AZ may spin off its Chinese business, says report

Ryan Mac

AstraZeneca is looking at spinning out its Chinese operation and listing it in Hong Kong or Shanghai to insulate the business from rising geopolitical tension, according to a Financial Times report.

The drugmaker wants to make sure its increasingly important Chinese business, which has been a strategic priority for AZ under chief executive Pascal Soriot and accounted for $1.6 billion of the group’s $10.6 billion in sales in the first three months of this year.

China has expanded rapidly in recent years to become the second-largest pharma market globally after the US, driven by a massive ageing population with rising spending power as well as efforts by state and regional governments to speed up access to new therapies – particularly in oncology, where AZ is very strong.

While growth has slowed of late amid the economic downturn worldwide, China is still a key territory for both new drug launches and pipeline-boosting deals alliances both for AZ and other big pharma groups.

In the last few weeks alone, AZ picked up new approvals in China for Soliris (eculizumab) in generalised myasthenia gravis, Koselugo (selumetinib) for neurofibromatosis, and lymphoma therapy Calquence (acalabrutinib), and just a few days ago it signed a partnership with Chinese biotech Cholesgen aimed at discovering new cholesterol-lowering drugs.

According to the FT – which says it heard of the plans from three people familiar with the matter – AZ has been discussing its move with bankers for months and is one of a growing number of multinationals considering such a separation. The newly listed company would remain under the direct control of AZ.

The news has emerged as the US and China are holding bilateral talks in an attempt to stabilise a relationship that has become increasingly tense over the status of Taiwan, which Beijing insists should be part of greater China, and expansion in the Pacific region. The US has pledged to defend Taiwan if an attempt to take control of it militarily takes place.

Meanwhile, the EU and US have claimed that China is lending tacit support to Russia in its invasion of Ukraine, and tit-for-tat disputes that have resulted in electronic technologies being banned from use in vital infrastructure on both sides have raised the threat of a trade war.

The FT noted that there is no guarantee that a separation will take place, but such a move could help insulate AZ from any moves by China to crack down on foreign companies whilst also unlocking another source of funding.

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