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Summary
- AstraZeneca and Gilead were rumoured to be in potential merger talks
- The £200 billion speculated merger could have been the biggest ever M&A deal in the sector
- The pharma industry raises concern over declining inventory levels of essential medicines amid coronavirus crisis
- The pharma industry fears supply chain disruption in case of no trade deal with the EU
AstraZeneca and Gilead potential merger
The evergreen pharmaceutical sector has been in the limelight since the outbreak of the Coronavirus, as the whole world is eying the sector with high hopes to come out with a remedy to the deadly disease as early as possible. It has been reported that the British drugmaker AstraZeneca Plc was in talks with Gilead Sciences Inc, a US based pharmaceutical company for a potential merger. The £200 billion potential merger is supposed to be aimed at joining forces to develop a cure for the novel coronavirus and touted as the biggest ever M&A deal in the sector.
Recently, the antiviral drug, Remdesivir, developed by Gilead Sciences, was said to have improved conditions of Covid-19 patients and was approved by the governments around the world for the treatment of Covid-19 patients.
AstraZeneca Plc has been valued at around £110 billion, it is one of the companies which is on the forefront for developing a vaccine for the Covid-19. Once the trials of the vaccine are successful, AstraZeneca Plc would be releasing 1 billion doses of the novel coronavirus vaccine in September. AstraZeneca has been working closely with the University of Oxford and the British government in the development of the Covid-19 vaccine.
Right now, there seems to be no confirmation from the two companies for the possible merger, and even if something is going on it could be a difficult process, in present circumstances.
Recent Business performance of AstraZeneca
In the first quarter of the financial year 2020, the group witnessed an increase in financial performance despite unprecedented times caused by the novel coronavirus. The group witnessed an increase in the revenue across the portfolio of products and therapies in all locations.
In the first quarter of the financial year 2020, driven by an increase in the product sales and increased revenue from all therapy across regions, the group reported growth in total revenue by 16 per cent to USD 6,354 million. The revenue surged by 17 per cent on a constant exchange rate basis.
The reported total operating expenses surged by 9 per cent to USD 4,194 million and core total operating expenses went up by 7 per cent to USD 3,600 million in the first quarter of 2020.
The group’s reported earnings per share surged by 27 per cent on the actual basis to $0.59, while the core earnings per share stood at $1.05 for the period, reflecting an increase of 17 per cent on actual basis.
Stock price performance-AstraZeneca Plc
On 9th June 2020, at the time of writing (before market close, GMT 10:16 AM), AstraZeneca Plc shares were 1.66 per cent up against its previous day closing price, trading at GBX 8,336. Stock's 52 weeks High and Low is GBX 9,004.00 /GBX 6,137.00. At the time of writing, the share was trading 35.83% higher than its 52-week Low and 7.42% lower than its 52-week High. Along with an annual dividend yield of 2.59 per cent, the beta of the company stood at 0.5, reflecting lower volatility as compared to the benchmark index. The total M-Cap (market capitalisation) of the company while writing stood at £107,605.43 million.
About AstraZeneca
AstraZeneca Plc (LON:AZN) is a Cambridge, United Kingdom-based global, science-led biopharmaceutical company. The group focuses on discovering, developing, manufacturing and commercialising prescription medicines and has operations all over the world with business in over 100 countries. Though the company selectively pursue therapies in autoimmunity, neuroscience, and infection, its three focus areas are Oncology, Cardiovascular & Metabolic Disease (CVMD) and Respiratory.
Latest from the Pharma industry
Amid the unprecedented crisis caused by the novel coronavirus, the stockpiles of medical supplies have been used up entirely. According to some reports, the pharmaceutical industry has raised concern on that and has called the British government to look into the matter of decreasing inventory of critical medicines and advised them to buy and store in sufficient quantities. Drugmakers fear that if the UK is not able to strike a post-Brexit trade deal with the EU, the procurement of these critical medicines would not be feasible.
In case of a no-deal Brexit, the UK would leave the EU without any formal agreement. This implies that the things between the two would not be sorted out and the UK would leave the EU without any agreements. The UK’s decades-old relationship with the EU would disappear suddenly. This would mean that UK citizens would lose their rights in the EU and vice-versa. UK’s free trade with its neighbours would come to an end. According to media sources, the food and medical supplies would be impacted in the short term. This disruption of medical supplies can bring down the healthcare system in the UK.
The no-deal event would also lead to jammed ports and scarcity of fuel. In the UK, most of the drugs and medicines are procured from the EU. In addition, the UK would not have any further transition period to switch to newer policies from existing systems. The deadly virus has led to a huge surge in demand for medicines used in curing respiratory disorders. To exacerbate things further the supply chain has been disrupted due to the closure of factories and travel restrictions leading to a decline in exports and air freights.
The global pharmaceutical companies operating in the UK ramped up production of critical medicines which enabled the undisrupted supply of medicines through the crisis caused by the pandemic. However, the industry fears the disruption of the supply chain in the case of no-deal Brexit amid the coronavirus crisis.
The industry has, therefore advised the government to procure and stockpile critical medicines to bolster the healthcare system in the fight against novel coronavirus. In case of no-deal Brexit, the pharmaceutical industry expects the freight carriers and borders gateways between the EU and the UK to remain open at the end of the Brexit transition period.
However, the government believes that it has all the checks and balances in place to counter the expected contingencies. The novel coronavirus has taken an incredible toll on the UK economy, and the government must do whatever it takes to hedge against the second wave of the pandemic. It is learnt from the history of pandemics that the maximum amount of carnage happens in the second wave. In the modern world, no economy can survive without trade deals with other countries. The UK government must procure essential supplies and medicines as the fear of the second wave of the virus still exists.
