Tax laws bolster Pfizer's coffers
- PHARMACEUTICALS.
COMPANIES INTERNATIONAL
By CHRISTOPHER BOWE and JAMES POLITI
384 words
16 May 2005
Financial Times
USA Ed1
Page 24
English
(c) 2005 The Financial Times Limited. All rights reserved
Pfizer's cash pile is enough to buy nearly all publicly traded US biotechnology companies, according to an analysis by Deutsche Bank.
Recent US tax law changes prompting repatriated foreign profits have bolstered the coffers of the world's largest drugmaker and it plans to repatriate up to Dollars 38.9bn - and at least Dollars 28.3bn in foreign earnings.
If added to Dollars 1.5bn in cash on hand and Dollars 20bn in short-term investments, according to first-quarter regulatory filings, Pfizer could have nearly Dollars 60bn in cash, giving it unparalleled strength in a profitable but fragmented industry.
The Deutsche Bank review calculated that Pfizer's cash position was equivalent to the market capitalisations for the 179 listed US biotech groups outside the top 20, which includes giants such as Amgen. The combined market capitalisation of the 179 biotech companies was Dollars 45.3bn. The top 10 had a combined market capitalisation of Dollars 226.9bn, and the next 10 totalled Dollars 17.3bn.
Although most of Pfizer's rivals have solid balance sheets, few, if any, have such cash power. Pfizer has Dollars 52bn in annual sales.
However, the money underscores the struggle in the industry to find new drugs. Pharmaceuticals companies must trawl for drugs - or companies with pipelines - worthy of development. It can cost up to Dollars 800m to bring a drug to market.
Wall Street is concerned about slowing growth due to patent expiries and uncertain productivity in their research laboratories and new drug pipelines.
Last year's tax changes and a new jobs law mean other major US pharmaceutical companies need to decide what to do with cash stockpiles. Bristol-Myers Squibb is repatriating Dollars 9bn, Eli Lilly's total is Dollars 8bn, Schering-Plough's Dollars 9.4bn, while Merck is considering whether to bring back Dollars 15bn, and Wyeth Dollars 2.7bn, according to filings.
Pfizer could afford to buy the second tier of top US biotech groups. "The planned use of proceeds includes domestic expenditures relating to advertising and marketing activities, research and development activities, capital assets and other asset acquisitions, and non-executive compensation in accordance with the act," it said in a recent filing.
