Eli Lilly, sporting a lower tax rate, scouts smaller deals in immunology, cancer

Eli Lilly
Tax reform will make Eli Lilly Lilly “much more competitive on a deal-by-deal basis," according to Darren Carroll, company SVP of corporate business development.

SAN FRANCISCO—Eli Lilly has tended to stay away from megadeals, and a big influx of cash from U.S. tax reform won’t change that.

Behemoth buys are the sorts of deals Darren Carroll, SVP of corporate business development, thinks will see the biggest boost as companies bring their overseas earnings home, and “those deals, frankly, we don’t believe are very helpful for shareholders on either side of the equation.”

“Every time we look at them, they just don’t make sense,” he said in a Tuesday interview at the J.P. Morgan Healthcare Conference, adding that “what they do is distract people.”

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That’s not to say Lilly won’t benefit from the new legislation. On the contrary, a reduced corporate tax rate will make Lilly “much more competitive on a deal-by-deal basis,” Carroll said, and the Indianapolis drugmaker expects to put its new tax-rate parity to good use.

For starters, it is scouting opportunities to bolster its immunology pipeline behind psoriasis newcomer Taltz and baricitinib, an arthritis product that’s won global approvals but hasn’t yet snagged the FDA’s greenlight.

And “we will, on a very selective basis, look to act” in oncology as well, Carroll said. In pain management, an area where Lilly has built its entire pipeline through deals, “we think we’re in a great position to be a partner for companies,” he added.

RELATED: Lilly weighs spinoff of bulked-up Elanco even as it beats Street estimates in Q3

Lilly may also come into cash if it goes through with an animal health divestment it's currently weighing. Last October, it said it would evaluate options for that unit, Elanco, including a potential sale or spinoff.

Make no mistake though, Carroll said: Lilly doesn’t need the money.

“This is not a business that we have to sell,” he said, adding, “We’re not in any way, shape or form looking to divest because we’ve done something else that compels us to get the cash.”

The possibility of jettisoning Elanco arose from the fact that “capital allocation now is favoring the human side of things,” but Lilly could still very well decide to keep the unit. “We’re taking a very broad look ... we’ll really know by the middle of this year, and we’ll be coming back to the market and letting people know,” Carroll said.

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