This article only represents the author's own views.
Drugs giant AstraZeneca Plc (AZN.US) has turned in a strong annual profit performance and broken new records for China sales, but what really stood out for investors was a small paragraph in the middle of the earnings statement. Tucked away under the headline figures and forward guidance in last week’s earnings report was a brief update about a Chinese investigation into AstraZeneca that has been weighing on investors’ minds. The multinational had been notified that it could face a fine of up to $4.5 million over allegations that some of its drugs were smuggled from Hong Kong into mainland China, evading $900,000 in import duties. The company said it was fully cooperating with the Chinese authorities and did not name any staff implicated in the inquiry. However, the case could be part of an investigation into sales practices involving AstraZeneca’s former head of China operations, who has slipped out of the public eye since being detained for questioning last year in a case that triggered a tumble in the drugmaker’s share price. At the time, shareholders were spooked by the risk that AstraZeneca could become mired in a messy and costly scandal, a decade after China slapped a record fine on drugmaker GSK for bribery charges.
In its latest statement, AstraZeneca said it was informed by Shenzhen authorities in January that it faced a fine of up to five times the value of unpaid import duties. It named the products in question as Imfinzi and Imjudo, used in combination to treat liver and lung cancers. One of the drugs has been approved in Hong Kong but had not gained clearance for sale in mainland China.