AstraZeneca US shares jump as details of Pfizer talks are revealed

AstraZeneca led a rally in London pharmaceutical shares on Tuesday as UK investors reacted to news of a tentative $100bn takeover approach from Pfizer that would have been the biggest pharmaceuticals deal in industry history if accepted.

A person close to the situation confirmed to the Financial Times that informal talks took place between the Anglo-Swedish drugmaker and its US counterpart late last year but had since ended.

One prominent sector analyst said Pfizer was likely to revive its interest in the future, attracted by AstraZeneca's promising pipeline of experimental cancer drugs and the potential for big cost savings between the companies.

Shares in AstraZeneca were up 7.1 per cent at £40.51 in early London trading, topping the risers on the FTSE 100. GlaxoSmithKline meanwhile rose 4.9 per cent after news of the £14.5bn sale of its oncology unit to Novartis. Shire was up 5.1 per cent at £30.73.

The London market had been closed for Easter on Monday but Pfizer shares rose almost 2 per cent in New York, after the talks were first reported in the Sunday Times.

Andrew Baum, analyst at Citigroup, said he expected Pfizer "to push aggressively ahead with a second approach" for AstraZeneca.

Any deal would herald the return of megamergers to the pharmaceuticals sector after a period when they had appeared to fall out of favour with companies and investors.

Pfizer has a history of big acquisitions, such as its $68bn takeover of Wyeth in 2009 and its $56bn deal with Pharmacia in 2002.

The company had recently appeared more focused on divesting non-core operations and restructuring but Ian Read, chief executive, said last year he would "never say never to a large acquisition that made sense".

An acquisition of AstraZeneca would provide an outlet for the tens of billions of dollars in cash that Pfizer has accumulated overseas - avoiding the hefty tax bill that would be involved in repatriating it to the US.

However, the foreign acquisition of one of Britain's biggest and most prized companies would be sure to rekindle debate over the openness of UK takeover rules and spark concern over jobs and investment in the life sciences sector.

AstraZeneca, led by Pascal Soriot, who took over as chief executive in 2012, has been struggling with declining sales and profits resulting from the loss of patent protection of several of its most lucrative drugs.

However, its shares have climbed more than 20 per cent in the past six months amid rising optimism over a range of treatments in development for cancer and autoimmune diseases, such as diabetes.

Mr Baum said an acquisition of AstraZeneca would transform Pfizer's "competitive presence along the critical axis of immuno-oncology [and] autoimmune disease".

Others were more sceptical. Jeffrey Holland, analyst at Jefferies, said that, while Pfizer was likely to be looking for opportunities to spend its offshore cash, AstraZeneca was a "poor fit" and an unlikely target for the US company.

He said Pfizer was more likely to acquire generic and speciality pharmaceuticals companies to bolster its low-growth established products business as a prelude to a future spin-off.

Additional reporting by Andy Sharman

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