Who's Winning Super-Sized Pharma Deals Race?

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April 28 (Bloomberg) -- Leerink Swann Pharmaceutical Analyst Seamus Fernandez and Bloomberg’s Jeff McCracken examine U.S. pharmaceuticals companies looking to Europe for acquisition targets. They speak with Trish Regan, Cristina Alesci, and Olivia Sterns on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

Pfizer deal.

Outline that.

Two reasons why pfizer wants to buy up astrazeneca.

Number one, the pipeline, number to, the tax benefits.

If you look at the pipeline, astrazeneca was up 40% year-to-date, and the reason is the pipeline.

They have information in the late stage oncology drugs and some early-stage drugs that have investors interested.

Pfizer has been one of the big victims of the patent lists.

They are losing the patent for celebrex and others.

They need to buy up a pipeline, essentially.

Astrazeneca does provide that for them.

And analyst is joining us from boston right now with a little more perspective on this deal.

You just heard olivia say this is pretty much about the pipeline process for pfizer.

Do you agree?

I actually do.

I agree with some aspects of it.

It was pretty attractive at astrazeneca, although the pipeline is advancing nicely at pfizer for some of the key products, but there are also aspects of this that will potentially make the pfizer tax rate go down, and in context with that, also being a u.k.-based or domiciled uppity, not based but domiciled, it will allow pfizer shareholders to benefit because there will be a lot more freedom to deploy the cash flow that pfizer generates.

You brought up a very important issue there, seamus, and what that means for the company's ability to make money work for it overseas.

We are seeing a number of deals right now that say u.s.-based companies looking to buy european-based companies.

Is this because they want to keep the money overseas rather than bring it back?

The irony is if you are a really big company or someone like pfizer, you're basically encouraged to stash your cash offshore, and now for pfizer, it seems they are being encouraged to domicile their headquarters offshore, as well.

And let's not forget.

Go back to the bill ackman deal.

There is an element there because valley and has a lower tax rate than the company the proposed to buy.

Maybe taxes have gotten that bad here in the u.s., and we always complain about corporate taxes, right?

Maybe now, given the m&a activity where seeing, it is true.

-- we are seeing, it is true.

A tax aversion play.

For such a big company.

To a certain extent, they want this tax issue to be fixed, right?

The treasury department wants it fixed.

Either way.

It is actually easier than to do a cross-border deal, but with the tax code in the united states, there is the possibility you will have a lot more m&a happening.

It is easier to get a deal done between two u.s.-based companies rather than to go cross-border and all of the risks with that.

Two things going on.

The issue of cash parked overseas, like apple, and i think pfizer had $70 billion of cash overseas.

And then there was the subjection to the corporate tax rate.

Good m&a possibilities overseas, then you keep that money on shore.

It is going on to 20% next year.

Pfizer currently paying 27%. and ge, speaking of the offshore cash, i think ge has $50 billion or more in offshore cash or cash equivalent.

Jeff is right.

Even today, we saw the charter deal.

That was involving comcast and time warner, and that was structured for passage.

They are doing a spinoff, and maybe down the line, charter can buy that company, but they chose to spin off the subscribers rather than selling them directly to charter because the parent company is comcast, and time warner did not want to do that.

What does that say about our tax code?

We are at a point now where it is more about a strategic move.

This is a move by pfizer because i think they feel like they can count on regulators and politicians to not do anything about this deal.

Think about this.

This is a very well-known name, and people know the name pfizer better than they would know the name valley it, and they can move offshore, save or cut their tax rate by billions of dollars, and d.c. will not do anything about it.

Republicans and democrats likely will not come together.

I feel that in the bowels of the pfizer real machine, they feel that -- aren't you the cynic, jeff?

Conspiracy theories.

What do you think?

You made the point earlier that this was mostly about taxes and some creative financial moves as opposed to strategic efforts.

That is not what i said.

Actually, what i said, you asked if this was a pipeline transaction, and i said this was also driven by tax opportunity, but the transaction makes a lot of sense strategically, when you combine the three potential companies that pfizer is considering to create here.

And then the potential breakup of those three companies, and if you take all of those three things together, the tax synergies, the opportunity to basically deploy your cash flow more efficiently so you can buy that more stock and treat your shareholders appropriately, and then also, it brings the pipeline together, so it is more effective.

I think you end up with quite a good strategic transaction, so i do not think that the cynical view of the is a big part of this.

Thank you so much, seamus, and good to have you, olivia, jeff, and coming up, the biggest

This text has been automatically generated. It may not be 100% accurate.


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