AstraZeneca, the largest multinational pharma company in China, has reportedly made plans to separate its local business there in case geopolitical tensions worsen.
With the help of bankers, the British drugmaker has worked out a plan to potentially spin its China business into a separate entity listed in Hong Kong while retaining control, the Financial Times reports, citing people familiar with the discussions.
A separation might not eventually take place, the people said. One of the people said listing in Shanghai is also an option.
AZ doesn’t appear to be proactively moving toward a spinoff. One of the FT’s sources said AZ is making it a rainy-day plan to protect the remaining business politically if China cracks down on foreign companies, according to the FT. Keeping the unit at a distance could also allay investor concerns over China-related risks, the people said.
In response to Fierce Pharma, AZ said it doesn’t comment on market rumors.
AZ’s international and China president Leon Wang labeled the FT’s report as “misinformation” in response to local media outlet Yicai (Chinese). An English version of the financial news site translated Wang’s description into “rumor.” The original Chinese phrase connotes falsehood.
AZ may not be alone in drafting a China spinoff plan.
“Every multinational with a strong China business” seems to have considered a similar move, one senior Asia-based banker told the FT. “Even if it’s just the option to give you flexibility in the future, it’s worth thinking about.”
Earlier this month, venture capital giant Sequoia split its China arm into Hongshan. In the past, Sequoia has made numerous investments in China’s biopharma sector, including in AstraZeneca spinoff Dizal Pharmaceuticals. Back in 2017, AZ transferred the R&D capabilities of its Innovation Center China into Dizal, a joint venture with the state-backed Chinese Future Industry Investment Fund.
AZ is the largest Western pharma in China by sales and has the most business exposure to the country. Despite mounting pricing pressure, the China outfit generated $1.6 billion in sales for AZ in the first quarter, representing 15% of the company’s total revenue during the period.
The company has also built large manufacturing and supply facilities near Shanghai and is setting up an inhalant manufacturing plant and rare disease innovation center in Qingdao.
AZ CEO Pascal Soriot has regularly sung the praises of AZ’s progress in China and of China’s biopharma environment in general.
“It’s hard to miss that Chinese companies are innovating at an incredible speed,” Soriot said during an investor event on the sidelines of the American Society of Clinical Oncology meeting in early June. “Being present in China gives us both the opportunity to partner with them and help them potentially develop and commercialize their products globally, but it also gives us a first-hand experience of what is to come in terms of commercial competition.”
The CEO has visited China several times, including as part of a group of foreign representatives that met with the new Chinese premier Li Qiang in March.
China is “completely open” for pharma investment, Soriot said during a press call after returning from that trip.
“When you are a global company like AstraZeneca you have always to cope with geopolitical risk and you have to try to manage that without getting too involved,” Michel Demaré, the company’s chair, told the FT at the time.
Editor's note: James Waldron contributed to this story.
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