After months of rumors drove up its share price, the Chinese drug company has unveiled a record licensing deal with AstraZeneca, only to see its stock tumble

Key Takeaways:

• Going into the deal, CSPC's earnings have been under pressure after its core drug business was hit by China's centralized procurement policies
• The company is accelerating its push into novel drugs for the global market under the new leadership of Cai Lei, who served in the U.S. research division and is the son of the firm's founder

Chinese companies in the drug discovery business have been haunted by a strange phenomenon for the past few months. After announcing large and lucrative licensing deals, their share prices have repeatedly plunged.

The counterintuitive reaction has been so pronounced since the second half of last year that it has been dubbed a curse on business development partnerships in China's innovative pharma sector.

And now CSPC Pharmaceutical Group Ltd. (1093.HK) has suffered the same setback. The Chinese biopharma revealed a much-anticipated deal with the multinational drugmaker AstraZeneca (NYSE:AZN) at the end of January, carrying an eye-popping value of up to $18.5 billion, only to be hit with a sharp stock selloff.

To some extent, this may be a straightforward case of "buy the rumor, sell the fact", in which the market prices in an anticipated event ahead of time. But digging a bit deeper, there could be other factors at play.

The cooperation pact gives AstraZeneca rights to CSPC's portfolio of anti-obesity drugs under development, as competition heats up in the global race for new and more convenient weight-loss treatments.

The two sides will jointly develop long-acting peptide drugs based on CSPC's technology for sustained drug release and its AI-driven discovery platform. AstraZeneca gets exclusive global rights outside Greater China to CSPC's injectable weight-management drugs, including one long-acting GLP-1R/GIPR agonist, with the serial number SYH2082, which is advancing into Phase One trials, as well as three preclinical programs.

The partners will also collaborate on four additional new programs, with CSPC retaining rights to these products in mainland China, Hong Kong, Macao and Taiwan.

GLP-1 weight-loss drugs have entered a new phase of development, with the emphasis now on multi-target agonists and oral formulations, stoking intensifying rivalry among pharmaceutical brands.

But SYH2082, the core asset in the CSPC-AstraZeneca collaboration, is already off the pace. Going forward, the developers must show that the product is effective while also speeding its progress through research and clinical trials. The partnership allows CSPC to tap into AstraZeneca's global R&D and commercialization network to manage those risks and boost the chances of success.

Under the deal, CSPC gets an upfront sum of $1.2 billion, second only to the downpayment secured by 3SBio (1530.HK) for a licensing deal between an overseas partner and a Chinese drugmaker. CSPC could also receive up to $3.5 billion in development milestones and up to $13.8 billion linked to sales targets, along with royalties on product sales that could reach double-digit percentages.

The deal's potential value of $18.5 billion sets a record for overseas licensing transactions by China's drug developers. But investors were seemingly disappointed when the news broke, despite the scale. CSPC shares plunged at the open, at one point falling more than 12%, before closing with a loss of 10.20% at HK$9.60. The group's drug platform subsidiary, CSPC Innovation (300765.SZ), also took a beating, sliding nearly 18% intraday and ending the session 15.72% lower.

Why did this record-setting deal fail to excite? High expectations have been priced in since last December when rumors of a major partnership between CSPC and AstraZeneca began swirling, driving the stock up about 38%. Therefore, much of the upside had already been absorbed. When the expectation was finally realized, short-term investors ran for the exits, triggering a pullback.

But deeper market concerns may also stem from CSPC's track record in corporate governance after an insider trading case involving executive director Pan Weidong and other prominent figures. In November 2025, Pan was fined the maximum 5 million yuan ($720,000) by China's securities regulator for share dealings in 2023 using privileged information about a planned group restructuring.

After learning about plans for CSPC Innovation to acquire CSPC Baike, Pan bought 2.74 million shares in CSPC Innovation for nearly 100 million yuan through a securities account held by NBPR, a wholly owned group subsidiary. The case also implicated three other former CSPC-affiliated executives, all of whom were penalized for related trades.

The involvement of multiple figures posed serious questions about the company's internal controls and governance standards.

Executive changes

CSPC's blockbuster licensing deal comes at a critical juncture, as revenue from its core finished-drug business has been severely squeezed by China's centralized procurement process for medicines, which is capping prices.

In the first three quarters of 2025, CSPC revenue fell 12.32% to 19.89 billion yuan from the same period a year earlier, while net profit slipped 7.1% to 3.51 billion yuan. The downturn followed a weak performance in 2024, when full-year turnover slipped 7.8% and net profit plunged 26.31%.

In response, the company shuffled its leadership last December to promote a sharper focus on innovative drugs, led by the son of the company's founder. Cai Lei, 45, joined CSPC in 2014 and previously served on the leadership team of the firm's U.S. R&D division, overseeing research, drug development and sales. He has now taken on the roles of vice chairman and chief executive officer at the firm founded by his father, Cai Dongchen.

The appointment signals a desire to accelerate the push into novel drugs and expand the firm's global reach. In recent years, the group has forged multiple licensing partnerships, with the total contract value of its outbound deals already exceeding $16.6 billion by the end of 2025. CSPC has secured more than 30 overseas clinical approvals worldwide, and 16 products have received fast-track or orphan-drug designations from U.S. regulators.

CSPC currently trades at about 25 times earnings, compared with a multiple of 56 for Hengrui Pharma (1276.HK; 600276.SH), which is also shifting from legacy medicines to innovative drugs. The $18.5 billion business deal marks a major milestone on CSPC's drug-discovery journey, but investor confidence will ultimately hinge on the company's ability to deliver those novel products and execute its international strategy.

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Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.