Astra-Zeneca to explore mega-merger with Gilead

Berlin According to an agency report, a megafusion could occur in the pharmaceutical industry. The British company Astra-Zeneca approached US biotech rival Gilead Sciences last month to sound out a possible merger, the Bloomberg news agency reported on Sunday, citing insiders. According to the report, there are still no formal talks about such a transaction.

A merger of Astra-Zeneca and Gilead would be the largest merger in the pharmaceutical industry to date. Astra-Zeneca would have to offer a total of more than $ 100 million for the American biotech company. Most recently, Gilead was valued at $ 96 billion.
Acquisition of Gilead would move Astra-Zeneca to the top five largest pharmaceutical companies in the world, with combined sales of approximately $ 46 billion in 2019. Astra-Zeneca most recently generated revenues of $ 24 billion, Gilead of $ 22 billion.

The British portfolio, which focuses heavily on cancer, respiratory and cardiovascular drugs, would be complemented by Gilead’s high-revenue antiviral drugs. The US group is by far the leading provider in this area – thanks in particular to its HIV and hepatitis C medication. However, Gilead’s attempt to gain a foothold in the oncology area has so far been less successful.

On the other hand, Gilead, with its active ingredient remdesivir, currently has the only medication that has shown at least some, if not yet a resounding, effect against Covid-19. Some analysts believe the average peak sales of up to $ 7 billion.

The two company heads, Astra Zeneca CEO Pascal Soriot and Gilead boss Daniel O’Day, who has been in office for a good year, know each other very well from their time together in top management at the Swiss pharmaceutical giant Roche.

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Skepticism in industry circles

In industry circles, however, the rumors about a merger of the two pharmaceutical companies are skeptical: Astra-Zeneca had been busy with many projects before the corona crisis, and now the company is working hard to bring a vaccine against Covid-19 onto the market as quickly as possible. In addition, it is not easy to thread such a big deal without the possibility of personal conversations. “We do not comment on rumors or speculations,” said a company spokesman on request.

Most recently, the pharmaceuticals merger wave was fueled by the takeover of Celgene by Bristol-Myers Squibb (with a transaction volume of just under $ 90 billion), Allergan by Abbvie ($ 63 billion) and the purchase of Shire by Japanese Takeda ($ 59 billion) .

The last of these three deals, Abbvie’s acquisition of Allergan, was agreed in June 2019 and closed a few weeks ago. The sector has traditionally been shaped by larger waves of mergers every three to four years. Meanwhile, small and medium-sized deals are occurring almost continuously, mainly because pharmaceutical companies are strengthening with the acquisition of smaller biotech companies.

Gilead, for example, most recently acquired cancer research companies Kite and Forty Seven, among others, and invested four billion dollars in the Belgian biotech company Galapagos.

It would be unusual that Astra-Zeneca, of all people, is now driving the merger wave, as the group has largely avoided acquisitions in the past two decades and is currently also growing organically very strongly. The group was created at the end of the 1990s through the merger of the Swedish pharmaceutical company Astra with the British company Zeneca, a spin-off from the ICI group, and has practically made only one major acquisition since then: the acquisition of the US biotech company Medimmune in 2007.

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Unlike almost all established pharmaceutical manufacturers, Astra-Zeneca never attempted to compensate for important patent expiries and subsequent sales losses in important medicines such as the cholesterol-lowering agent Crestor through acquisitions. Between 2011 and 2018, the group lost a third of its sales before the trend reversed. For a long time, investors therefore avoided the company’s shares.

Overcome weak phase

Frenchman Pascal Soriot, who has headed the British group since 2012, was determined to develop new medicines, especially against cancer, despite the weak phase. He had to deal with several setbacks in the beginning.

In 2014, the US competitor Pfizer tried to take over the British company for around $ 117 billion. At that time, Astra-Zeneca fought back with hands and feet. It was “a special experience” for everyone at Astra-Zeneca, Soriot told the Handelsblatt in an interview. “It was like a small village was under attack: everyone saw what they could do to defend themselves.”

The manager was successful and was able to fend off the takeover attempt, Pfizer gave up, and Soriot’s strategy has now paid off: the company has reported a whole series of important successes in recent years with new active ingredients and medicines for cancer, respiratory diseases and other diseases. The lung cancer drug Tagrisso in particular has now emerged as a very strong sales driver. With around 16 percent sales growth in the first quarter of 2020, Astra-Zeneca is now the fastest-growing big pharma group.

With a market capitalization of over 130 billion euros (around $ 145 billion), Astra-Zeneca was the most expensive member of the London stock exchange index FTSE-100 a few days ago and had even overtaken the previous heavyweights Royal Dutch Shell and Unilever. For analysts, Astra-Zeneca is one of the favorites among global pharmaceutical companies.

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The British pharmaceutical manufacturer is currently making headlines with its commitment to developing a vaccine against the coronavirus. Together with the University of Oxford, the British want to produce an effective vaccine this year, and human tests are already underway.

With the project, Astra-Zeneca demonstrates willingness to invest in completely new therapeutic areas. The group was previously not represented in the vaccine sector. Acquiring Gilead would in principle be another step towards infectious diseases, which should develop into a new focus for the pharmaceutical industry in the face of the corona pandemic. But it would also be a maneuver that would be more complex and complex than vaccine engagement in every respect.

More: Approval of remdesivir as a corona drug is delayed

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