AstraZeneca shares slide 7% after reports of Bristol Myers talks

AstraZeneca's shares plummeted 6.7% after reports of preliminary talks with Bristol Myers Squibb, with analysts questioning the logic of a potential tie-up.

AstraZeneca's shares fell sharply on Monday as analysts and investors questioned the logic of a possible tie-up with Bristol Myers Squibb after reports they held preliminary talks about forming one of the world's biggest drugmakers. Shares in ‌AstraZeneca were down 6.7% at 0722 GMT, the biggest drop on the FTSE 100 index, as ‌investors and analysts said Britain's biggest drugmaker had little obvious need for a transformative acquisition despite potential financial benefits.

A person familiar with the matter told Reuters that AstraZeneca and Bristol had held talks, confirming an earlier Financial Times report. On Friday, the two had ⁠a ​combined market capitalisation of nearly $400 billion, ⁠with AstraZeneca valued at $264.11 billion and Bristol Myers at $133.41 billion. "A combination with Bristol does not make strategic or financial sense," said ⁠Markus Manns, portfolio manager at Union Investment, an AstraZeneca shareholder. "Many past mega-mergers have destroyed value and there is no apparent need ​for Astra to do it," he added. While AstraZeneca this year completed a direct listing on ⁠the New York Stock Exchange, underscoring its focus on its biggest market and its aim of benefiting from higher U.S. valuations, a Bristol ⁠Myers ​deal would effectively mean a British company buying a major U.S. pharmaceutical champion.

Manns said AstraZeneca CEO Pascal Soriot had, in his 14 years at the helm, consistently prioritised research and development over cost-cutting. "A merger ⁠would deeply disrupt a well-run company with a full pipeline," he warned. Jefferies analysts said in a note they ⁠were puzzled by the reports ⁠of talks given AstraZeneca has a strong "growth and innovation profile". "If there is one company that doesn't need financial engineering, it's AstraZeneca," they wrote.