Amgen, Inc. (NASDAQ:AMGN) wants to acquire one or more key biotech companies, but deal-making is difficult in today’s high-valuation environment.
That’s the message the company sent to investors this week, as it remains on the prowl to find deals that make sense to help grow its porfolio. CNBC has more details:
Amgen, the world’s largest biotech company, has said it is “looking hard” for deals to deploy its $27bn cash pile but warned it is struggling to find targets amid soaring valuations in the life sciences sector.
The note of caution comes as mergers and acquisitions activity in the healthcare sector recorded its strongest start to a year in more than a decade, with almost $32bn of global deals announced since the start of January.
In order to get deals in the space done, buyers have had to pony up sky-high premiums. For example, Celgene’s recent acquisition of Juno for $9 billion was a nearly 100% markup to the company’s pre-deal valuation.
“We want to deploy any excess cash and our first priority is to do acquisitions and invest in the business,” Amgen CFO David Meline told the Financial Times recently. However, “We see all of these deals announced, and we participate pretty actively in considering whether to bid, but we haven’t been able to come up with a business case that would make a return for our shareholders.”
For now, AMGN plans to keep looking — but the company isn’t willing to pay a price beyond what it feels it can earn a good return on.
Amgen, Inc. shares were unchanged in premarket trading Tuesday. Year-to-date, AMGN has gained 0.56%, versus a -0.57% rise in the benchmark S&P 500 index during the same period.