Merck KGaA has the firepower to pull off a big buyout, but will it?

The execs at Merck KGaA have been hinting around for months now that they're interested in doing some sizable deals to build up the drug R&D side of the business at the conglomerate. And CEO Karl-Ludwig Kley helped feed the rumor mill on Friday with his boast that the company has deep enough pockets to pull off a multibillion-dollar buyout without straining.

"We can easily invest a high single-digit billion amount, without endangering our good rating," Kley told Germany's Handelsblatt, according to a report from Reuters. And he's not blowing smoke. A Barclays analyst concluded recently that Merck had close to $11 billion available for a buyout--even after the drugs/chemical group acquired AZ Electronic Materials. 

Merck KGaA could use a few bullish moves on the pharma side of the business. The company, which hasn't had a new blockbuster approval in more than a decade, decided to shutter its big R&D center in Switzerland back in 2012, the first round in what turned out to be a top-to-bottom reorganization that included big layoffs and a management shakeup.

The pharma side of the company experienced a bitter setback with the collapse of a once high-profile MS therapy. The cancer vaccine Stimuvax also flopped in Phase III, though last fall the company decided to take the drug--renamed tecemotide--back into a late-stage study in a high-stakes gamble aimed at proving that it really can work for a subgroup of patients.

A high-profile buyout at this stage might help restore positive feelings for a pharma group with little in its track record to inspire confidence.

- here's the story from Reuters

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