Pfizer-Allergan $150B Merger Thrown Into Doubt After Treasury Imposes New Rules On Tax Inversions
The move, which was more aggressive than expected, is aimed at companies that are attempting to move their tax addresses out of the U.S. to shift profits to low-tax countries using a maneuver known as earnings stripping. "They’ve addressed literally every benefit that one attempted to gain from an inversion and shut them all down systematically," says Robert Willens, a New York-based tax analyst.
The Wall Street Journal:
New Rules On Tax Inversions Threaten Pfizer-Allergan Deal
The Treasury Department imposed tough new curbs on corporate inversions Monday, shocking Wall Street and throwing into doubt the $150 billion merger between Pfizer Inc. and Allergan PLC, which was on track to be the biggest deal of its kind. The Treasury move, which was more aggressive than anticipated, sent Allergan’s shares tumbling 19% in after-hours trading and could stall a trend in corporate deal-making that has seen companies searching for ways to escape the U.S. tax net. Pfizer shares edged 0.9% higher. (Rubin and Hoffman, 4/4)
STAT:
Treasury’s New Rules On Tax Inversions Raise Questions About Pfizer-Allergan Deal
After months of anticipation, the US Department of Treasury issued new rules about so-called tax inversions that raised uncertainty about the $160 billion merger deal between Pfizer and Allergan. The rules are designed to curb inversions, which effectively reduce federal revenue and, as a result, have been widely criticized as unpatriotic and detrimental. In these deals, a US company buys a foreign company and reincorporates headquarters overseas where corporate taxes are lower. The acquiring company can reduce taxes by adding debt to its US unit and shifting profits overseas. (Silverman, 4/4)
In other pharmaceutical news —
Reuters:
Makers Took Big Price Increases On Widely Used U.S. Drugs
Major drug companies took hefty price increases in the U.S., in some cases more than doubling listed charges, for widely used medications over the past five years, a Reuters analysis of proprietary data found. Prices for four of the nation's top 10 drugs increased more than 100 percent since 2011, Reuters found. Six others went up more than 50 percent. Together, the price increases on drugs for arthritis, high cholesterol, asthma and other common problems added billions in costs for consumers, employers and government health programs. (Humer, 4/4)
The Associated Press:
Gilead Paying Up To $1.2B For Nimbus Unit, Drug Candidate
Biologic drugmaker Gilead Sciences Inc. said Monday that it will buy a subsidiary of Nimbus Therapeutics LLC and its experimental pill for an increasingly common metabolic disorder that causes life-threatening fat buildup in the liver. Gilead, based in Foster City, California, will pay $400 million for Nimbus Apollo Inc. Parent company Nimbus Therapeutics, based in Cambridge, Massachusetts, could receive another $800 million if Nimbus Apollo’s drug development program meets certain milestones in testing results and medicine approval and sales. (Johnson, 4/4)
The Wall Street Journal:
Why Walgreens Hasn’t Escaped Its Rut
Walgreens Boots Alliance Inc. isn’t afraid to be bold. The largest U.S. drugstore chain is in the middle of many of the pharmaceutical industry’s major story lines. The company signed a 20-year agreement in December with embattled Valeant Pharmaceuticals Inc., a pact it has since defended. It is trying to finalize its $9.4 billion acquisition of drugstore rival Rite Aid Corp., a deal that is facing regulatory scrutiny. And it is also a major partner of controversial upstart Theranos Inc., a relationship it has threatened to terminate. What’s more, Walgreens formed a key partnership in February with UnitedHealth Group Inc.’s OptumRx, a benefit manager. And it has said it won’t shy away from more big deals. (Russolillo, 4/4)
