SHANGHAI (Reuters) - Chinese e-commerce giant Alibaba Group Holding Ltd (N:BABA) has scrapped plans to inject its pharmacy business into a Hong Kong-listed affiliate, citing regulatory uncertainties over the deal as well as over China's broader healthcare industry.
The affiliate, Alibaba Health Information Technology Ltd (HK:0241), said in a filing on Friday that a time limit for the deal to go ahead had been reached on Thursday. The firm said it had not applied to extend it, effectively terminating the plan.
China has been launching a raft of new regulations as it tries to overhaul its healthcare market, creating a sometimes complex business environment for the hospital operators, drug firms and medical device companies targeting an overall healthcare bill estimated to hit $1.3 trillion by 2020.
In April last year, Alibaba said it wanted to inject its pharmacy operations into Alibaba Health in a $2.5 billion deal to consolidate its healthcare enterprise and ride a boom in online health-related business.
However, regulators have grown increasingly cautious about the sale of online drugs, while Alibaba Health itself has come under fire for its role operating a government-linked drug tracking platform.
China's drug watchdog suspended the platform in February after an outcry by domestic pharmacy chains who complained the role gave Alibaba Health an unfair advantage over rivals.
Alibaba Health said uncertainties over the deal, as well as regulatory changes in the wider healthcare market, were behind the decision to not pursue the plan.
"There are currently substantial regulatory uncertainties in relation to the medical and healthcare industry," it said in a filing to the Hong Kong stock exchange.
Alibaba will instead look to separately inject a portion of its health food, dietary supplements and nutritional products business into Alibaba Health, the latter said. That business is currently operated by Alibaba's online platform Tmall.
A Hong Kong-based spokesman for Alibaba Group Holding declined to comment.
