Gilead shares rise 5% on report of AstraZeneca's interest in megamergerGilead shares rise 5% on report of AstraZeneca's interest in megamerger
FILE PHOTO: The company logo for pharmaceutical company AstraZeneca is displayed on a screen on the floor at the NYSE in New York

(Reuters) – Shares of U.S. drugmaker Gilead Sciences Inc rose over 5% in premarket trading on Monday after a report it had been approached by Britain’s AstraZeneca for a possible merger to form one of the world’s largest drug companies.

AstraZeneca’s shares fell 2.4% on the FTSE 100 as investors contemplated a large payout and questioned the rationale of a deal that would create a company with a combined market value of about $232 billion, based on Friday’s closing prices.

A merger would also unite two drugmakers at the forefront of efforts to fight the new coronavirus but could be politically sensitive as governments seek control over potential vaccines or treatments.

Gilead’s remdesivir is the first drug to show improvement in COVID-19 patients in formal trials. Shares of the company have risen about 18% this year through Friday’s close.

“(Gilead) may be on the verge of having one of the fastest growing products in the industry, if they can successfully establish profitable commercial pricing for remdesivir,” said SVB Leerink analyst Geoffrey Porges.

Any potential deal may suggest that AstraZeneca is looking to diversify away from its dependence on cancer drugs, he added.

Analysts also saw a deal as uncertain given the political environment.

Citi analyst Andrew Baum said he anticipated that the U.S. administration would likely seek to block any potential acquisition of any major U.S. biopharma involved in the development of future therapeutics for the pandemic.

The Bloomberg report said AstraZeneca contacted Gilead last month, but Gilead was not interested in combining with another big drugmaker.

AstraZeneca is also racing to develop a vaccine for COVID-19 through its partnership with Oxford University.

(Reporting by Ludwig Burger in Frankfurt, Keith Weir in London and Manas Mishra in Bengaluru; editing by Jan Harvey, Jason Neely and Sriraj Kalluvila)