Many of the country’s largest pharmaceutical companies, from Merck & Co. to Bristol-Myers Squibb are under pressure to do deals right now because they are staring at huge patent cliffs for their top-selling drugs.
For investors considering whether to buy into these companies, figuring out which management teams are going to make the right acquisitions is a bit of a crapshoot. It can be difficult to build a financial model for a company without knowing who it will acquire. Further uncertainty comes from the fact that many pharma acquisitions involve drugs still in development. So the next best thing can be to look at management’s acquisition track record. In that respect, Merck just earned some credibility with investors.