Dating Game: AstraZeneca Courts Gilead
AstraZeneca (LSE: AZN) approached Gilead Sciences (Nasdaq: GILD) last month about a possible merger; the two companies are not currently in formal talks, as first reported by Bloomberg.
Although unlikely, this deal would be the largest health care merger in history. AZN, valued at $140 billion, is the U.K.’s biggest drugmaker by market capitalization and has developed treatments for conditions from cancer to cardiovascular disease. GILD, worth $96 billion at Friday’s close, is the creator of a drug that’s received U.S. approval for use with coronavirus patients.
The pharmaceutical industry landscape is shifting at a time when drugmakers are racing to find effective treatments for Covid-19. If a deal moves forward, it would surpass Bristol-Myers Squibb Co.’s $74 billion takeover of Celgene Corp. last year. The deal would also rank among the 10 biggest M&A transactions of all time.
The pandemic may have suggested a new opportunity in antivirals to AZN, said John Rountree, a managing partner at London pharmaceutical consulting firm Novasecta Ltd., and companies from around the world have demonstrated a willingness to collaborate on responses.
“Perhaps AstraZeneca has a belief that antivirals are going to be a much more important domain than previously believed, owing to the recent Covid-19 tragedy, and snapping up one of the clear leaders in that field will give it a platform for future growth beyond oncology,” he said.
The bottom line: “Most large biopharma deals arise from a position of distress, not strength, and Gilead today is far from distressed. … It may suggest that AZN is looking to leverage its valuation and current strategic position by making a large acquisition to diversify away from dependence on its blockbuster oncology franchise. Other targets, such as perhaps Biogen, Amgen, or Alexion, may be equally suitable for these purposes, and could prove more amenable to overtures.” — SVB Leerink analyst note
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