
Taking a somewhat contrarian approach appears to be working for Soriot. In fact, the signs over the last few months point to a company forging ahead in spite of the probe that ensnared current and former employees and led to the detention of AstraZeneca’s then China chief Leon Wang.
Every incremental bit of news over the last few months has indicated that things are moving in the right direction in terms of Astra’s presence in China, said Emily Field, an analyst at Barclays. “I think that this is slowly just fading into the background for people,” she said of the probe impact.
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Striking deals
Amid the turmoil, Astra negotiated Chinese state medical insurance coverage for a flagship cancer treatment, secured wider approvals for other top-selling cancer drugs, inked collaborations with local biotechs and acquired a partner’s business to market an anaemia drug first approved in China.
Though sales did fall in the final quarter, AstraZeneca’s full-year revenue in China grew 9 per cent to a record US$6.4 billion.
As well as the research centre, Astra also announced local collaborations: with the Beijing Cancer Hospital on research, with local biotechs Harbour BioMed Shanghai and Syneron Bio on developing new therapies and with vaccine maker BioKangtai on manufacturing. All fit China’s aims for its biotech innovation ecosystem.
Soriot, meanwhile, is in China to join business and government leaders for two high-profile annual summits. In a column published on Thursday (Mar 20) by the China Development Forum, he wrote of how AstraZeneca sells China-made medicines in over 70 countries.
Experimental drugs originating from China also feature in AstraZeneca’s pipeline, after the company turned to Chinese partners to license potential treatments for cancer, obesity, cardiovascular disease and more.
“We have no doubt China will consolidate its position as a global scientific powerhouse and make an even bigger difference for patients around the world in the coming years,” he wrote.
Probe pain
Yet while the mood music between Soriot, AstraZeneca and the Chinese government looks increasingly positive, the various probes into its local business have damaged the company’s reputation.
For one, other pharmaceutical companies are reluctant to hire anyone who’s recently worked at AstraZeneca due to a fear of contagion from the probe, according to sources familiar with the matter.
AstraZeneca did not respond to a Bloomberg request for comment.
AstraZeneca’s woes have inevitably triggered comparisons to GSK’s bribery scandal in 2012, which ultimately cost the company three billion yuan to settle. GSK eventually pared back from the Chinese market, shuttering a research site and divesting a manufacturing plant.
The circumstances are very different though, and AstraZeneca’s response compared to GSK’s is “night and day”, according to Field, who added that China needs the British drugmaker to fight diseases such as breast and lung cancers.
“I do not think they ever wanted to kick AstraZeneca out,” she said. The investigations may have been about China trying to make an example out of the company as part of a crackdown on potential fraudulent behaviour, Field added.
The latest probe follows separate fraud cases dating back to 2021 that led to the sentencing of 100 ex-Astra employees, who were accused of defrauding the national medical insurance claims by tampering with genetic tests.
Meanwhile, Wang’s whereabouts are not public. Having joined AstraZeneca in 2013, a year after Soriot became CEO, he was widely credited with cementing the company’s dominant position in China and was eventually promoted to lead all of its international operations.
Since his detention, AstraZeneca has overhauled its China leadership. Wang was replaced by Iskra Reic, a company veteran who most recently oversaw its vaccines and immune therapies unit.
In an interview with CNBC on Friday, Soriot said the Beijing project “started in our minds, in our plans much earlier” and is “not related at all” to the probe. BLOOMBERG
