PA ANALYSIS: Could AstraZeneca be the next big takeover target?

Added 27th July 2017

Witnessing AstraZeneca's share price dive Thursday morning has given some investors a sense of déjà vu and sparked ideas that Britain's second largest pharma firm could be vulnerable to another takeover bid.

PA ANALYSIS: Could AstraZeneca be the next big takeover target?

On Thursday, the pharma giant’s half year results were eclipsed by a much more devastating piece of news – the failure of its lung cancer drug trial. 

The trial is the first in a string of tests to be completed later this year and throughout 2018 as part of AstraZeneca’s Mystic project, which measures the efficacy of various drugs developed by the firm in attaining progression free-survival in patients with diseases like lung cancer, bladder cancer, leukaemia and breast cancer.

The Mystic setback had an immediate impact on the firm’s share price, sending it crashing down by 15% and erasing more than £10bn off its market value.

Importantly, it provoked further speculation of AstraZeneca being poised for a takeover.

Rumours about AstraZeneca as a potential M&A target have swirled for years now.

"Whereas the threat of a potential takeover lit a fire under Unilever to simplify its business model, AstraZeneca and its investors seem to have put all their eggs in one basket, namely the success of its Mystic project."

Famously, it came close to being acquired by American pharma kingpin Pfizer for £69.4bn in 2014.

At the time, non-executive chairman Leif Johansson said that AstraZeneca would “continue building on the momentum we have already demonstrated as an independent company”, promising a pipeline of new innovative drugs and further growth.  

At around £43 per share, its shares were around £12 lower than Pfizer’s offer of £55 per share.

Three years later, has AstraZeneca delivered on its promise to shareholders?

Whereas the threat of a potential takeover lit a fire under Unilever to simplify its business model, AstraZeneca and its investors seem to have put all their eggs in one basket, namely the success of its Mystic project.

Some investors have been waiting for the other shoe to drop for some time now. 

Liontrust’s equity income team predicted earlier this year that there could be disappointment with AstraZeneca’s innovations in the immuno-oncology space and cut its exposure accordingly, from 5% 12-months ago to its current 0.8%.

Back in February, co-manager of the Liontrust Macro Equity Income fund Jamie Clark argued that too much was riding on the outcome of the Mystic trials, drawing parallels with Bristol Meyer’s own fall from grace.

Bristol Meyers, once believed to have an unassailable lead in the I/O space, was “priced at a steep premium to peers with little room given to the possible limits of I/O and the risk of future disappointments”. The same can be said of AstraZeneca, he argued.

Clark’s co-manager Stephen Bailey reiterated the same point Thursday morning, arguing now more than ever Britain’s second largest pharma company looks poised for a takeover.

“The impact of Mystic on AstraZeneca’s share price was always going to be explicitly binary,” said Bailey.

Kames Income Hub

home_research_centre

Vincent McEntegart, manager of the Kames Diversified Monthly Income Fund, explains how he aims to deliver a stable and sustainable income of 5% p.a.*, paid monthly, by investing in a range of asset classes

Square Mile Research

Premier Multi Asset Global Growth - Alex Farlow
Premier Multi Asset Global...

Talking Factsheets is a video service for users...

Visitor's Comments Add your comment

Add Your Comment

We won't publish your address

About Author

Kristen McGachey

Senior Reporter

Kristen joined Last Word Media and the world of financial journalism in April 2016, leaving behind a career in a legal publishing firm as a senior researcher turned assistant editor.

This native Angelino initially moved to the UK in 2008 to complete her undergraduate studies at the University of Nottingham. She subsequently obtained a Masters degree in Philosophy with Literature from the University of Warwick.

Profiles

Viewpoint

Investment Strategy

Feature

Tweets

Events

PA Edinburgh 2017
PA Edinburgh 2017

Thursday 7 September
Balmoral Hotel, Edinburgh

PA Alternatives 2017
PA Alternatives 2017

Tuesday 12 September
Sofitel St James, London  

PA Dublin October 2017
PA Dublin October 2017

Tuesday 10 October
Westbury Hotel, Dublin

PA US 2017
PA US 2017

Tuesday 17 October
Furniture Makers' Hall

OTHER STORIES FROM LAST WORD...