AstraZeneca is planning to separate its China business from the rest of the company and list it separately on Hong Kong’s stock exchange. This will protect AstraZeneca against rising geopolitical tensions.
Three people who are familiar with the discussions say that the Anglo-Swedish pharmaceutical company began to discuss the idea several months ago with bankers. It is now among a growing list of multinational companies considering this option.
The same people warned that a separation may not occur. One person said that listing the entity in Shanghai is also possible.
The discussion reveals the major restructuring that multinational corporations may be forced to undergo as a result of the growing friction in the relationship between China, the US, and its allies.
According to the plans AstraZeneca would separate its China operations into a separate entity, but retain control over the business.
AstraZeneca’s adviser said that the idea had been “on table” for several years, but it was pushed aside until recently due to a global decline in biotech stocks.
One senior banker in Asia said that “every multinational with a China-based business” seemed to have thought about a similar move. Even if you just want to have the flexibility for the future, this is worth considering.
A person familiar with AstraZeneca plans stated that listing a separate unit in Hong Kong or Shanghai would insulate the company from any Chinese moves to crackdown on foreign companies, as it would make it appear more plausible. This would provide a different source of capital.
The separate listing would also allow investors to feel more secure that their remaining investments are less exposed to China.
A consultant for pharmaceutical companies said that AstraZeneca could benefit from a domestic listing by gaining Beijing’s support and obtaining faster approvals of therapies developed in China.
This would not be the group’s first attempt to separate finance its China operations. AstraZeneca established a joint venture for research and development in 2017 with a Chinese investment fund. Dizal Pharmaceutical was listed two years ago in Shanghai.
AstraZeneca stated that it “did not comment on rumours, speculations or future strategies or M&A”.
AstraZeneca, the world’s largest pharmaceutical company by sales in China, generated $1.6bn there in the first quarter. The consultant said that “China is more significant to AstraZeneca” than other large pharmaceuticals. The company has expanded its Chinese business with the recent approval of cancer drugs and a drug for a rare condition.
The large population of China, who are increasingly affected by diseases due to pollution, smoking and westernised diets, makes it an attractive market for pharmaceutical firms. The Chinese government has speeded up the approval process for innovative treatments to encourage drugmakers not to limit themselves to older or generic drugs.
AstraZeneca also stated that it was interested in making deals with Chinese biotechs. Pascal Soriot, the chief executive of AstraZeneca, said that the company has “no limitations” in buying Chinese companies after returning from a visit to the country. It signed a $600mn partnership with Shanghai-based LaNova Medicines last month for the global license for a potential cancer drug.
Michel Demare, chair of the company, said in a statement last month that “when you are a multinational company like AstraZeneca, you always have to deal with geopolitical risks and you have try to manage this without getting too engaged.”