Taking pharma's tax inversion and slim-down trends to the next level
Name: Ian Read
Title: CEO of Pfizer
Pfizer ($PFE) CEO Ian Read started a trend in 2012 when he kicked off Big Pharma's slim-down craze, selling off his company's nutrition business to Nestle and prepping a spinoff of animal health division Zoetis ($ZTS). Today, that craze is still going strong--and Read is examining the prospect of taking it to up a notch.
With last year's agreement to buy Allergan ($AGN)--the largest ever deal in the healthcare industry--Read set the stage for a large-scale split that would see Pfizer break into two pieces. The higher-margin innovation side would become one business, while established products division would form its own.
Of course, for now, Read is concentrating on integrating Allergan, and he's said Pfizer may not decide on a potential divide until the end of 2018. In the meantime, though, his grand plan has inspired some of his pharma peers to hive off non-core assets (think Merck ($MRK) and OTC, Novartis ($NVS) and animal health)--and investors at other companies to push for bigger shake-ups (GlaxoSmithKline and Johnson & Johnson).
But Read's Allergan transaction, if successful, could do more than just pave the way for a wider company breakup. It could also pave the way for other pharma companies to push ahead with tax inversion deals, despite the U.S. Treasury's attempt to thwart them.
While the department has now twice rolled out stricter rules on the deals to stop companies from moving their tax domiciles abroad, Read paid no heed when striking the Allergan pact. To dodge the tighter reins, he structured the deal so that Allergan is technically buying Pfizer, and so far, the government hasn't been able to do anything to stop it.
The companies are in a "strong position to close the deal in the second half of the year," Allergan CEO Brent Saunders said during his company's Q4 conference call. "I don't see any obstacles."
And that means other companies, earlier scared away from striking their own tax-lowering deals, may begin to come out of the woodwork to follow in Pfizer's footsteps.
-- Carly Helfand (email | Twitter)
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