RBC splashes cold water: AstraZeneca (AZN.US)'s acquisition of BMY.US (BMY.US) is “extremely unlikely”, and differences in valuation and antitrust are the biggest obstacle

The Zhitong Finance App learned that investment bank RBC said that AstraZeneca (AZN.US)'s potential acquisition of BMY.US (BMY.US) is currently unlikely to happen.

RBC analyst Trung Huynh wrote in a research report on Monday, “In our opinion, it may be very difficult for the two parties to agree on value perceptions.” “AstraZeneca has previously shown that with its goal of reaching $80 billion by 2030, it has a clear independent development path, and the shareholders of Bristol-Myers Squibb are facing headwind pressure from the patent cliff. In our view, both sides need a strong economic and strategic basis to support this merger. We need to see more substantial progress before we think a deal is possible.”

Prior to the publication of the research report, media reported on Sunday that AstraZeneca and Bristol-Myers Squibb had preliminary discussions on a potential merger that would create one of the world's largest pharmaceutical companies. The deal will expand AstraZeneca's market share in the US while creating a pharmaceutical giant with a combined market capitalization of nearly $400 billion.

The share price of Bristol-Myers Squibb was basically flat on Monday, while AstraZeneca's stock price plummeted 9%.

According to Huynh's analysis, the deal, which could take 18 months to complete, faces potential issues, including antitrust risks, as the two companies have significant overlap in the field of oncology. AstraZeneca will also inherit Bristol-Myers Squibb's “patent cliff” for drugs including Eliquis (2026-2028), Opdivo (2028-2031), and Orencia (2028).

Huynh wrote in the research report, “There is significant overlap between the two sides in the field of oncology (particularly immuno-oncology, IO), which may trigger a thorough antitrust review; we believe there may be a divestment of assets.” The bank gave Bristol-Myers Squibb the “same as the market” rating, with a target price of $64.

Huynh also said that he would like to know why AstraZeneca needed large-scale mergers and acquisitions after AstraZeneca had previously stated that it was not necessary to carry out such a huge deal.