Pressure relieved on AZ as details of Chinese probe emerge

AstraZeneca's exposure to liability in a Chinese investigation into illegal drug imports appears to be much less than had been feared, according to new information in its fourth-quarter results update.

Rumours started swirling about problems for the drugmaker in China last Autumn after several workers were placed under investigation by the authorities, including the president of its Chinese operations Leon Wang, in connection with data privacy breaches and the import of unlicensed medicines.

AZ's latest update concerns the illegal drug importation allegations, with the company indicating that last month it received a notice from prosecutors and the Shenzhen City Customs Office "regarding suspected unpaid importation taxes" that it believes relate to its cancer drugs Imfinzi (durvalumab) and Imjudo (tremelimumab).

The company says the total unpaid tax amounts to around $900,000, which could result in a fine of between one and five times the amount unpaid – a maximum of $4.5 million – if it is found liable.

The relatively minor penalty amount has alleviated some of the uncertainty about the scale of the liability that AZ may be facing, and shares in the company were up around 4.5% at the time of writing.

The increase in the stock may also have been driven by a solid set of results for AZ in the last quarter of 2024, with revenues up 25% to $14.9 billion, driven by a 69% increase in alliance revenues from Daiichi Sankyo-partnered cancer drug Enhertu (trastuzumab deruxtecan) and asthma therapy Tezspire (tezepelumab), partnered with Amgen. Full-year group revenue rose 21% to $54 billion.

AZ booked $540 million from Enhertu in the fourth quarter, a rise of 54%, and $1.99 billion for the full year out of total worldwide revenues for the product of $3.75 billion. Tezspire brought in $213 million and $684 million, respectively, almost double what was achieved in 2023, out of global sales of $1.2 billion.

Chief executive Pascal Soriot said that it is possible that other cancer drugs may come into the scope of the Chinese investigation, including Enhertu, but – even if that is the case – the liability is expected to be roughly in the same area of magnitude if possibly a little bigger.

He also said the 2024 result was a "very strong performance" that has been backed up by "nine positive high-value phase 3 studies in the year, which coupled with increasing demand for our medicines in all key regions, will help sustain our growth momentum into 2025."

The company has set an ambitious target of driving annual sales above $80 billion by the end of the decade.