NEW YORK — AstraZeneca PLC has made a preliminary approach to rival drug maker Gilead Sciences Inc. about a potential merger, according to people familiar with the matter, in what would be the biggest health care deal on record.
The UK company informally contacted Gilead last month to gauge its interest in a possible tie-up, the people said, asking not to be identified because the details are private. AstraZeneca didn’t specify terms for any transaction, they said. While Gilead has discussed the idea with advisers, no decisions have been made on how to proceed and the companies aren’t in formal talks, the people added.
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AstraZeneca, valued at $140 billion, is the United Kingdom’s biggest drug maker by market capitalization and has developed treatments for conditions from cancer to cardiovascular disease. Gilead, worth $96 billion, is the creator of a drug that’s has received US approval for use with coronavirus patients.
Gilead 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, the people said.
A representative for Gilead declined to comment. A spokesman for AstraZeneca said the company doesn’t comment on “rumors or speculation.”
The overtures show how the pharmaceutical industry landscape could shift at a time when drug makers are racing to find effective treatments for COVID-19. If a deal goes ahead, it would surpass Bristol-Myers Squibb Co.’s $74 billion takeover of Celgene Corp. last year as the biggest-ever health care acquisition, according to data compiled by Bloomberg.
It would also be one of the 10 biggest merger-and-acquisition transactions of all time.
Shares of AstraZeneca have risen about 41 percent over the past 12 months, making it the best performer on a Bloomberg Intelligence index of major Western pharmaceutical companies. Shares of Gilead have gained about 19 percent over the period.
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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 Foster City, Calif., company has seen 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 authorization from the 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 $7.7 billion 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 $1 billion on the treatment this year alone.
AstraZeneca is helping to manufacture a COVID vaccine developed at the University of Oxford. The United States has pledged as much as $1.2 billion to support the efforts as part of Operation Warp Speed, a push to secure vaccines for America. The shot is expected to enter final-stage clinical trials in June.
Gilead was founded in 1987 by Michael Riordan, a doctor with a Harvard MBA who aimed to discover treatments for viral infections after a bout with dengue fever acquired in Southeast Asia. The company’s best-known successes include Tamiflu, the influenza treatment it helped develop.
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The company also makes Truvada,which 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 $117 billion approach from Pfizer Inc., 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 United Kingdom.
Health care dealmaking has been a rare bright spot as the global pandemic and resulting lockdowns have doused the market for mergers and acquisitions. Global M&A volumes are down about 45 percent 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 $100 billion in total, the data show, the lowest for a two-month period in at least 22 years.
AstraZeneca CEO Pascal Soriot, a former executive at oncology specialist Roche Holding AG, has transformed the company since taking the helm nearly eight years ago. At the time, it was struggling with an aging stable of drugs and a shortage of innovation.
AstraZeneca has since overtaken UK rival GlaxoSmithKline in market value.
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