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AstraZeneca seen as tricky takeout target after setback

August 2, 2017

With AstraZeneca (AZN) reeling from the failure of its critical Phase III Mystic lung cancer trial and recently-quelled rumors of company chief Pascal Soriot, some companies may think it’s time to snap up the company. But, that might be harder to accomplish, analysts suggest.

It was only three years ago that AstraZeneca and Soriot fended off pharma giant Pfizer (PFE) and its $119 billion offer. Even though AstraZeneca is seen by many to be in a weak position now, it’s unlikely that Pfizer will look to open its wallet for the U.K.-based company. Nor are companies such as Novartis (NVS), Sanofi (SNY) and GlaxoSmithKline (GSK) looking to make such a big acquisition, Reuters noted this morning.

Citing an unnamed banking source, the industry is unlikely to see any “mega-mergers” this year, at least until there is greater certainty on how the U.S. Congress will amend the federal tax code. The banking source, Reuters reported, said the pharma industry is in a “wait and see” mode right now when it comes to large-scale M&A.

Some companies may want to make a bid for AstraZeneca to gain access to its pipeline of oncology drugs such as Imfinzi, Tagrisso or acalabrutinib, but, Reuters pointed out that Pfizer is the key to whether or not any company will actually make a move on AstraZeneca. One unnamed banker the news agency spoke with said companies that may be eying AstraZeneca will wait to see what Pfizer does next as far as M&A goes.

“Pfizer has taken a break on M&A for now and no-one expects them to make another move for AstraZeneca. But M&A is like a game of chess and nobody will go after AstraZeneca until Pfizer picks its next target,” the unnamed banker told Reuters.

Pfizer may make a move soon though. The company missed its revenue predictions for the quarter. Sales were negatively impacted by falling demand for its older drugs. The company also said its pneumonia vaccine Prevnar saw sales drop by 8 percent during the quarter. In early May, analysts were suggesting that Pfizer needed to make another big acquisition in order to spur growth.

It’s also unlikely that GSK will actually make a play for AstraZeneca. Last week, Emma Walmsley, GSK’s chief executive officer, streamlined the company’s developmental programs by killing more than 30 preclinical and clinical programs. Additionally, Walmsley announced the company was going to allocate 80 percent of its research-and-development budget to respiratory and HIV/infectious diseases.

There are also some additional political concerns in the United Kingdom. Lawmakers in that country are concerned about what an acquisition of a large company like AstraZeneca could do to British employment. They are concerned about large-scale job losses, Reuters said.

Soriot told Reuters that it’s common for takeover talk to occur after a company sees a notable trial failure. But, he also said that if Mystic had hit its endpoints, then analysts would also speculate whether or not the company was in play due to the potential revenue streams.

“Any company that has a very good pipeline, like we do, is of course attractive. But if Mystic was positive, I’m sure you’d be asking me the same question,” Soriot told Reuters.

While AstraZeneca hit a big snag with Mystic, the company has seen some positive news snagging two Breakthrough Therapy Designations from the U.S. Food and Drug Administration this week, an announcement that its EGFR tyrosine kinase inhibitor Tagrisso met Phase III endpoints in a lung cancer trial. Additionally the company struck a deal worth up to $8.5 billion with Merck (MRK) to collaborate on combining AstraZeneca’s PARP inhibitor Lynparza with Merck’s PD-1 inhibitor Keytruda to test against multiple cancer types.

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