$AstraZeneca PLC(AZN)$ has been in early-stage discussions about acquiring Bristol-Myers Squibb, a move that could create one of the world's largest pharmaceutical companies, according to people familiar with the matter. The talks, which remain confidential and are still at a preliminary stage, may or may not result in a formal transaction, these sources cautioned.

With a market capitalization of $133.4 billion, Bristol-Myers Squibb would provide AstraZeneca with a significantly larger foothold in the U.S. market. AstraZeneca itself is valued at approximately 195.9 billion pounds ($264.4 billion), making it larger than its potential acquisition target.

Bristol-Myers Squibb is preparing for patent expirations on several of its core products, including the blood thinner Eliquis and the cancer drug Opdivo. These two drugs together account for nearly half of the company's sales. In its most recent quarter, the company posted record quarterly revenue of $13 billion, driven by newer products such as the blood cancer therapy Breyanzi, the skin cancer drug Opdualag, and the heart medication Camzyos.

Under the leadership of CEO Pascal Soriot, AstraZeneca has become a powerhouse in oncology, boasting a portfolio of blockbuster drugs. Soriot, who took the helm in 2012, famously fended off a takeover attempt by Pfizer, which sparked intervention from the British government over concerns about losing a key UK company. AstraZeneca is now the second-largest company by market capitalization on the London Stock Exchange. The company is increasingly focusing on the U.S. market, having recently upgraded its American stock listing from an ADR on Nasdaq to the New York Stock Exchange, while maintaining its headquarters and primary listing in London. AstraZeneca is pursuing an ambitious target of $80 billion in sales by 2030 and is also looking to enter the lucrative weight-loss market with several pipeline drugs.

However, analysts have expressed skepticism about the potential deal. A Mizuho analyst suggested that investors might oppose the merger, noting that AstraZeneca's earnings per share are expected to grow by 10% or more over the next five years, while Bristol-Myers Squibb's EPS could decline for the rest of the decade. "Investors would argue that AstraZeneca does not need Bristol-Myers Squibb, but the reverse is true; unless there are massive deal synergies that offset the revenue/earnings decline, this merger is difficult to justify," wrote Jared Holz, a Mizuho healthcare specialist, in a Sunday report. However, Holz added that his "first reaction is that if there was ever a time to do such a deal, it would be now," citing the Trump administration's relatively lenient stance on mergers and acquisitions.

If the transaction were to proceed, it would rank among the largest pharmaceutical deals in history, surpassing Bristol-Myers Squibb's $74 billion acquisition of Celgene in 2019.