The share market was not favorable for the renowned British drug company AstraZeneca (AZN.L) on Monday. The shares of AstraZeneca fell by 2.1% in the early trades of Monday after reports came in that the company had approached Gilead Sciences (GILD.O), its U.S. rival, for a possible merger.
The merger, if it actually took place, would bring together two of the largest drug companies in the world. When combined, the companies would have the market capitalization of nearly$232 billion, according to the closing share prices on Friday.
The merger would have also united two drug makers who are at the forefront of the efforts to fight the ongoing health crisis. However, it could have been a politically sensitive decision as the governments would want to gain control over potential treatments or vaccines.
In one of his research notes, UmerRaffat, the Evercore ISI analyst, had questioned the motives of the British group that is seeking to tie up with a company that is not even growing at the same pace as itself. He asked why a company is growing at ten percent interested in another company that is only registering growth in low single digits.
However, Raffat also mentioned that Gilead’s low net-debt position would let the so-called suitor go for a more leveraged bid to achieve a definite increase in earnings per share. AstraZeneca had reportedly contacted Gilead in May, but the U.S. drug manufacturer did not show any interest in the merger.
Early research indicating that Calquence, the cancer drug from Astra, might help the hospitalized pandemic patients get over the worst phase of the disease increased the U.S. traded shares of the company on late Friday, but this positive sentiment was gone too soon.