Astrazeneca eyes Gilead in big pharma’s move beyond Covid-19

LONDON: Two drugmakers behind the industry’s most prominent responses to the Covid-19 pandemic are looking into the possibility of a combined future as economies emerge from lockdowns.

Astrazeneca Plc, co-developer of one of the fastest-moving experimental coronavirus vaccines, has made a preliminary approach to Gilead Sciences Inc, maker of the only Us-approved treatment, according to sources.

If they decided to pursue a merger, it would rank as the biggest deal ever in the sector.

The companies aren’t in formal discussions, according to the sources, and some investors expressed scepticism about the strategic rationale. Still, the mere suggestion of a blockbuster pharma merger is a sign that the industry is getting back to something resembling business as usual.

Successful Covid-19 treatments or vaccines are unlikely to be big moneymakers, meaning drugmakers face the return of old pressures to gain scale and boost innovation, or risk becoming targets.

Astrazeneca chief executive officer Pascal Soriot learned that lesson six years ago when Pfizer Inc launched an unsuccessful bid for the UK company that eventually reached Us$117bil in value. Now, Soriot can ponder a deal that would insulate the company against takeovers, making it one of the world’s biggest drugmakers.

“There’s no doubt when you’re in a position of strength it’s not a bad idea to try and consolidate that.”

Adam Barker

Astrazeneca shares fell as much as 2.6% in London, while the company’s 2024- and 2028dated euro-denominated bonds were little changed. Gilead rose about 3% in premarket trading in the United States, not seeing the kind of surge typical of takeover targets, as some investors question the feasibility of a tie-up.

A deal is unlikely given the limited strategic rationale for Astrazeneca at this time, and while Gilead is in the middle of a turnaround, Jefferies analyst Peter Welford said in a note.

Citi’s Andrew Baum raised the prospect of political objections in the Unted States and the UK.

Gilead was worth Us$96bil at Friday’s close, while Astrazeneca has a market value of about Us$140bil.

The UK company’s shares have surged during Soriot’s nearly eight-year tenure as the CEO has mounted an aggressive push into oncology and other profitable areas.

Since the Pfizer bid, Astrazeneca has “been the biggest success story in large pharma in terms of turning around its R&D productivity,” said Adam Barker, an analyst at Shore Capital Group Ltd.

“There’s no doubt when you’re in a position of strength it’s not a bad idea to try and consolidate that.” Pharma has long been a realm of addition through mergers and acquisitions. Astrazeneca was formed by the 1999 merger of Sweden’s Astra with British Zeneca. — Bloomberg