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AstraZeneca a tricky takeover target after big cancer drug blow

* Lung cancer flop ramps up growth challenge for drugmaker

* AstraZeneca still has novel medicines to attract predators

* But obvious acquirers wary of big deals, political fallout

LONDON, Aug 1 (Reuters) - Hurdles ranging from existing commercial tie-ups to politics make drugmaker AstraZeneca a problematic takeover target in the wake of last week's big lung cancer setback that hammered the stock and rekindled takeover talk.

Industry executives and bankers say Pfizer, which failed to buy it for $118 billion in 2014, is unlikely to return, while European rivals Novartis, Sanofi and GlaxoSmithKline are wary of large deals.

Overall, the drugs industry is in "wait and see mode," according to one banking source, who sees no mega-mergers until there is clarity on tax reform in the United States, where a suggested corporate tax holiday could unleash another round of M&A.

AstraZeneca still boasts a pipeline of new drugs that could lure predators - even after the failure of its immunotherapy treatment to curb lung cancer as hoped in the closely watched Mystic trial.

Two other new cancer medicines, Tagrisso and Lynparza, are doing well, while its troubled immunotherapy drug Imfinzi should still be a significant seller for non-metastatic lung cancer, despite the big hit to the firm's chances in advanced disease.

Such prospects are tarnished, however, by the downward spiral of older drugs like cholesterol fighter Crestor and the road to growth will be "longer and slower" as a result of Mystic, according S&P Global, which downgraded its debt rating for AstraZeneca on Friday.

Spinning off the group's old medicines might be one way to make AstraZeneca more attractive, some bankers suggest, but that is unlikely to happen any time soon.

Another complication for any acquirer wanting to access the full potential of AstraZeneca's new drugs is last week's tie-up with Merck & Co for Lynparza, which transfers half the drug's value to the U.S. firm.

POLITICAL SCIENCE

Politics, meanwhile, adds a further twist.

British officials have rallied behind science-based industries, after Pfizer's 2014 bid ran into opposition from many lawmakers. Indeed, Prime Minister Theresa May called out AstraZeneca and the need to "defend a sector that is as important as pharmaceuticals is to Britain" in a 2016 speech.

In practice, of course, promises on jobs and investment might limit such concerns, as happened when chip designer ARM was bought last year by Japan's SoftBank.

But it all makes AstraZeneca a tricky target for the likes of Novartis and Sanofi, which could use AstraZeneca's newer drugs to boost their pipelines in oncology, currently the hottest area of drug research.

At the same time, healthcare bankers believe these European manufacturers will not want to make a move while U.S. giant Pfizer - a serial acquirer - is still eyeing its next big deal.

"Pfizer has taken a break on M&A for now and no-one expects them to make another move for AstraZeneca. But M&A is like a game of chess and nobody will go after AstraZeneca until Pfizer picks its next target," said one banker.

Pfizer's loss of appetite for AstraZeneca can be explained by the U.S. government's move to block the kind of tax-saving deal it planned for AstraZeneca in 2014, as well as its decision to address cancer immunotherapy through a separate deal with Germany's Merck KGaA.

British rival GSK is one company that could generate big synergies by buying AstraZeneca, but new CEO Emma Walmsley is focused on streamlining her firm's drug pipeline, a process that is expected to involve only small bolt-on deals.

AstraZeneca CEO Pascal Soriot, who last week insisted he was not a quitter after talk he might leave to join Teva Pharmaceutical Industries, says takeovers are a fact of life but is sanguine about the chances of a fresh bid.

"Any company that has a very good pipeline, like we do, is of course attractive. But if Mystic was positive, I'm sure you'd be asking me the same question." (Editing by Pravin Char)