The 4 Most Cash-Rich Drugmakers Right Now

March 30, 2017
By Mark Terry, BioSpace.com Breaking News Staff

Money, they say, isn’t everything. But in terms of cash stockpiles, having a big pile provides a lot of opportunities for biopharma companies to make deals.

Keith Speights, writing for The Motley Fool, looks at four biopharma companies that have the most cash, cash equivalents and marketable securities, and which ones are vying for the top three spots.

1. Johnson & Johnson

Probably not a big surprise, given the overall size of this mega-company. At the end of 2016, Johnson & Johnson had $41.9 billion in cash, definitely at the top spot. Except … the company plans to close on its acquisition of Actelion in the second quarter of this year, and that’s for $30 billion in cash.

“That’s a huge check to write, but Johnson & Johnson won’t be exactly impoverished after buying Actelion,” Speights writes. “The company generated operating cash flow totaling $18.8 billion last year. Even after paying a nice dividend and buying back nearly $9 billion in stock, J&J added more than $5.2 billion to its cash position in 2016.”

J&J are currently trading for $124.84.

2. Amgen

Once J&J wraps up its Actelion sale, Amgen will actually be number one company in terms of cash. It reported $38.1 billion in cash at the end of last year. Speights thinks the company will continue with its trend of annual dividend increases. Its yield is currently 2.8 percent. Last year, it spent about $3 billion on a stock buyback program and has another $4.1 billion remaining.

And there are hints that the company will be in the market to buy another company, probably soon. Notoriously disciplined when it comes to M&A, on the company’s fourth-quarter call the company’s chief executive, Bob Bradway, noted, “I think we have felt for some time that we have considerable flexibility to do transactions. And when we’ve talked in the past about the kinds of things we’re looking at, we’ve often talked about it in the context of the big plate of things that we have internally that we’re working through.”

Speights writes, “My guess is that a deal could come sooner rather than later. Sales are sluggish for several of Amgen’s top-selling products, including bone marrow stimulant Neulasta and Neupogen and anemia drug Epogen. Amgen seems likely to beef up its portfolio to offset these declines, although I doubt the company will attempt an acquisition as big as J&J’s buyout of Actelion.”

Amgen are currently trading for $164.48.

3. Gilead Sciences

At the end of the year, the company had about $32.4 billion in cash, which places it third, depending on how you’re counting J&J. The company’s dividend yield is slightly larger than 3 percent and it bought back $11 billion in stock last year.

That seems likely to end, however. The company’s chief executive officer, John Milligan, had indicated as much, and 2017 seems likely to be an acquisitive year for the company.

That would no doubt delight investors and analysts alike, who have been urging the company to buy something to make up for its faltering hepatitis C franchise. There probably aren’t any mega-mergers in its future, but Kite Pharmaceuticals , Incyte , Vertex Pharmaceuticals , Puma Biotechnology , Portola Pharmaceuticals and Arrowhead Pharmaceuticals have all been floated.

Speights thinks smaller oncology biotech companies are the most likely candidates. “However,” he writes, “Milligan hasn’t limited potential acquisitions to only the oncology space. Expect a large transaction (or several smaller deals that add up to a large amount).”

Gilead are currently trading for $67.43.

4. Pfizer

Once J&J’s cash vault is diminished, Pfizer can take the number three position. At the end of the year, it reported $17.9 billion. Its dividend yield is about 3.8 percent, and the company has indicated it will increase it this year.

More acquisitions? Hard to say. In the last year or so, it bought Hospira, Medivation and Anacor . But this is the company willing to cough up $160 billion for Allergan before the deal fell apart, so they’re probably not done yet. Speights notes that the company’s chief financial officer, Frank D’Amelio, indicated Pfizer needs acquisitions to grow its top-line revenue.

Pfizer are currently trading for $34.34.