Skip to Content
Stock Analyst Update

What to Make of Astra Zeneca-Gilead Merger Reports

We are not making any changes to our fair value estimate or moat rating for either company after their unconfirmed merger discussion.

Mentioned: ,

Bloomberg reported over the weekend that AstraZeneca (AZN) informally approached Gilead Sciences (GILD) about a potential merger last month, but we're not making any changes to our Astra or Gilead fair value estimates or moat ratings based on the unconfirmed discussions. Combining a $140 billion market cap Astra with a $100 billion Gilead would be a record-breaking merger in healthcare (Bristol-Myers Squibb's Celgene acquisition in 2019 was valued at $74 billion), although there is no confirmation that the firms are still considering such a move, and it would be a clear break from Gilead's strategy to focus on small deals. Also, Astra fought off an offer from Pfizer in 2014 and is on a strong growth trajectory, without the need to supplement cash flows to this extent.

That said, given the size of both Astra and Gilead, we think there could be a surprising amount of overlap in strategy without the need for significant divestments, if such a deal were legitimately in the works. For example, Astra's strong oncology portfolio has minimal direct overlap with Gilead's mostly development-stage oncology pipeline. In immunology, Astra's newer asthma biologics--like Fasenra and phase 3 drug tezepelumab--could be joined by pipeline drugs for pulmonary fibrosis in the Gilead/Galapagos collaboration. COVID-19 exposure is also complementary; Gilead's antiviral treatment remdesivir is already being used following solid phase 3 results, and Astra/Oxford's leading vaccine program (poised to enter phase 3 in the United States next month) and Astra's antibody program (to enter testing this summer) would round out their collective coverage of key treatment and prevention strategies. Also, Astra CEO Pascal Soriot and Gilead CEO Daniel O'Day served together at Roche in the late 2000s; Soriot arrived in 2006 from Sanofi-Aventis just as O'Day moved from Roche Pharma to the diagnostics side of the business.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

Karen Andersen does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.