Sitting on $25B, Gilead goes shopping for high-dollar buyouts

Gilead Sciences ($GILD), raking in revenue with its revolutionary hepatitis C franchise, is intensifying its M&A rhetoric as it sits on a huge pile of cash, scouting for deals in the $10 billion range.

The company has long been coy with analysts and investors agitating for a big buyout, issuing vague statements about how it intends to spend the $25.1 billion in cash and equivalents it had in the bank as of Sept. 30.

But Chief Scientific Officer Norbert Bischofberger broke that trend in an interview with the Financial Times, saying his company is looking at targets with assets that have already passed the proof-of-concept stage, name-checking Gilead's $11 billion acquisition of Pharmasset as a model.

"People ask, 'What are you going to do with all your money?' " Bischofberger said. "Well, we have our eye on the external world--we have incredible cash flows and we are looking for opportunities."

Those cash flows come courtesy of Sovaldi and Harvoni, a pair of hep C therapies that have Gilead on pace to bank more than $30 billion in revenue this year. Analysts have prodded the company about signing another big deal since Sovaldi first began breaking sales records in 2013, and Gilead's September move to raise $10 billion in debt stirred yet more pointed questions and speculation.

Speaking to the Financial Times, Bischofberger said Gilead would look at companies that are "complementary" to its home base of virology but wouldn't balk at buying into a new field altogether. The key is to leverage its enviable cash position to buy into something that already looks like it works, he said, "rather than getting something cheap with uncertainty."

But the crush of M&A in recent years has in part cannibalized what was once biopharma's middle class, with larger drugmakers snapping up promising outfits with market caps around $10 billion and thus trimming the list of potential targets for Gilead. Analysts, fond of giving the company buyout notes, have repeatedly suggested Vertex Pharmaceuticals ($VRTX), owner of a growing cystic fibrosis franchise, and Incyte ($INCY), maker of treatments for cancer and inflammation.

- read the interview

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