Are we about to see a return for the pharma mega-merger?

There are rumours that a pharma 'mega-merger' – between AstraZeneca and Bristol Myers Squibb – is in the offing, ending several years without this type of deal.

A report in the Financial Times suggests that UK-headquartered AZ and BMS of the US have been in discussions about joining forces to create a $400 billion pharma giant, the fourth-largest by value, for a few months.

The last mega-mergers between big pharma companies were BMS' $74 billion deal with Celgene in 2019 and the $63 billion AbbVie/Allergan tie-up in 2020, and there was a steady stream of large-scale transactions in the previous couple of decades.

Since 2020, there have been some big acquisitions, such as Pfizer's $43 billion takeover of Seagen and AZ's absorption of Alexion for $39 billion. However, mega-mergers and the particular challenges they pose – months of regulatory and antitrust scrutiny, disruption to daily operations, and the challenges associated with integrating two culturally different workforces – seem to have fallen out of favour.

AZ has a market value of more than $250 billion, which is nearly twice that of BMS (around $133 billion), and shares in the UK's second-largest fell more than 6% after the FT article surfaced.

On the other hand, BMS shares rose by around the same margin in pre-market trading today. That may reflect enthusiasm amongst shareholders for an AZ deal, particularly as BMS is facing a $30 billion patent cliff between now and 2030 as drugs like anticoagulant Eliquis (apixaban) and blood cancer therapy Pomalyst (pomalidomide) lose market exclusivity.

The rumour will no doubt add to concerns about AZ shifting ever closer to the US market, having already listed on the New York Stock Exchange earlier this year, albeit whilst retaining its presence on the UK's FTSE 100 index, and revealed a $50 billion investment programme in the US in response to the Trump administration's threat of tariffs that dwarfs its plans in the UK and other countries.

More than a decade ago, AZ's chief executive – Pascal Soriot – fended off a hostile $106 billion takeover attempt by Pfizer, making a strong case for remaining independent with a pledge – which was achieved – to grow its annual revenues to $45 billion by 2023.

The company is now targeting annual revenues to $80 billion by 2030, half from the US market, from a level of just over $54 billion last year, but has said it can achieve that with its internal operations and does not need M&A to hit that target.

Photo by Shubham Dhage on Unsplash