Shares in EU drugmakers jump

London - 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 US giant Pfizer had approached Britain's AstraZeneca over a deal.

Pfizer and AstraZeneca declined to comment on a Sunday Times report of a possible $100bn 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% at 11:27, led by AstraZeneca, up 6.5% at 4 030 pence, and GSK, up 5.4% at 1 643 pence.

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

Analysts also pointed to Belgium's UCB SA, up 3.1%, and Switzerland's Actelion, 1.5% 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 $14.5bn for GSK's oncology business and is also divesting its vaccines business to GSK for $7.1bn plus royalties.

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

Novartis shares rose 2.5% in morning trade to €76.5.