Robust competition and a lack of willing sellers has stifled Merck’s M&A ambition, but CEO Ken Frazier says with valuations coming down possibilities are being created.
Large mergers and acquisitions have dominated the start of 2019: Takeda has completed its $62 billion (€54 billion) takeover of Shire, Bristol-Myers Squibb is set to merge with Celgene in a $74 billion deal, and Eli Lilly has bought Loxo Oncology (albeit for a relatively low $8 billion).
Therefore, it was no surprise that Ken Frazier, CEO of Merck & Co., was asked about the state of biotech M&A and his own firm’s acquisition ambitions at the JP Morgan Healthcare Conference in San Francisco.
“We continue to look for those assets that we believe can create value for our shareholders and then I think it becomes more possible with more recent valuations – we’re very active,” he told interviewer Chris Schott.
However, the lack of large deals being made by Merck is not due to a lack of trying, he said, but rather the high valuations within the industry, he said.
“We’ve actually tried to consummate some deals. They haven’t worked because we haven’t had a willing seller, or the asset was too robustly competitive because it was a late-stage asset.”
Frazier said he is seeing the valuation of biotech assets broadly coming down, and as this falls “it creates more possibilities.”
Despite Frazier’s words, Merck has not been unsuccessful in its pursuit of inorganic growth, though the large deal – meaning “an important deal, not necessarily large from a size standpoint” – remains elusive.
The firm merged with Schering-Plough in a deal worth $41 billion back in 2009, and since then has made nine acquisitions.
Last year the firm bolstered its animal health division through the $2.1 billion takeover of Antelliq Group, and added oncolytic immunotherapy firm Viralytics for A$502 million ($360 million).