AstraZeneca (LSE:AZN) shares recovered strongly on Wednesday after a Reuters report said there are “no discussions” with Bristol Myers Squibb (NYSE:BMY) over a possible merger, easing fears that had triggered one of the FTSE 100’s sharpest declines earlier this week.
The rebound came after investors reacted negatively to reports suggesting the two pharmaceutical companies were exploring a deal that could have created one of the world’s largest drugmakers.
Reuters source rejects merger claims
According to Reuters, a senior source familiar with the situation said there are no negotiations taking place between AstraZeneca and Bristol Myers Squibb.
“There is no deal between AstraZeneca and BMS. There never was a deal to be done, and there are no discussions between the companies,” the source told Reuters on Wednesday, speaking on condition of anonymity.
The comments directly challenged market speculation that emerged after weekend reports suggesting the companies had explored a possible combination. Reuters had previously reported that preliminary discussions had taken place but said it was unclear whether they had continued.
The clarification helped AstraZeneca recover part of Monday’s near-9% decline, its steepest one-day fall since 2020.
Investors questioned the benefits of a deal
Many analysts had struggled to identify a compelling strategic case for combining the two pharmaceutical groups.
AstraZeneca, with a market value of roughly $264 billion, and Bristol Myers Squibb, valued at around $133 billion, would have created a company worth almost $400 billion. However, many in the market argued that AstraZeneca had little to gain from such a transaction.
Jefferies described the reported proposal as “more than a head scratcher,” adding: “if there is one company that doesn’t need financial engineering, it’s AZ.”
Markus Manns, portfolio manager at Union Investment, told Reuters that the proposed merger “does not make strategic or financial sense” and compared it to “the pharmaceutical industry’s equivalent of the FIFA privatisation moment.”
UK shareholders remain focused on AstraZeneca’s standalone growth
For many UK investors, AstraZeneca’s existing growth strategy already offers a clear long-term investment case without the risks associated with a mega-merger.
Lucy Coutts, investment director at JM Finn, told Reuters that “the only advantage for AstraZeneca in this rumoured combination with BMS seems to be to accelerate its U.S. footprint and sales” and added that “BMS shareholders would be the winners of any combination with AZN.”
That sentiment was reflected in Monday’s trading, when AstraZeneca was among the FTSE 100’s biggest fallers while Bristol Myers Squibb shares moved sharply higher in the United States.
Regulatory obstacles would have been significant
Even if discussions had progressed, analysts believe a transaction of this size would have faced substantial regulatory scrutiny.
Both companies compete directly in key oncology markets through AstraZeneca’s Imfinzi and Bristol Myers Squibb’s Opdivo, while also marketing the only two approved anti-CTLA-4 cancer therapies.
Competition experts have suggested that significant asset disposals would probably have been required before regulators would approve any merger.
Strong fundamentals remain the key investment story
The merger speculation has also overshadowed AstraZeneca’s recent operational performance.
The company recently reported second-quarter earnings per share of $2.63, comfortably ahead of the $2.48 consensus estimate, while maintaining its ambition of generating $80 billion in annual revenue by 2030.
Alongside its recent New York Stock Exchange listing and plans to invest $50 billion in U.S. research, manufacturing and development by 2030, AstraZeneca continues to pursue expansion through organic growth rather than transformational acquisitions.
For UK investors, Wednesday’s recovery suggests the market is once again refocusing on the company’s long-term fundamentals rather than an acquisition that, according to Reuters’ latest report, was never under active discussion.
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