Novartis CEO says shopping for bolt-ons is tough. Why? Creeping biotech deal prices

Pharma had its slowest first half for M&A since 2013, according to research from EP Vantage.

Amid a noted slowdown in biopharma M&A, fresh comments from Novartis CEO Joe Jimenez signal the challenges facing the industry’s dealmakers. Namely, too-high biotech valuations have forced the Swiss drugmaker's M&A scouts to eye earlier-stage assets.

Jimenez said Tuesday that Novartis is “still very focused on our strategy of bolt-on acquisitions anywhere from $2 billion to $5 billion,” but added that the company is having a hard time finding value in that size range.

“I have said previously that valuations are such that it’s very difficult to find acquisitions that are in that range that would add value for Novartis shareholders,” Jimenez said during the company's quarterly conference call. “So what’s happened is we have moved upstream in terms of earlier stage assets.”

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To that point, the drugmaker late last year picked up privately held Ziarco with its midstage atopic dermatitis candidate for an undisclosed sum. Jimenez added on Tuesday that for larger potential acquisition options in the $10 billion to $15 billion range, “we just don’t see it yet.”

Jimenez’s comments come as many dealmakers hold off on major moves, partly because of uncertainty coming out of Washington, D.C., After Donald Trump won the U.S. presidency last year, some analysts thought his ideas for a corporate tax overhaul and a repatriation holiday would spur dealmaking.

But those talks haven’t gone far in Washington, and pharma execs continue to hold out.

Recent research from EP Vantage noted that the sector’s deals totaled at $49.3 billion in value for the first half of 2017, lower than the same period for any year dating back to 2013. And Johnson & Johnson’s Actelion buy, worth $30 billion, makes up the majority of that total. Market watchers don’t expect much in the way of large buys before the end of 2017, the publication reports.

RELATED: Will Trump’s election make pharma M&A great again?

In an ironic twist, some industry watchers concluded after the election that higher valuations might boost M&A as biotech boards would be more willing to sell at a higher price. But now it seems buyers might not be on the same page.

Speaking with Business Insider this week, Shire CEO Flemming Ornskov said there’s a “lot of unknowns” at the moment and that execs would like to get some answers before signing off new deals, “particularly big M&A,” he said.