Merck CEO Rob Davis expressed high confidence during the company’s J.P. Morgan presentation on Monday, revealing that the company is open to deals in the range of “multi tens of billions of dollars.”
Merck may or may not be in the market to spend around $30 billion on Revolution Medicines—but the New Jersey–based pharma is definitely in the market for something.
“We are not limited from a balance sheet,” CEO Rob Davis said during a presentation at the J.P. Morgan Healthcare Conference. “It’s more where do we see strategic opportunity.”
Davis placed Merck’s target dollar range at “multi tens of billions of dollars,” adding, “I’ve got to look at my CFO [Caroline Litchfield]. I would spend more, she won’t let me.”
Merck was one of two Big Pharmas linked in the M&A rumor mill to buy Revolution Medicines, which is developing a pipeline of targeted drugs for RAS-driven cancers. The other alleged suitor, AbbVie, also appears to have a near-unlimited balance sheet, announcing Tuesday that it will pump $100 billion into its U.S. R&D and manufacturing operations over the next 10 years. AbbVie denied it was in talks to buy Revolution.
In a note to investors on Tuesday, BMO Capital Markets noted a new assured tone from Merck.
“Thinking back on Merck’s presentation last year, we note new confidence from management, with raised mid-2030s guidance for new growth drivers (+$20B since last year),” the analysts wrote. Specifically, the company increased long-term estimates for its cardiometabolic/respiratory portfolio by $5 billion, infectious disease portfolio by $10 billion, and ophthalmology portfolio from “multibillion” to greater than $5 billion, according to BMO.
During Merck’s presentation, Davis said, “The success and progress we’ve had to date now puts us in a position where we see visibility to more than $70 billion of commercial opportunity as we look out to the mid-2030s.”
In fact, Davis said he “couldn’t be more confident as I sit here today,” and went on to call immuno-oncology blockbuster Keytruda’s loss of exclusivity (LOE) period “more of a hill than a cliff.”
“I’m quite confident that we will be in a position at a minimum to go through a very shallow period post the LOE, returning in a few years to growth,” the CEO continued.
In response to Davis’ comments regarding the Keytruda LOE, BMO said, “We view commentary from Rob Davis suggesting growth through the LOE is still possible as increasingly positive and realization of such results would be beyond our current expectations today, pushing for greater MRK upside.”
