AstraZeneca eyed a merger with Gilead Sciences

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AstraZeneca eyed a merger with Gilead Sciences

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AstraZeneca informally contacted with the Gilead Sciences last month to display its interest in this tie-up.  If the transaction were to take place, it would be the biggest transoceanic merger yet. This deal would unite two of the leading players in the fight against coronavirus.

A spokeswoman for AstraZeneca said the company did not comment on rumours or speculation. Gilead did not comment or respond to this merger news. Gilead has discussed the proposal with their advisers, but no decisions have been taken on.

The British drug maker’s Chief Executive Officer Pascal Soriot called his counterpart at Gilead, Daniel O’Day, on May 9 to suggest the companies explore a merger, people familiar with the matter said on Monday, asking not to be identified because deliberations are private.

AstraZeneca, valued at $140 billion, is the U.K.’s biggest drugmaker by market capitalization. The company developed treatments for patients of cancer to cardiovascular disease. Whereas, Gilead is the creator of the drug worth $96 billion at Friday’s close.

AstraZeneca (AZN) shares dropped by more than 2% on Monday in London. Even as the FTSE 100 (UKX) index rose after the UK-based company made an initial approach last month to US firm Gilead (GILD). These two big pharmacy companies have a combined stock market value of approx. $140 billion. Gilead rose as much as 3.3% in trading in the U.S. The stock is still more than a third lower than its 2015 highs.

Gilead’s antiviral drug Remdesivir has been approved for the treatment of Covid-19 patients by the government. Remdesivir is clinically tested and result as it could improve the condition of coronavirus patients. Remdesivir has an emergency use authorization from the U.S. Food and Drug Administration. It is found in some early studies that it could shorten hospital stays for people with Covid-19. SVB Leerink recently forecast that sales of the drug may reach $7.7 billion in 2022.

AstraZeneca deal with Gilead is likely to given the limited strategic rationale at this time, and while Gilead is in the middle of a turnaround.

Political, Strategic Hurdles faced by AstraZeneca Gilead deal:

  • A deal is unlikely given the limited strategic rationale for AstraZeneca at this time, and while Gilead is in the middle of a turnaround
  • AstraZeneca has a decent pipeline and an “operating leverage thesis” that is fueled by top-line growth
  • Struggle to see either company’s motivation to continue talks
  • U.S. government would likely try to block any acquisition of a major U.S. biopharma company that is involved in pandemic therapeutic development
  • Even greater political opposition seen from the U.K. government

AstraZeneca-Gilead Deal to Face Political, Strategic Hurdles

Both the Big Pharma companies performed very well over the past years. Shares of AstraZeneca have risen about 41% over the past 12 months. While the stock of Gilead has risen by more than 15% over the same time period.

Gilead Revenue

Total revenues for the fourth quarter of 2019 were $5.9 billion compared to $5.8 billion for the same period in 2018. Net income for the fourth quarter of 2019 was $2.7 billion, or $2.12 per diluted share, compared to net income of $3 million, or $0.00 per diluted share, for the same period in 2018. Non-GAAP net income for the fourth quarter of 2019 was $1.7 billion, or $1.30 per diluted share, compared to $1.9 billion, or $1.44 per diluted share, for the same period in 2018.

 

Full-year 2019 total revenues were $22.4 billion, compared to $22.1 billion for 2018. Net income for 2019 was $5.4 billion, or $4.22 per diluted share, compared to $5.5 billion, or $4.17 per diluted share, for 2018. Non-GAAP net income for 2019 was $8.5 billion, or $6.63 per diluted share, compared to $8.7 billion, or $6.67 per diluted share, for 2018. (Source: Gilead Science)

(Source: Business Quant)

Gilead Revenue by Business Vertical
Graphical representation of Gilead Revenue by Business Vertical

AstraZeneca Revenue

In the first quarter, AstraZeneca reported revenue of $5.49 billion, a YoY rise of 6.04%, and $92.57 million ahead of the consensus estimate. However, excluding the impact of divestitures, the company reported a 21% year over year rise in revenue. New medicines such as Calquence, Farxiga, Brilinta, Fasenra, Lynparza, Imfinzi, and Tagrisso together reported an 83% ($900 million) YoY increase in revenue. (Source: AstraZeneca)

AstraZeneca plc. is a British-Swedish multinational pharmaceutical and biopharmaceutical company that engages in the research, development, and manufacture of pharmaceutical products. The Company focuses on innovative science and leadership in three main therapy areas:

  • Oncology
  • Cardiovascular, Renal and Metabolism
  • Respiratory diseases

Gilead Sciences Inc. is an American biopharmaceutical company headquartered in Foster City, California. The company focuses on the discovery, development, and commercialization of innovative medicines. Gilead recognizes that the development of innovative medicines for life-threatening diseases is only one aspect of improving public health. The company is doing internal research and development, as well as through collaborations with academic and industry partners.

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