Would AstraZeneca really find itself contending with another megamerger offer, this time from Novartis? That’s the speculation on the street, and it apparently has investors jazzed enough to bid up the U.K. drugmaker’s shares by 6%, despite the signs pointing away from such a deal.
Of course, no such buy may be in the works, and the last time AstraZeneca saw megamerger interest--from Pfizer--CEO Pascal Soriot and British officials beat that bid off with a heavy stick. But after Citi analyst Andrew Baum issued a note last week citing AstraZeneca as a solid target for Novartis, Soriot faced buyout questions during Thursday morning’s earnings call.
"As to whether we would be exposed, we certainly have been very aware over the last few years that as we create value then at some point our pipeline becomes attractive," Soriot said during the call.
"Hopefully, it becomes attractive to our shareholders but, of course, it may be attractive to anybody."
Baum suggested that AstraZeneca’s new meds and near-term pipeline--particularly its cancer assets, including immunotherapy meds--would be attractive to Novartis, which recently emphasized the importance of its oncology business by splitting it out of its overall pharma division. Plus, Novartis is shopping its stake in Roche, and selling those shares could raise some $14 billion in cash that could help fund a megadeal.
But Novartis CEO Joe Jimenez has shown no sign of shopping for a megamerger. He has said that he’s interested in deals perhaps bigger than bolt-on buys, and with the company behind in the immuno-oncology arena, a purchase that beefed up its expertise there could be attractive. Then again, Jimenez has said he’s not convinced that a major immuno-oncology deal is warranted.
Meanwhile, AstraZeneca is scouting for its own acquisitions, aiming to build up its top line following a series of pipeline-focused deals. The company is said to be in the hunt for Medivation, which boasts a prostate cancer blockbuster in Xtandi, plus a couple of promising pipeline meds. Novartis, for that matter, is a rumored bidder as well.
Soriot has also been cutting costs to help offset sales losses as the company’s blockbuster statin med Crestor faces generic competition. That drug saw sales slide by almost 30% in Q2, and with more copycat meds now approved, Q3 is likely to be worse.
And to raise cash and shed extraneous products, AstraZeneca has been selling off rights to the company’s older drugs. The pare-down deals reflect an industrywide trend, as major drugmakers zero in on therapeutic fields where they believe they can profit most.
Soriot has been more aggressive than most, however, and that has raised some eyebrows among analysts and investors. Earlier this year, for instance, the company pawned off certain international rights to two cardiovascular drugs for $500 million; those same drugs brought in almost half that much in revenue in those markets last year.
Jimenez has done some similar restructuring to emphasize Novartis’ own strengths, namely its big asset swap with GlaxoSmithKline, in which it traded off vaccines for GSK’s oncology portfolio. That deal amped up the company’s cancer drug lineup and made it into one of the leading companies in the field. Legacy GSK meds helped Novartis turn in a respectable Q2 performance, analysts said, shoring up the company’s case for its new structure, which put Bruno Strigini in charge of the new Novartis Oncology unit.
- see the Reuters article
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