(March 21): AstraZeneca plc will invest US$2.5 billion (RM11.06 billion) in a new research centre in Beijing, in a major show of commitment to China just months after the company’s top executive there was detained by authorities. 

The hub — AstraZeneca’s second in the country and a collaboration with the Beijing government — will focus on early-stage research and include an artificial intelligence lab. The investment over five years also covers collaborations with biotechs and a hospital as AstraZeneca tries to capitalise on the booming local sector, where Big Pharma is jostling to secure the next blockbuster to emerge.

Chief executive officer Pascal Soriot has frequently talked up the scientific promise of China. Friday’s announcement came as he met Beijing’s mayor Yin Yong, who according to Chinese media urged Soriot in December to expand AstraZeneca’s research and development in the capital.

Even so, the timing is striking. Though details remain scant, Chinese authorities are investigating some of Astra’s current and former employees over alleged law breaches around drug imports, data privacy and insurance reimbursement. The drugmaker confirmed last year its China president, Leon Wang, was detained as part of the probe.

Rather than withdraw, as rival GSK plc effectively did when hit by a Chinese investigation more than a decade ago, AstraZeneca is upping its investment.

The decision reflects AstraZeneca’s belief in Beijing’s life sciences ecosystem and the company’s commitment to the country, Soriot said in a statement.

It also represents something of a mood shift. As its troubles mounted in China, Soriot moved last year to bulk up AstraZeneca’s US business. That was shortly after Donald Trump’s election victory, and the strategy fitted the then president-elect’s expected focus on boosting domestic manufacturing.

But the fresh China investment shows Soriot also has no intention of backing away from the world’s second-largest economy. Astra has built up a substantial presence, with a life sciences innovation campus in the eastern city of Wuxi, and a US$1 billion investment fund together with a state-owned bank.

Shares of AstraZeneca traded 1.1% lower on Friday. They were up about 13% over the past 12 months through Thursday’s close.

The agreements announced on Friday include a partnership with the Beijing Cancer Hospital and deals with biotechs Harbour BioMed and Syneron Bio. Astra will also launch a joint venture for vaccines development and manufacturing with BioKangtai, focusing on respiratory and other infectious diseases.

Soriot has also been invited to join the Beijing International Business Leaders Advisory Council, the company said.

AstraZeneca has already agreed a series of deals with Chinese biotechs including a US$2 billion deal with CSPC Pharmaceutical Group Ltd and the US$1.2 billion acquisition of Gracell Biotechnologies Inc.

Beijing will be just its sixth strategic R&D centre globally, and its second in China to go with its Shanghai site. The new hub will be at Beijing’s BioPark, where international pharmaceutical companies are opening offices. Astra expects its Beijing workforce to grow to 1,700 employees.

China’s probe shocked investors, hitting the company’s shares as fears grew about potential hefty fines. Soriot told reporters in November Astra has strong compliance mechanisms in China, but that it can’t police every single employee. The company has since put in place new measures including field-based compliance officers to more closely monitor staff, he said. 

In January, Astra said it had received an appraisal opinion from the Shenzhen city customs office regarding suspected unpaid import taxes, likely relating to cancer medicines Imfinzi and Imjudo. The drugmaker said it could be fined as much as US$4.5 million — a figure that reassured investors.

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