Johnson & Johnson says it has 15% more to splash on R&D thanks to tax cuts. Will we see more pipeline plays?

J&J
(Image: Johnson & Johnson)

Share buybacks have been the name of the game for a few years now as M&A went through a quiet patch, but with deals ramping up in 2018, J&J says its boosting its R&D budget over the coming years. Will the Big Pharma be looking to beef up its pipeline?

Celgene, Gilead, Sanofi and Novartis have all made some big deals in recent months, spending tens of billions on marketed and pipeline drugs in bleeding disorders, cutting-edge cancer therapies and rare diseases.

With the new tax cuts coming out of the Trump administration lowering corporate rates for U.S. biopharmas, some have opted for share buybacks, which rankles with those pushing for innovation. But others have been looking to use the cash for R&D play.

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This morning in its first-quarter report, J&J said it was going to use some of its cash for the latter (although it certainly has made major buybacks in the past). Its CEO Alex Gorsky said: “The U.S. tax legislation passed late last year is creating the opportunity for us to invest more than $30 billion in R&D and capital investments in the U.S. over the next four years, which is an increase of 15%,” with the caveat that capital investments will also include non-R&D, so we'll have to see just how much does go into its research budget.  

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But in general, that’s a nice boost: Already this week J&J announced it was teaming up with Bristol-Myers Squibb on BMS-986177, a Factor XIa inhibitor that is in early trials as an anticoagulant to prevent thrombotic events. Cash terms were not disclosed, but more of these deals may be on the horizon.

The Big Pharma also works on its JLABS program, which helps out and can invest in very early-stage medical device and biotech companies, as well as in digital health. It has hubs across North America, Asia and Europe, with its global head Melinda Richter recently telling FierceBiotech it was still hopeful for a new U.K. JLABS hub to come into being.

Astellas, too, is in on the M&A act, with local reports saying it’s lining up $1.8 billion “in an M&A diversification bid” that could include biotech buys. Meanwhile, fellow Japan native Takeda, which has already spent big and small on U.S. and European biopharmas over the past two years, is said to be weighing a potential $50 billion deal for Shirealthough this will now come sans its oncology business, which it sold last week.