Novartis shake-up, Pfizer-AstraZeneca report lifts pharma stocks

LONDON, April 22 Tue Apr 22, 2014 5:47am EDT

LONDON, April 22 (Reuters) - Shares in European drugmakers received a shot in the arm on Tuesday amid a flurry of activity, with Novartis striking a multi-billion dollar deal with GlaxoSmithKline and reports U.S. giant Pfizer had approached Britain's AstraZeneca over a deal.

Pfizer and AstraZeneca declined to comment on a Sunday Times report of a possible $100 billion deal, but the potential bid fueled speculation the sector was ripe for consolidation as drugmakers build scale in specialized areas where they can find growth.

The European healthcare sector index was up 2.8 percent at 0927 GMT, led by AstraZeneca, up 6.5 percent at 4,030 pence, and GSK, up 5.4 percent at 1,643 pence.

Shares in Britain's Hikma Pharmaceuticals and BTG also rose more than 4 percent, while Shire, a perennial subject of takeover speculation, was up 4.6 percent.

Analysts also pointed to Belgium's UCB SA, up 3.1 percent, and Switzerland's Actelion, 1.5 percent stronger, as potential targets for a larger rival.

Citi said the "usual suspects were likely to return to focus", noting that previously cited potential targets in Europe included Shire, Actelion and UCB, based on either promising pipelines or significant cost and tax synergies.

"We expect renewed interest in the use of offshore cash held by US companies to fund ex-US M&A," the analysts said in a briefing note.

The Sunday Times cited sources saying informal conversations had taken place between Pfizer and AstraZeneca but the British company resisted the approach.

A big driver behind Pfizer's interest is drugs to treat cancer, including promising experimental medicines in AstraZeneca's pipeline know as immunotherapies, analysts said.

Novartis is also strengthening its oncology portfolio with the GlaxoSmithKline deal, an area in which GSK said it ranked outside the global top 10.

The Swiss drugmaker is paying $14.5 billion for GSK's oncology business and is also divesting its vaccines business to GSK for $7.1 billion plus royalties.

In a separate transaction, Novartis said it had agreed to divest its animal health division to Eli Lilly for about $5.4 billion.

Novartis shares rose 2.5 percent in morning trade to 76.5 euros. (Reporting by Paul Sandle and Belinda Goldsmith; Editing by Mark Potter)

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