Lilly chief skeptical of buyouts--and not just megadeals
Does any pharma CEO really need to take the no-megadeals pledge these days? The prevailing strategy is toward smaller, bolt-on buys rather than the big mergers we saw back in 2009. But we still hear the "not for me, thanks" assurance on a fairly regular basis.
The latest: Eli Lilly ($LLY) chief John Lechleiter. He told The Wall Street Journal that his company won't resort to a large deal to fix its current patent-cliff problems. And those patent-cliff problems are big: Its top-selling Zyprexa went off patent in October.
Even small deals and partnerships aren't a sure thing, he said. Lilly is betting that its own pipeline will offer a better bang for the buck than buying in a bunch of late-stage products.
Lechleiter also pledged himself to the anti-diversification crowd. Rather than spending its $4 billion or so in cash on ancillary businesses to beef up sales, Lilly will focus on prescription drugs. "I don't think we can return to the Lilly of the 1970s, when we were buying up medical device companies," Lechleiter told the WSJ. "[O]ur core is pharmaceutical innovation."
According to FierceBiotech research, Lilly spent $5 billion on R&D last year, up 3% from 2010. At the end of the year, it had 11 late-stage products, including the risky-but-potentially-huge Alzheimer's candidate solanezumab. Key study results are due later this year.
In the meantime, he said, acquisitions don't always deliver returns for shareholders. So, Lechletier said, Lilly's cash might be better spent on keeping up investor dividends.
- read the WSJ interview
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