What's going on?

Reports surfaced over the weekend that AstraZeneca � the UK’s biggest pharmaceutical company � is looking to join forces with US biotech Gilead in a potential merger.

What does this mean?

Most of the time, AstraZeneca�s focus is on cancer treatments and cardiovascular drugs. But the pandemic has prompted the $140 billion company to look into whether any of its existing medications can help treat coronavirus, as well as pushed it to help developers at the University of Oxford manufacture their own potential vaccine.


Gilead � which primarily specializes in HIV medication � has developed a drug that instead might tackle coronavirus head on. And as that drug�s been going through clinical trials to prove it works � while also being approved for emergency use in several countries � investors have been watching carefully hoping to profit from any progress.

Why should I care?

For markets: Money isn�t everything.

This deal would be the largest pharmaceutical merger ever: the resulting company could be worth at least $240 billion, with annual revenues of $46 billion and profits of $19 billion (tweet this). And once you account for synergies � eliminated costs that reduce outgoings by 20-25% in most biotech-pharma mergers � profits will probably be even higher. But investors don�t seem convinced: Gilead�s stock barely moved on Monday, which could be because major link-ups are often fraught with process clashes � and any deal could detract from the combined company�s core business.

The bigger picture: Copycats.

The purchase of biotech firms by pharmaceutical companies has been commonplace recently, as bigger companies try to add more products to their portfolios without incurring the high costs of development. But there might be some under-the-radar benefits too: �tax arbitrage�, for example � though it’s already caused a few attempted cross-border mergers to be blocked by regulators. If Astra-Gilead becomes a reality, it might be met with similar concerns over whether the US or UK would have control over any potential coronavirus cure, which may ultimately see the deal axed.