Amgen Is Open to Bigger Deals While Staying Disciplined

  • `More energetic about being out there,' CFO says in interview
  • Amgen considering bigger targets after focusing on smaller M&A

After sitting out for most of the biotech acquisition frenzy of 2015, Amgen Inc. is ready to do a deal.

In the past year, the drugmaker has introduced six products, digested its last major acquisition -- the $10 billion purchase of cancer drugmaker Onyx in 2013 -- and undertaken a companywide restructuring. Time is ripe for bigger targets again, and the challenge is to be patient, says Chief Financial Officer David Meline.

Amgen is now “more energetic about being out there,” but passed on some potential deals in the second half of last year that weren’t a perfect fit, Meline said in an interview at the company’s headquarters in Thousand Oaks, California. “The hardest thing to do when you have money in the bank is to be disciplined."

The biotech giant isn’t alone in its pursuit. As valuations have moderated in a recent sell-off of pharmaceuticals stocks, drugmakers including Gilead Sciences Inc. and Biogen Inc. have indicated they’re ready to go shopping.

In January, Amgen, which has more than $30 billion in cash and equivalents, outlined six therapeutic categories that it will concentrate on. Two of them, cardiovascular and neuroscience, are newer areas for the company, with potential to be built up.

Neuroscience is the newest, as Amgen has no approved products on the market. One indication of its serious commitment is a broad partnership with Novartis AG, signed in September, to co-develop drugs for Alzheimer’s and migraine. Amgen is bringing two migraine drugs to the table, one in a final-stage trial and another at early stage. They are also co-developing Novartis’s BACE inhibitor for Alzheimer’s disease.

In cardiovascular, Amgen recently gained approval for cholesterol drug Repatha and heart failure drug Corlanor. It’s poised to move another heart failure candidate, partnered with Cytokinetics Inc., into a final-stage trial.

The remaining four categories are Amgen’s cornerstones: oncology/hematology, bone health, inflammation and nephrology. Last year, the company introduced products such as blood cancer drugs Blincyto, Imlygic and Kyprolis, the latter acquired through the Onyx deal.

Amgen has also reduced its workforce and closed facilities in Washington state and Colorado as part of a reorganization announced in July 2014. Its biggest deal of 2014-2015 was the purchase of closely-held Dezima Pharma, according to data compiled by Bloomberg. Amgen paid $300 million in cash upfront, and agreed to as much as $1.25 billion in future milestone payments.

When Chief Executive Officer Bob Bradway said in November that Amgen was open to “potentially some larger things,” he didn’t mean to indicate it was on the brink of signing papers, according to Meline. Rather, the CEO signaled a shift from the focus a year ago on small, early-stage transactions.

“We’re saying you shouldn’t be surprised if we do” a bigger transaction, Meline said.

David Piacquad, senior vice president of business development, said his team sees about 3,000 opportunities a year, from small academic licensing deals to acquisitions. They’re constantly roving the globe -- Piacquad recently traveled to Cambridge, England, and the Netherlands. He has a team based in South San Francisco with expertise in immuno-oncology and a “little SWAT team” of cardiology experts spread across the world.

It’s all about balancing internal research and acquired innovation, Piacquad said.

“Companies trying to do it all internal might hit a dry patch, while those rolling up more and more and more companies can’t sustain it,” he said. “The virtuous approach is to do a bit of both.”

Even if investors are hankering for deals right now, Piacquad says Bradway “does a nice job of playing the long game,” telling Piacquad to ignore the noise. The marching orders, he says, are simply to “do deals that make sense.”

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