One of the many large transactions that take place in the pharma market, the Obama Administration aimed fast at the Pfizer/ Allergan deal – which was set to be a record deal ($160 billion). If the deal had gone through, the biggest drug company in the world would have moved its business to Ireland (on paper), to lower its taxes.
Due to the deal collapsing, Pfizer has agreed to pay Dublin-based Allergan a ‘break-up fee’ which is in the region (and up to) $400m. This is another commercial snag for the large pharmaceutical company in beating their competitors, with their Chief Executive, Ian Read, highlighting that, “The Company’s disadvantage with foreign rivals that faced significantly lower tax bills”.
If Pfizer had got the deal over the line, not only would they have reduced their tax levels, the company would also have had access to Allergan’s industry leading products such as Botox, the dry-eye treatment Restasis and the newly developed irritable-bowl drug Linzess.
Aside of the doomed Allergan deal, Pfizer was beginning to increase sales by washing away generic competition to big sellers like cholesterol fighter Lipitor.
Pfizer breast-cancer drug Ibrance have started very strongly in the market and with a new cholesterol fighter in the pipeline, analysts say it will compete very well in a very lucrative market.
The events taking place across in the U.S, the FTSE was lifted with strong rumours that Pfizer would shift their efforts towards a U.K based pharma company, namely Shire and AstraZeneca.
Now the deal has stopped in its development, the two drug makers will focus on other strategies to boost their profits with Pfizer already highlighting whether to separate its global established products business – which are mostly off-patent drugs. Pfizer has received a lot of pressure from stakeholders and analysts to dismantle the company so that growth and profits would pick up at a faster pace.
Ian Read, Pfizers’s CEO explained that their concentration on current business growth is still high on their agenda, “We remain focused on continuing to enhance the value of our innovative and established businesses.”
In a news conference this week President Obama said that the new rules are meant to prevent “one of the most insidious tax loopholes out” and make wealthy U.S corporations shoulder their tax responsibly like every working class American.
An Inversion, in essence, is when a big company buys a small company, in another country (which tends to have a lower tax rate) and moves the company’s address on paper, but nothing else.
Is it the last time we hear from another hostile Pfizer takeover for a while? Or is there another deal in the pipeline? Time will only tell.