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November 1, 2014


Pfizer Says Inversion Deal Is Still On the Table

While Pfizer Inc.’s CEO acknowledged Tuesday that the U.S. Treasury Department’s recent crackdown on inversions has diminished the deal’s appeal, the drug maker has yet to rule out an acquisition that would lower its tax bill.

New York-based Pfizer explored deals with AstraZeneca PLC and Actavis PLC this year that would lower the company’s taxes by relocating Pfizer’s headquarters overseas. However, both deals fell through, and the U.S. Treasury Department recently issued new guidance in an attempt to dissuade any further attempts.

Ian Read, Pfizer’s Chief Executive, said the new tax rules make such deals “more complicated and potentially limits the value for U.S. companies that redomicile.”

In spite of this, Mr. Read said the deals could still be a “potential source of creating value” for his company and that Pfizer would continue to investigate further. “We still believe on a case-by-case basis there is meaningful value to be had from inversions,” he told analysts and investors on a conference call.

Mr. Read said tax-inversion deals could free up a “substantial portion of your future cash flows outside the U.S. tax system.”

Meanwhile, Mr. Read said the company was still undecided as to whether it would be further divided after shedding certain assets in recent years. Pfizer had said in the past it was considering a split.

The company stands at a strategic crossroads as many of its patents on top-selling drugs continue to expire.

Pfizer has tried to boost its revenue through a variety of means including attempts to find new uses for existing products, such as vaccinating older adults with Prevnar 13, a vaccine designed to battle pneumococcal disease.

Sales of the company’s top-selling product, the pain drug Lyrica, rose 16% to $1.32 billion for the third quarter, while sales of its Prevnar family vaccines rose 19% to $1.14 billion.

Source: Loftus, Peter, “Pfizer Hasn’t Rules Out Potential Inversions, Chief Says,” The Wall Street Journal, October 28th, 2014