AstraZeneca shares fell nearly 7% on Monday after a report said the British drugmaker had held merger discussions with Bristol Myers Squibb, raising questions among investors over the strategic merits of a deal that would create one of the world’s largest pharmaceutical companies.
AstraZeneca’s London-listed shares dropped as much as 6.7% to 11,804 pence, underperforming a broadly flat FTSE 100 index. Bristol Myers Squibb rose 2.7% in pre-market trading after closing Friday at $65.31, close to a 52-week high.
The Financial Times, citing people familiar with the matter, reported that the companies had held discussions over recent months but said negotiations could still be delayed or fail to result in an agreement. Neither AstraZeneca nor Bristol Myers Squibb commented on the report.
A merger would create a pharmaceutical group worth almost $400 billion based on current market values, combining AstraZeneca’s market capitalisation of roughly $264 billion with Bristol Myers Squibb’s $133 billion valuation.
The report comes as AstraZeneca is pressing ahead with an ambitious expansion strategy under Chief Executive Pascal Soriot, including a planned $50 billion investment in U.S. manufacturing and research facilities and preparations for a direct U.S. stock market listing aimed at attracting higher equity valuations.
Analysts at Jefferies questioned whether such a transformational acquisition would fit with AstraZeneca’s existing strategy.
”We are a bit perplexed,” the brokerage said, noting that AstraZeneca already has one of the strongest growth and innovation profiles in the global pharmaceutical sector.
Jefferies said the combination could strengthen the companies’ oncology franchises and improve cash generation for research and development, but argued the strategic rationale for AstraZeneca shareholders was unclear.
The brokerage also warned that any transaction would likely face close antitrust scrutiny because of the companies’ significant oncology portfolios. It added that Bristol Myers Squibb’s upcoming patent expiries could dilute AstraZeneca’s long-term growth profile, even if the merger proved accretive to earnings in the near term.
Both companies recently exceeded earnings expectations.
Bristol Myers Squibb reported second-quarter earnings per share of $2.04, beating analysts’ forecasts of $1.61, while revenue rose to $12.97 billion against expectations of $11.71 billion. The company has gained nearly 48% over the past year, supported by stronger earnings and progress in expanding its oncology and immunology pipeline through partnerships, including agreements with BioNTech and Hengrui Pharma.
AstraZeneca posted second-quarter earnings per share of $2.63, ahead of analysts’ estimates of $2.48, while revenue of $15.38 billion was broadly in line with market expectations.
Soriot has previously resisted takeover interest, most notably rejecting Pfizer’s $118 billion bid in 2014. Since then, AstraZeneca has more than quadrupled in value, driven by strong growth in oncology, rare diseases and biopharmaceuticals.
Investors are now looking ahead to the companies’ next earnings updates. Bristol Myers Squibb is scheduled to report third-quarter results on Oct. 29, followed by AstraZeneca on Oct. 30. Any announcement on a potential merger before then would likely dominate discussions with investors and reshape guidance for both companies.
