Analysts ‘perplexed’ over Big Pharma merger report

The people who make sense of things for a living don’t know what to make of this one: Analysts were baffled yesterday by a Financial Times report that rival drugmakers AstraZeneca and Bristol Myers Squibb are in talks to pull off one of the largest mergers in Big Pharma history.

The merger might not come together but, if it does, the combined entity would become the world’s fourth-largest drugmaker by market capitalization, worth $400 billion, per FT. Neither company commented on the report.

That don’t impress investors much: AstraZeneca’s stock tumbled ~7% yesterday as shareholders booed the prospect of the UK’s second-most valuable public company merging with US-based Bristol Myers, which may have trouble on the horizon:

• The US drugmaker’s growth is expected to dip next year as patents on its top-performing medications expire.
• Meanwhile, AstraZeneca’s business is booming.

“Given the strength of AZ’s growth and innovation profile, we are a bit perplexed,” Jefferies analysts said of the potential merger.

One potential explanation: AstraZeneca may want more US business, which currently accounts for nearly half of its revenue. Also, its combined pipeline with Bristol Myers would likely create the industry’s biggest cancer drug portfolio, per Jefferies.

That could attract harsh antitrust scrutiny, but in the US, now’s the time—mergers have surged under the Trump administration.—ML