Shire is suddenly the talk of the town as investors and investment banks publicly mull a match-up with AstraZeneca. The U.K. drugmaker's stock gained 7 percent today after UBS said AstraZeneca could bid for Shire at a 40 percent premium and still create value. And this comes after big gains last Friday on rumors that Pfizer might put in a bid.
What's UBS's thinking? The Swiss bank said its analysis showed that even at a 40 percent premium, Shire would boost AstraZeneca earnings by 2 percent to 9 percent from 2009 to 2011. But here's the caveat: In raising money to help buy Shire, AstraZeneca might run into issues "with certain loss scenarios on Seroquel and Nexium," big sellers that go off patent soon. Moreover, UBS stated, "A bid would to us confirm that many of AstraZeneca's problemsÂ are in fact related to long-term maintenance of margins." Really.
Other analysts said that though an AstraZeneca buyout of Shire would be more plausible than a Pfizer deal, AstraZeneca and Shire aren't a natural fit. The merger talk may say more about investors' desire for a big-news deal than about what's really going on. Plus, deal speculation is more fun than worrying about which economic shoe will drop next.
ALSO: AstraZeneca could face its first Seroquel challenger next week as a patent expiration puts Teva Pharmaceutical Industries in position to launch its version of the drug at risk. The med delivered $4 billion to AZ's top line last year. Report