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The coronavirus pandemic put a stranglehold on big pharma dealmaking, but it looks like the logjam’s about to break. AstraZeneca (NYSE:AZN) has spoken with Gilead Sciences (NASDAQ:GILD) about forming a gigantic biopharmaceutical powerhouse.
The biggest deal yet
People familiar with the matter told Bloomberg that the big British drugmaker informally floated the idea with Gilead in May to gauge interest. No terms have been discussed, but this would be the largest deal the healthcare sector has ever seen.
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Gilead’s market cap ranged between $91 billion and $101 billion last month and most biopharmaceutical buyout offers come with 40% to 60% premiums. Before assuming the deal will happen, though, it’s important to realize Gilead’s not interested in selling, and the California headquartered company certainly doesn’t need help making money in this industry.
Hungry for profits now
Lynparza’s recent approval to treat prostate cancer and Tagrisso’s likely approval as a post-surgical adjuvant for early stage lung cancer patients will push Astra’s bottom line much higher in the years ahead. At the moment, though, the British pharma isn’t nearly as profitable as Gilead.
Although sales of Gilead’s lead hepatitis C antiviral drugs have been squeezed by competition, its HIV franchise, led by Biktarvey, helped Gilead deliver $8.2 billion in free cash flow over the past year. That was 481% more profits to pay dividends and acquire rivals than Astra’s operations produced over the same time frame.
The merger could also make AstraZeneca a COVID-19 powerhouse. The FDA recently authorized Gilead’s remdesivir for emergency treatment of COVID-19 and Astra’s prepared to produce 2 billion doses of a SARS-CoV-2 vaccine that could protect people from infection in the first place.
Cory Renauer owns shares of Gilead Sciences. The Motley Fool owns shares of and recommends Gilead Sciences. The Motley Fool has a disclosure policy.