Shares in AstraZeneca shot up in overseas markets yesterday as it emerged that it had held talks with Viagra maker Pfizer over a £150bn merger.
AstraZeneca has shares and bonds traded around the world, which reacted strongly to reports over the Bank holiday weekend that the two companies had been in merger discussions which would effectively be a £60bn takeover of the British company.
Yesterday it emerged that the talks had taken place several months ago, and that they had been abandoned with no current plans to resume, according to Bloomberg News.
However, the shares were still expected to shoot ahead due to hopes that, while no deal happened, the pair had at least been considering a tie-up.
Both companies have been in a phase of retrenchment over recent years, like many major drug companies struggling to strike new blockbuster medicine gold. AstraZeneca has seen its share price rise strongly under chief executive Pascal Soriot as its restructuring has included collaboration deals with specialist developers like Immunocore on cancer treatments.
A merger deal would create major cost-cutting opportunities, as well as severe job losses, probably in AstraZeneca’s 6,700-strong UK workforce. A tie-up would also spark renewed political problems for the British government due to the long-running concerns about control of Britain’s key industries going abroad. AstraZeneca has long been lauded as a key player in Britain’s high-value research industry, even while non-executive director Baroness Shriti Vadera was a Labour business minister under the previous government.
AstraZeneca’s US-listed stock, known as American depository receipts, gained as much as 6 per cent yesterday. AstraZeneca Pharma India shares were up a similar amount before losing some of their steam to close in the afternoon 4 per cent up.
Analysts said AstraZeneca’s cancer treatments may have attracted the approach, although others pointed out that its so-called “patent cliff”, the large number of its medicines falling out of patent, could put off Pfizer’s shareholders. “The consensus AstraZeneca model is hugely dependent on pipeline assumptions, as the base business will deteriorate massively by 2020 as several key products go off patent,” said ISI Group analyst Mark Schoenebaum.
AstraZeneca and Pfizer did not comment, but Mr Soriot and his chairman Leif Johansson will face tough questions at their quarterly results presentation on Thursday.