AstraZeneca US M&A idea would ail more than cure

Pfizer

03/08/2026 10:48

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Neil Unmack
LONDON, Aug 3 (Reuters Breakingviews) - Pascal Soriot has not historically been big on transatlantic mega-mergers: back in 2014 AstraZeneca’s AZN.L CEO thwarted a hostile bid for his own company from U.S. rival Pfizer PFE.N. Even so, he has held talks on a $380 billion combination with Bristol Myers Squibb BMY.N, the Financial Times reported on Sunday. Given such a move would offer plenty of risk without much return, it too may end up in the dustbin.
Reports of a potential deal with BMS feed into Astra’s long-standing desire to bulk up in the United States. The group wants half its revenue by 2030 to derive from the U.S., which is both the world’s most lucrative drugs market and one of its least efficient. Astra now lists its shares in New York as well as London, and Soriot has lamented European governments’ reluctance to pay top dollar for medicine.
Besides supercharging Astra’s U.S. operations to 54% of combined total sales, a deal might create scale. It would fashion the broadest oncology business in the market, combining Astra’s Tagrisso, for example, with BMS blockbuster Opdivo. There would also be plenty of cash savings, as both businesses would need fewer salespeople. Assume savings at 10% of the companies’ combined operating expenses this year, in line with what one analyst told Breakingviews appears possible, and pre-tax savings could reach $5 billion.
That’s where the logic of a deal ends. Since fending off Pfizer, Astra has thrived by boosting investment in drugs and hitting bold revenue targets. BMS, by contrast, is a business facing sharp falls in sales as drugs lose exclusivity - Opdivo revenue is set to nearly halve by 2030 to $5 billion, per Visible Alpha. Astra has a few years' respite before it has to face such a patent cliff, with Tagrisso losing exclusivity after 2030. Meshing the two would create a bigger, earlier crunch. Jefferies analysts described the idea of a merger as “more than a head-scratcher”.
BMS’s shrinking pie makes the numbers hard to justify. Assume a purchase by the larger Astra, with a 30% premium. BMS would be worth $205 billion including debt. Factoring in BMS 2030 operating profit of $12.3 billion, according to analysts polled by LSEG, plus the $5 billion of synergies, and the after-tax return in 2030 would be around 7% - which is below the sector’s 8% cost of capital.
Astra is growing healthily in the United States anyway, with 42% of first-half sales coming from the U.S. Soriot’s goal of $80 billion revenue by 2030, while ambitious, is not impossible: Jefferies analysts estimate he may narrowly beat that target. Astra shares’ 7% fall on Monday morning sends a handy message that this mega-deal seems like an unnecessary distraction.
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CONTEXT NEWS
AstraZeneca’s shares fell on August 3 following reports the previous day that the UK-listed pharma group had held merger talks with U.S. peer Bristol Myers Squibb.
Shares in AstraZeneca were down 6.7% as of 0722 GMT. A person familiar with the matter told Reuters that AstraZeneca and Bristol had held talks, confirming an earlier Financial Times report.
On July 31, the two had a combined market capitalisation of nearly $400 billion, with AstraZeneca valued at $264 billion and Bristol Myers at $133 billion.
AstraZeneca declined to comment when contacted by Breakingviews.

(Editing by George Hay; Production by Oliver Taslic)
((For previous columns by the author, Reuters customers can click on UNMACK/neil.unmack@thomsonreuters.com))