Astrazeneca: How a fraud investigation crashed a FTSE 100 giant
Not too long ago, pharmaceutical giant Astrazeneca reached a £200bn valuation—one of only a few London-listed FTSE 100 companies to do so. The major milestone was a testament to CEO Pascal Soriot’s strategic overhaul over the past decade, which has steered Astrazeneca away from its historic focus on respiratory and primary care toward a successful [...]
Not too long ago, pharmaceutical giant Astrazeneca reached a £200bn valuation—one of only a few London-listed FTSE 100 companies to do so.
The major milestone was a testament to CEO Pascal Soriot’s strategic overhaul over the past decade, which has steered Astrazeneca away from its historic focus on respiratory and primary care toward a successful portfolio of cancer drugs.
But that valuation has slipped by nearly a quarter in just two months. Astrazeneca’s market capitalisation has now fallen as low as £152bn.
So, where did it all go wrong for the FTSE 100 giant?
Where did it go wrong for Astrazeneca?
Shares in the FTSE 100 giant plunged last week when it emerged that Chinese authorities had deepened their investigation into the business.
Growing fears over an investigation into insurance fraud and data privacy breaches within its China operations have spooked investors.
For its part, the company has clarified that, for now, day-to-day leadership continues under Astrazeneca China’s general manager. However, details around Wang’s detention have remained murky, creating concern among investors.
“As a matter of policy,” Astrazeneca said, “we do not comment on speculative media reports including those related to ongoing investigations in China.”
The company faces further scrutiny as Chinese officials widen their investigation under a national anti-corruption campaign targeting healthcare. Among the allegations, former Astrazeneca employees are accused of falsifying genetic tests to secure reimbursement for the company’s lung cancer drug, Tagrisso.
Additionally, several current and former company executives are being investigated for potentially breaching data privacy laws and for the suspected illegal importation of certain cancer drugs – likely including Enhertu, Imfinzi and Imjudo – from Hong Kong.
Pharmaceutical rival GSK faced a similar scandal in 2014 and was fined around $500m by Chinese regulators over bribery allegations.
However, Shore Capital equity analyst Sean Conroy warned against comparing the two situations.
He said: “Importantly, [Astrazeneca] has reiterated that it is not aware that it is being directly investigated; until such point, we would caution people from drawing too many parallels between this and the bribery scandal that reared its head for GSK in 2014.”
Brokers say ‘buy’ the FTSE 100 giant
Shore Capital has maintained its ‘buy’ rating on the stock, seeing it as undervalued despite the growing uncertainty. “Q3 results next week could help to allay some of these concerns,” analysts said.
Astrazeneca is due to report its third-quarter results on Tuesday. Investors will be on the lookout for additional product approvals as well as the progress of newly-launched treatments.
Wall Street expects quarterly earnings of $1.01 (78p) per share, an increase of over 16 per cent year over year. Revenue estimates are also up, projected at $13bn (£10bn), annual growth of around 13.5 per cent.
At the half year point, Astrazeneca upgraded its revenue guidance thanks to strong underlying growth in product sales and Alliance Revenue within The company raised its total revenue and core EPS guidance for 2024.
But this “hasn’t been enough to give a further shot in the arm to market sentiment,” said Derren Nathan, head of equity analysis at Hargreaves Lansdown.
“At the third-quarter health check, the market is likely to be paying close attention to the pace of adoption of some core products, and there’s hope that recent approvals will provide a tailwind to growth,” he added.
Overall, analysts reckon the company is on track to hit its $80bn (£62bn) revenue target and a mid-thirties operating margin by 2030.
“Markets aren’t expecting any change to that longer-term steer, but some further reassurance wouldn’t go amiss. The same could be said about some further detail on the investigation by the Chinese authorities into AstraZeneca’s President in the region, Leon Wang,” Nathan said.
