Top pharma execs are closely tracking a flurry of news coming out of Washington, intently waiting to see how the new presidential administration’s plans for business will play out for their respective companies. While details are few and far between, analysts have been anxious to know what CEOs are thinking on the topic, with it coming up again and again in earnings calls.
For starters, Allergan CEO Brent Saunders said he doesn’t believe “we’ll see tax reform in 2017 at this point.” His company is “plugged in” to the ongoing discussions, he said, but “there's no real plan yet for what tax reform will look like nor when it will appear.”
President Donald Trump met with biopharma leaders last week to talk about drug prices, regulations and tax rates. But, as GlaxoSmithKline CFO Simon Dingemans put it in his answer to a question on taxes, “the devil is going to be in the detail of what the proposals finally turn out to be.”
One CEO who has been thinking about tax details is Sanofi CEO Olivier Brandicourt, who pointed out on his company’s conference call that international trade agreements might limit one of Trump's primary concepts, border taxes.
Trump has frequently talked about border taxes as a way to promote domestic manufacturing, but Brandicourt said they will “have to comply with [World Trade Organization] agreements, … and that may actually limit the actual scope we believe.” Plus, “human medicines are very often exempt” from such taxes, he said.
As a foreign company with substantial operations in the U.S., Sanofi could stand to gain from a U.S. corporate tax overhaul, Brandicourt believes.
Merck CEO Ken Frazier, who attended Trump’s biopharma confab, said on a conference call that participants at the meeting “got a lot of issues on the table.” From there, he and others will have “regular check-ins” to keep communication channels open with officials.
Also in attendance during the meeting was Eli Lilly CEO David Ricks, who told investors and analysts that the conversation was short on policy details.
However, Ricks said he left “with some confidence that the people who we'll be working with closely as legislation moves forward have a good grasp of those facts.”
Pfizer CEO Ian Read said on his company's fourth-quarter earnings call that he agrees with Trump that, when it comes to “free riding on American innovation of pharmaceuticals,” current trade agreements “haven't been negotiated hard enough.”
Read also pointed out that tax changes could make it cheaper for Pfizer to access financing. “Some deals that previously would not have been affordable, may now be affordable,” he said.
Celgene CEO Mark Alles said his team is “very, very optimistic” about the administration’s plans to “focus on preserving and enhancing the competitive marketplace" in healthcare. Alles said that “we have to see” how the repeal and replace efforts for Obamacare unfold. He thinks “it's going to be a pro-innovation, a pro-industry policy environment.”
In talking about potential changes in the U.S., execs for Glaxo and Roche both took a chance to highlight their vast operations in the country. GSK CEO Andrew Witty said the London-based company has nine factories, plus a global R&D center, in the country.
Roche CFO Alan Hippe said the Basel-based company is a “great citizen in the U.S.” About 40% of Roche’s sales and operating costs are in the U.S., Hippe said.
Leaders at both drugmakers are waiting to see how potential changes to the U.S. business environment could impact their operations.