Drugmaker AstraZeneca (NASDAQ:AZN) has drafted plans to spin off its China business and list it as a separate company in Hong Kong or Shanghai, the Financial Times reported. The move comes amid growing geopolitical tensions between the U.S. and its allies and China. AstraZeneca intends to retain control of the separate China entity.
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Potential Spin-Off of China Business
The listing of AstraZeneca’s China business as a separate company in Hong Kong or Shanghai is expected to shield it from any possible crackdown by the Chinese government on foreign companies. Further, a domestic listing might help the Chinese unit to obtain financing or raise capital. Moreover, the spin-off could improve investor sentiment about AZN due to lower exposure to China.
AstraZeneca reportedly started discussing the idea of separating its China operations with its bankers several months ago. In fact, an adviser to the company told the Financial Times that the company has been contemplating the spin-off for years, but postponed it until recently due to a global decline in biotech stocks. Nonetheless, sources cautioned that the separation of the China business might not ultimately happen.
AstraZeneca is the largest drugmaker in China. The company generated $5.74 billion or 13% of its overall revenue from China in 2022. Last year, at an event in Wuxi to celebrate the company’s 30 years of operations in China, AstraZeneca’s president in China and global vice president Wang Lei said that the company intends to “Build a local, transnational company that loves the Communist Party and loves the country.”
Is AstraZeneca a Good Stock to Buy Now?
AstraZeneca reported better-than-anticipated first-quarter earnings despite a decline in its COVID-related sales. This month, three analysts reiterated a Buy rating on AZN.
Overall, Wall Street has a Strong Buy consensus rating on AZN stock based on four unanimous Buys. The average price target of $79.67 implies about 6% upside potential. Shares have advanced nearly 11% so far in 2023.
Interestingly, SVB Securities analyst Andrew Berens is the most accurate analyst for AZN. Copying the analyst’s trades on this stock and holding each position for one year could result in 96% of your transactions generating a profit, with an average return of 13.4% per trade.
