US drugmaker Gilead Sciences Inc witnessed a rise in its share prices by over five percent in premarket trading on Monday. This was a result of reports that British Pharmaceutical giant, AstraZeneca, had approached the company with the proposal of a possible merger, which could lead to the formation of one of the largest drug companies in the world.

AstraZeneca's shares fell 2.4 percent on the FTSE 100 as investors contemplated a large payout and questioned the rationale of a deal that would create a company with a combined market value of about $232 billion, based on Friday's closing prices.

At the Forefront of Vaccine Development?

A merger would also unite two drugmakers at the forefront of efforts to fight the new coronavirus but could be politically sensitive as governments seek control over potential vaccines or treatments.

Gilead Sciences
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Gilead's remdesivir is the first drug to show improvement in COVID-19 patients in formal trials while several potential candidates failed to provide positive results hoped for. Shares of the company have risen about 18 percent this year through Friday's close.

"(Gilead) may be on the verge of having one of the fastest-growing products in the industry, if they can successfully establish profitable commercial pricing for remdesivir," said SVB Leerink analyst Geoffrey Porges.

AstraZeneca Possibly Looking To Diversify

Any potential deal may suggest that AstraZeneca is looking to diversify away from its dependence on cancer drugs, he added. Analysts also saw a deal as uncertain given the political environment.

Citi analyst Andrew Baum said he anticipated that the US administration would likely seek to block any potential acquisition of any major US biopharma involved in the development of future therapeutics for the pandemic.

The Bloomberg report said AstraZeneca contacted Gilead last month, but Gilead was not interested in combining with another big drugmaker. AstraZeneca is also racing to develop a vaccine for COVID-19 through its partnership with Oxford University.

(With inputs from agencies)