AstraZeneca plans to merge with Gilead

  •   10/06/2020 - 10h27
  •   DEHOUI Lionel

The announced merger between the British company AstraZeneca and the American company Gilead will create a new giant in the pharmaceutical industry. The value of this merger is estimated at more than $200 billion. That's a value far greater than that of MSD or Pfizer.

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AstraZeneca plans to merge with Gilead
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Why does AstraZeneca want to merge with Gilead?

According to Bloomberg, AstraZeneca AZN.L has approached Gilead Sciences GILD.O with the specific goal of a possible merger. This information was reported last Sunday, May 7th by sources very close to the case.

The aim of this operation would be to bring the two groups closer together in order to find vaccines or remedies against Covid-19. This is a disease caused by the new coronavirus. It has been raging for nearly 7 months and has caused more than 400,000 deaths worldwide.

According to Bloomberg, AstraZeneca contacted Gilead in May with its proposal. Unfortunately, the American rival stressed that it was not ready to merge with its competitor, but reserves the right to comment.

Furthermore, the market capitalization of the two companies would be $232 billion if they merged, considering their closing prices last week. This is well in excess of the $200 billion capitalization of the large Pfizer PFE.N and the $207 billion capitalization of Merck MRK.N.


Some criticisms and comments

The idea of merging the two companies has been questioned by some sources close to AstraZeneca. For them, Gilead's rescission treatment is not enough to prove that the American group deserves to merge with AstraZeneca. Rather, it could undermine the British giant's work in its search for a coronavirus vaccine.

In a similar vein, analysts at Jefferies noted that a deal between the two groups is unlikely. In their view, Gilead is not yet satisfied with its HIV research. As such, the group would like to continue its activities in this area in order to add value over time.


A merger of two groups with similar performances

Gilead's most widely marketed product is Biktarvy. It is a treatment for HIV with first quarter sales estimated at $1.69 billion. That's right!

Meanwhile, the "blockbuster" Tagrisso is AstraZeneca's flagship drug. It is a treatment for lung cancer, with sales of $982 million in the first quarter.

This year, the stock prices of both groups have rebounded considerably. This increase is justified by the new interest of investors in the health sector. An interest provoked by the race for treatment caused by the coronavirus pandemic.

In April, AstraZeneca shares hit an all-time high. In contrast, Gilead stock has remained in its 20% year-to-date rise