AstraZeneca shares fell more than 6% in early trading on Monday after reports emerged that the British pharmaceutical giant had held preliminary discussions with US-based Bristol Myers Squibb over a potential merger, a move that could create one of the world’s largest drugmakers.
A person familiar with the matter told Reuters that the companies had explored a possible combination, confirming an earlier report by the Financial Times.
The discussions could result in a deal in the near future, though the talks could also be delayed or fail altogether, according to the reports.
The prospect of a transaction surprised investors, who questioned why AstraZeneca would pursue a transformational acquisition at a time when its own business continues to deliver strong growth.
The shares fell by over 6% during premarket trading in the US as well.
Investors struggle to see strategic rationale
The market reaction reflected broader skepticism about the industrial logic behind such a combination.
“A combination with Bristol does not make strategic or financial sense,” Markus Manns, portfolio manager at Union Investment, an AstraZeneca shareholder, told Reuters.
“Many past mega-mergers have destroyed value and there is no apparent need for Astra to do it.”
Jefferies analysts led by Michael Leuchten also questioned the strategic benefits.
“Why is perhaps not yet clear to us: we suspect that most people will focus on the potential to establish an even bigger oncology powerhouse, with the resultant portfolio likely the broadest in the industry. However, beyond the regulatory hurdles we would argue that pipeline assets could be sourced elsewhere, as AstraZeneca has been doing, particularly in China.”
Chris Beauchamp, chief market analyst at IG, echoed those concerns while noting the political implications of a larger US footprint.
Expert View
Though a rare example of a big UK firm buying a smaller US firm is something to warm the cockles of the British heart, it risks the departure of yet another national champion, and in any case the pair’s large cancer divisions is a major hurdle to a successful deal. BMS has struggled since 2023, and some Astra shareholders will wonder at the need to do expensive M&A when their shares are doing so well.
Chris Beauchamp
A deal would reshape the pharmaceutical industry
Based on Friday’s closing valuations, AstraZeneca was worth about $264.1 billion, while Bristol Myers Squibb carried a market capitalization of roughly $133.4 billion.
A merger would create a pharmaceutical group valued at nearly $400 billion, making it the world’s fourth-largest listed drugmaker by market capitalization and one of the biggest healthcare deals ever completed.
Such a transaction would also significantly expand AstraZeneca’s presence in the United States, a market that already accounts for nearly half of the company’s revenue.
The company has committed to investing $50 billion in US research and manufacturing by 2030 and completed a direct listing on the New York Stock Exchange in June.
A takeover of Bristol Myers would further strengthen its American footprint while reviving concerns in Britain about major listed companies shifting their focus away from the UK.
The direct listing itself had already been viewed as a setback for London’s equity market.
Growth ambitions already on track
AstraZeneca has set an ambitious target of generating $80 billion in annual revenue by 2030, up from $58.7 billion last year.
Despite those expansion plans, Chief Executive Sir Pascal Soriot recently suggested that acquisitions were not essential to achieving the company’s objectives.
Speaking to reporters last week, Soriot said AstraZeneca did not “need M&A to deliver” its 2030 revenue target.
Instead, the company has focused on licensing agreements and partnerships, particularly in China, to strengthen its pipeline of experimental medicines.
Any acquisition of Bristol Myers would dwarf AstraZeneca’s previous largest transaction—the $39 billion purchase of rare disease specialist Alexion in 2021.
Bristol Myers faces mounting challenges
For Bristol Myers Squibb, a deal could offer an opportunity to address years of underperformance.
The US drugmaker has struggled since its $74 billion acquisition of Celgene in 2019 failed to deliver the expected returns.
At the same time, the company faces significant revenue pressure as several of its blockbuster medicines approach patent expiry.
That backdrop has led some investors to view Bristol Myers as a potential takeover target, although combining two companies with extensive oncology portfolios would likely invite close scrutiny from regulators.
With both companies among the world’s leading cancer drug developers, analysts expect any merger proposal to face significant antitrust hurdles before receiving approval.
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