AstraZeneca has made a preliminary approach to rival drug maker Gilead Sciences about a potential merger in what would be the biggest healthcare deal.
The UK company is reported to have informally contacted Gilead last month to gauge its interest in a possible tie-up. AstraZeneca did not specify terms for any transaction.
While Gilead has discussed the idea with advisers, no decisions have been made on how to proceed and the companies are not in formal talks.
AstraZeneca, valued at $140 billion (Dh514.2bn), is the UK’s biggest drug maker by market capitalisation and has developed treatments for conditions from cancer to cardiovascular disease.
Gilead, worth $96bn at Friday’s close, is the creator of a medicine that has received US approval for use with coronavirus patients. It is not currently interested in selling to or merging with another big pharmaceutical company, preferring instead to focus its deal strategy on partnerships and smaller acquisitions.
A representative for Gilead could not be reached for comment outside of regular business hours. A spokesman for AstraZeneca said the company does not comment on “rumours or speculation”.
The overtures show how the pharmaceutical industry landscape could shift at a time when drugmakers are racing to find effective treatments for Covid-19. If a deal goes ahead, it will surpass Bristol-Myers Squibb’s $74bn takeover of Celgene last year as the biggest healthcare acquisition, according to Bloomberg.
It would also rank among the 10 biggest M&A transactions of all time.
Shares of AstraZeneca have risen about 41 per cent over the past 12 months, making it the best performer on a Bloomberg Intelligence index of major western pharmaceutical companies. Shares of Gilead gained about 19 per cent over the period.
Gilead has attracted investor interest as its antiviral drug for Covid-19, remdesivir, worked its way through clinical trials in recent months.
The stock is still more than a third lower than its 2015 highs. The company has registered a steady decline in sales in its hepatitis C franchise and is trying to reinvigorate its drug development pipeline.
Remdesivir, which has an emergency use authorisation from the US Food and Drug Administration, has been shown in some early studies to shorten hospital stays for people with Covid-19. SVB Leerink recently forecast that sales of the drug may reach $7.7bn in 2022.
Gilead has been dispensing early rounds of the drug for free, leading some investors to question how the company plans to make money from it in the future. Chief executive Daniel O’Day has said the company may spend $1bn on the treatment this year alone.
AstraZeneca is helping to manufacture a Covid-19 vaccine developed at the University of Oxford.
The US pledged as much as $1.2bn to support the efforts as part of Operation Warp Speed, a push to secure vaccines for America. The shot is expected to enter phase three clinical trials in June.
Gilead was founded in 1987 by Michael Riordan, a doctor who sought to discover treatments for viral infections after a bout with dengue fever acquired in South-East Asia. The company’s best-known successes include Tamiflu, the influenza treatment it helped develop.
The company also makes Truvada, a medicine that can help prevent HIV, as well as drugs for liver disease and inflammation. Gilead employs about 12,000 people, according to its website.
AstraZeneca is no stranger to large-scale, politically sensitive M&A. In 2014 it fended off a $117bn approach from Pfizer, a deal that attracted attention from US lawmakers as it would have allowed New York-based Pfizer to lower its tax bill by redomiciling in the UK.
Healthcare dealmaking has been a rare bright spot as the global pandemic and resulting lockdowns have weakened the market for mergers and acquisitions. Global M&A volumes are down about 45 per cent this year, according to data compiled by Bloomberg, and announced deals have been falling apart at a steady pace.
Excluding minority investments, dealmaking in April and May barely topped $100bn in total, the data shows, the lowest two-month period in at least 22 years.
AstraZeneca chief executive Pascal Soriot, a former executive at oncology specialist Roche, has transformed the company since taking the helm about eight years ago. At the time, it was struggling with an ageing stable of drugs and a shortage of innovation.
He has championed the development of Lynparza, which was initially approved for ovarian cancer but has also proved useful for treating other forms of the disease. AstraZeneca has overtaken UK rival GlaxoSmithKline in market value.
Last year, AstraZeneca sealed its biggest transaction in more than a decade, agreeing to pay as much as $6.9bn to buy into a promising breast cancer treatment developed by Japanese drugmaker Daiichi Sankyo.
The UK company reached a deal this month with Accent Therapeutics to potentially spend more than $1.1bn collaborating on novel oncology therapies.
AstraZeneca shares have also been boosted by positive data from trials of its blockbuster lung cancer drug Tagrisso.