AstraZeneca approaches Gilead about potential merger

AstraZeneca has made a preliminary approach to rival drugmaker Gilead Sciences Inc. about a potential merger, according to people familiar with the matter, in what would be the biggest healthcare deal on record.

The U.K.-based firm 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. Although Gilead has discussed the idea with advisors, no decisions have been made on how to proceed and the companies aren’t in formal talks, the people added.

AstraZeneca, valued at $140 billion, is the U.K.’s biggest drugmaker by market capitalization and has developed treatments for conditions including cancer and cardiovascular disease. Gilead, worth $96 billion at Friday’s close, is the creator of a drug that has received U.S. 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 drugmakers 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 healthcare acquisition, according to data compiled by Bloomberg.

Shares of AstraZeneca have risen about 41% over the last 12 months. Shares of Gilead gained about 19% over the period.

Gilead has attracted investor interest as its antiviral drug for COVID-19, remdesivir, worked its way through clinical trials in recent months. The Foster City, Calif.-based 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 U.S. 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.

AstraZeneca — which is helping to manufacture a COVID vaccine developed at the University of Oxford — is no stranger to large-scale, politically sensitive mergers and acquisitions. In 2014 it fended off a $117-billion approach from Pfizer Inc., a deal that attracted attention from U.S. lawmakers as it would have allowed New York-based Pfizer to lower its tax bill by redomiciling in the U.K.