When will Merck KGaA take the M&A plunge?

Merck KGaA CEO Karl-Ludwig Kley

Merck KGaA is talking up deals again, pointing to its healthy cash reserves and saying it can well afford a blockbuster buyout to bolster its pipeline. But that's been the story for nearly a year, so what's the German giant waiting on?

On the company's second-quarter earnings call, CEO Karl-Ludwig Kley told reporters that Merck KGaA is looking at some "interesting" targets but said there's no rush. "We can but we don't have to pursue acquisitions," he said, according to Reuters. And any future M&A will almost certainly come in the company's drug and life sciences businesses, CFO Marcus Kuhnert said in a video interview, focusing on its Merck Serono and Merck Millipore divisions.

That all may sound familiar. Kley in May: "We are able to take ambitious steps. We can afford investments and acquisitions." In February: "We can easily invest a high single-digit billion amount, without endangering our good rating." Same goes for November, when the CEO underlined that big deals were hardly off the table.

Since then, however, Merck KGaA has been content to sit on the sidelines amid a dealmaking boom in the pharma world, watching AbbVie ($ABBV) snare Shire ($SHPG), AstraZeneca ($AZN) claim Almirall, and a host of other rival drugmakers swap business units to retill their profits.

And the company's sluggishness is not for lack of urgency. Rebif, Merck KGaA's multiple sclerosis-treating cash cow, again ceded ground to its competitors in the last quarter, and a few costly late-stage missteps in recent years have left it with a light list of Phase III candidates to take the drug's place.

Merck KGaA's R&D division has remained in flux since shedding hundreds of jobs in 2012 and twice realigning its management. Last month, Merck veteran Luciano Rossetti stepped in to steer the company's roughly $1.5 billion annual research budget, promising to jump-start the company's pipeline.

Over the past 6 months, Merck KGaA has repeatedly looked to dealmaking to keep R&D moving, striking agreements with MorphoSys, Mersana and Pfizer ($PFE) to bring in new assets. The company's oncology-heavy pipeline includes oncolytic vaccines, immunotherapies and a variety of kinase inhibitors, plus treatments for lupus, osteoarthritis and multiple sclerosis.

- read the results (PDF)
- here's the Reuters story