AstraZeneca (AZN) May Reportedly Spin-Off its Chinese Business
Per an article by the Financial Times (“FT”), AstraZeneca AZN drafted plans to spin-off its China business and list it separately in Hong Kong as a way to hedge itself against rising geopolitical risk.
Though the article also cautions investors that the spin-off may ultimately not happen, listing the entity in Shanghai is a possibility.
The spin-off is intended to enable AstraZeneca to protect itself from tensions between the United States and China, by carving off its Chinese operations into a separate legal entity while retaining control of the business. The listing in either Hong Kong or Shanghai will allow AstraZeneca to insulate itself politically from the Chinese government’s crackdown on foreign companies by making it a more plausibly domestic Chinese business. A domestic listing will also bolster the country’s support toward the company for drug innovations and secure faster marketing approvals for therapies.
In the year so far, shares of AstraZeneca have increased 10.9% compared to the industry‘s 2.0% growth.
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The FT article also claims that AstraZeneca has been reportedly discussing these options with banks for quite some time. However, the company’s management refused to comment ‘on rumours or speculations around future strategy or M&A’.
Being one of the most populous countries in the world, China is an attractive market for pharmaceuticals. The country houses an ageing population that suffers from several harmful diseases. The Chinese government accelerated the approval process for innovative medications and is trying to encourage drugmakers to expand beyond their generic treatments in the country.
AstraZeneca derives a substantial portion of its revenues from its Chinese operations. The company is the largest overseas pharmaceutical company in China in terms of sales. During first-quarter 2023, AstraZeneca generated around 15% of its total revenues from China that amounts to $1.6 billion.
AstraZeneca PLC Price
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Zacks Rank & Key Picks
AstraZeneca carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the overall healthcare sector include ANI Pharmaceuticals ANIP, Ligand Pharmaceuticals LGND and Novartis NVS. While ANI Pharmaceuticals and Ligand Pharmaceuticals sport a Zacks Rank #1 (Strong Buy), Novartis carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, the estimate for ANI Pharmaceuticals’ 2023 earnings per share (EPS) have increased from $2.42 to $3.31. During the same period, the earnings estimates for 2024 have risen from $3.76 to $4.32. Shares of ANI Pharmaceuticals are up 27.6% in the year-to-date period.
Earnings of ANI Pharmaceuticals beat estimates in each of the last four quarters, delivering an average earnings surprise of 68.64%.
In the past 60 days, the estimate for Ligand’s 2023 earnings EPS increased from $4.16 to $5.25. During the same period, the earnings estimate for 2024 has increased from $4.58 to $4.69. In the year so far, the shares of Ligand have risen 16.8%.
Ligand Pharmaceuticals beat earnings estimates in two of the last four quarters, while missing the mark on the other two occasions. On average, the company’s earnings witnessed an earnings surprise of 21.50%.
In the past 60 days, the estimate for Novartis’ 2023 and 2024 EPS have increased from $6.57 to $6.72 and $7.08 to $7.26, respectively. Shares of Novartis are up 12.3% in the year-to-date period.
Earnings of Novartis beat estimates in each of the last four quarters, witnessing an average earnings surprise of 5.15%.
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