AstraZeneca and Gilead explore possibility of merger

Shares dip as it emerges there are no active talks on what would be politically sensitive deal

Shares of Gilead Sciences rose as much as 3 per cent on Monday after a report said the US drugmaker had been approached by Britain's AstraZeneca for a possible merger to form one of the world's largest drug companies.

AstraZeneca contacted Gilead last month but the US company, which is testing its drug remdesivir as a Covid-19 treatment, was not interested in combining with another big drugmaker, Bloomberg reported.

Gilead’s shares, which have risen about 18 per cent this year to the end of last week, pared some of their premarket gains after CNBC reported citing sources that the companies were not in active talks.

AstraZeneca’s shares fell 2.8 per cent on the FTSE 100 as investors contemplated a large payout and questioned the rationale of a deal that would create a company with a combined market value of about $232 billion, based on Friday’s closing prices.

A merger would also unite two drugmakers at the forefront of efforts to fight the new coronavirus but could be politically sensitive as governments seek control over potential vaccines or treatments.

Gilead’s remdesivir is the first drug to show improvement in Covid-19 patients in formal trials, while AstraZeneca is racing to develop a vaccine for Covid-19 through its partnership with Oxford University.

“[Gilead] may be on the verge of having one of the fastest growing products in the industry, if they can successfully establish profitable commercial pricing for remdesivir,” said SVB Leerink analyst Geoffrey Porges.

Any potential deal may suggest that AstraZeneca is looking to diversify away from its dependence on cancer drugs, he added.

Analysts also saw a deal as uncertain given the political environment. Citi analyst Andrew Baum said he anticipated that the US administration would likely seek to block any potential acquisition of any major US biopharma involved in the development of future therapeutics for the pandemic. – Reuters