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Eli Lilly and Co. (LLY) may have problems with large acquisitions in the fourth quarter.
The war chest of the 142-year-old pharmaceutical company was built largely by the IPO of its veterinary health unit, Elanco (ELAN), in September.
The company announced that the split had left the company 80.2% stake in Elanco, that it would work actively to sell no later than one year after its IPO. The spin-off brought Eli Lilly $ 4 billion, according to documents filed by the company with the SEC.
"We will use this money against our capital priorities," Joshua Smiley, Chief Financial Officer, El Lilly told Reuters on Tuesday. "The Armo deal we signed earlier this year, we will try to do more of those."
The company concluded in June the acquisition of California-based ARMO BioSciences Inc. for $ 1.6 billion. The recent acquisition is focused on cancer treatments and immuno-oncology, an aspect of Lilly's product line that has continued to grow.
On Monday, the drug maker announced a new partnership, NextCure, Inc., to uncover new cancer treatments and to enter the cancer drug market, one of the most profitable areas of medicine.
The flagship Roche Holdings (RHHBY) offering for the treatment of lymphoma, leukemia and autoimmune diseases, rituximab, generates over $ 7.1 billion annually, for example.
Further expansion in the sector could be an attractive investment for traders interested in Lilly or seeking to capture potential mergers and acquisitions targets, which could even be sought by companies other than Lilly, given the underlying demand for industries in the sector.
Indeed, Smiley noted in his interview that large-scale mergers in the industry are unlikely at this point, thereby ruling out some possibilities for blockbusters.
The elimination of mega-fusions from the range of possibilities means that some of the most popular anti-cancer drug manufacturers such as Merck (MRK), Johnson & Johnson (JNJ), Bristol Myers Squibb (BMS), the aforementioned companies Roche and Celgene (CELG) pose serious challenges to Lilly's expansionist policy.
Company officials did not return requests for comments on possible vesting objectives or a timetable for implementing potential redemptions.
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