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AstraZeneca and Gilead negotiate a possible merger

AstraZeneca and Gilead negotiate a possible mergerAstraZeneca and Gilead negotiate a possible merger

Britain’s AstraZeneca has approached its American rival Gilead Sciences with a potential merger to create one of the world’s largest pharmaceutical companies, Bloomberg News reports, citing sources familiar with the matter..

The deal could bring together two of the world‘s leading drug manufacturers and strengthen the pharmaceutical industry’s impact on the novel coronavirus. The merger can be politically significant as national governments seek to control the production of potential vaccines or treatments.

AstraZeneca started negotiations with Gilead last month, but its American competitor was not then interested in merging with another major pharmaceutical company, Bloomberg said..

AstraZeneca spokeswoman said the company will not comment on rumors or speculation.

Gilead, the world’s largest HIV drug maker, declined to comment on published information.

In a merger, their market capitalization will be about $ 232 billion, based on the current value of the companies’ shares.

This would exceed the value of Merck and Pfizer by $ 207 billion and $ 200 billion, respectively..

Two sources familiar with AstraZeneca’s opinion have questioned the rationale for such a merger. In particular, they told Reuters that Gilead’s Craisivir for Covid-19 patients would not be a compelling reason to justify a multi-billion dollar deal that would distract AstraZeneca from working on a coronavirus vaccine..

One of the sources questioned the indicated timing. Given the potential impact of a successful vaccine on AstraZeneca’s share price, it does not need to strain to reach an agreement, especially when travel restrictions make it difficult to meet face-to-face negotiations..

While Gilead may look relatively inexpensive with a 12x P / E ratio and AstraZeneca may be interested in potential cost savings and decent free cash flow, Jefferies analysts do not see a deal likely..

«We believe Gilead sees its HIV business very undervalued», – said in a note from analysts. Experts believe that the company «would prefer to add value over time and conclude my own agreements».

Gilead’s biggest blockbuster is HIV drug Biktarvy, with $ 1.69 billion in Q1 sales.

AstraZeneca’s top-selling product is Tagrisso, a lung cancer drug that generated $ 982 million in first-quarter revenue.

Both stocks jumped this year as the healthcare sector attracted investor interest as drug makers seek to develop their own treatments and vaccines to fight the pandemic..

AstraZeneca shares hit a record high in late April, while Gilead shares are up 20% YTD.

Gilead, AstraZeneca and other drug manufacturers including Eli Lilly, Pfizer and Merck are involved in the development of vaccines or treatments for Covid-19, a respiratory illness caused by the new coronavirus.

It is unclear if the vaccine will work, but AstraZeneca’s partnership with the University of Oxford to develop it is one of the few initiatives supported by the headquarters of the President of the United States. Donald Trump to combat Covid.

Gilead has also been at the forefront of Covid-19 treatment.

Its antiviral drug remdesivir is the first drug to improve the condition in Covid-19 patients in formal clinical trials..

SVB Leerink estimates the drug has been approved for emergency use in patients with Covid-19 in several countries, including the United States and South Korea, with annual sales of more than $ 7 billion by 2022 if global countries stockpile the drug for future use. outbreaks.

The AstraZeneca-Gilead agreement would not be the first major pharmaceutical merger. American drug maker Bristol Myers Squibb completed its $ 74 billion acquisition of Celgene in November, and AbbVie buys botox maker Allergan for $ 63 billion.