Cash-Rich Amgen Joins the M&A Hunt for Big and Small Deals
February 3, 2017
By Mark Terry, BioSpace.com Breaking News Staff
Amgen has been notoriously disciplined when it comes to acquisitions. It set a $10 billion deal cap and stuck to it. But at its fourth-quarter conference call, the company indicated that it had plenty of cash and planned on spending it.
“I think we have felt for some time that we have considerable flexibility to do transactions,” Bob Bradway, Amgen’s chief executive officer, said at the conference call. “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.”
And it helps that the company has $40 billion in cash to play with.
In October 2016, the company inked a research collaboration deal with Copenhagen, Denmark’s Nuevolution AB. The two companies will collaborate to develop and commercialize drugs in oncology and neuroscience with multiple targets. But that’s practically pocket change for Amgen, a deal that could hit $410 million (US) for each target, with royalties.
And on September 29, Amgen signed tow license and collaboration agreements with Arrowhead Pharmaceuticals to develop and commercialize RNA interference (RNAi) treatments for cardiovascular disease. Those programs will use Arrowhead’s subcutaneous RNAi delivery platform. That’s for $35 million upfront, $21.5 million in an equity investment, and up to $617 million in option payments, as well as various milestone payments and royalties.
Bradway said, “But we feel like we’re in a place now where we can look externally for large and small opportunities to help grow the business. So I think the message is, we’re confident in the outlook for our company. We’re confident in the importance of innovation. And we’ve got a balance sheet that supports our ability to look at transactions large and small.”
So it looks like Amgen, with $40 billion burning in its pockets, is going on a shopping spree.
Unless President Trump’s tax reform plan throws a wrench in the gears. Trump has indicated he wants to change the corporate tax rate, as well as allow companies with offshore cash to be able to repatriate it. It’s a popular idea with corporations, but may face pushback from Congress.
David Meline, Amgen’s chief financial officer, weighing in on the topic at the conference call, said, “I guess from my perspective, I don’t really view us even today pre-tax reform as having some arbitrary cap in terms of what we can look at. We think we need to look at all opportunities of all sizes.”
John Carroll, writing for Endpoints News, says, “There’s a long list of companies now in a buying mode, scouring their respective fields for deals. Pfizer ’s Ian Read has been an eager player for some time. Sanofi needs to show it can complete a deal after Medivation and Actelion got away. Gilead , Biogen and others are frequently cited on the list of industry hunters in need of a deal.”
He also points out that, “so far there’s been more talk than action.” After the boom-boom years of 2014 and 2015, 2016 wasn’t a big year for biopharma M&A activity. This year took off with two big deals, Takeda Pharmaceutical ’s $5.2 billion acquisition of Ariad Pharmaceuticals and Johnson & Johnson ’s acquisition of Actelion for $30 billion, which also included spinning off Actelion’s R&D pipeline into a new standalone company.
The year’s young. Who’s next?