What will Pfizer do with tax reform? It won't revive a split, CFO says

Pfizer HQ
Pfizer's tax rate will sink from 23% to 17% thanks to U.S. tax reform. (Norbert Nagel/Wikimedia Commons)

Pfizer’s finally getting what it always wanted in U.S. tax reform. And now, all eyes are on what it’ll do next.

One thing CFO Frank D’Amelio crossed off the list of options? A companywide split. When Pfizer tabled the idea back in 2016, many analysts assumed taxes factored into that decision. Now, though, even though the company could be split “in a tax efficient way ... we really don’t see any trapped value” that could be unlocked through the maneuver, D’Amelio told analysts on Pfizer’s fourth-quarter conference call.

CEO Ian Read also downplayed the possibility of doing a big M&A deal with the up to $24 billion in overseas cash that Pfizer intends to bring home.

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“We had the capacity before tax reform to do M&A,” he reminded analysts, adding that “in fact, we attempted to do two large ones that were thwarted by government interventions.”

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That said, though, Read does still see a wave on consolidation coming within the pharma industry in response to payer pressure, and when it does, Pfizer will be ready.

“I would say we have a core competency of consolidation of large companies,” he said. And if the consolidation wave brings along an opportunity to create value for shareholders, “I expect that Pfizer would be at the forefront at it.”

For now, though, “we don’t feel any pressure” to make pickups, Read said, considering the state of Pfizer’s business. The company’s fourth-quarter revenues came in (PDF) on target at $13.7 billion, and earnings per share of 62 cents topped 56-cent expectations.

For next year, the company expects to generate between $53.5 billion and $55.5 billion, a range that came in higher than Street-watchers expected. And Pfizer predicted earnings per share will hit between $2.90 and $3.00, thanks in part to a tax rate that’s sinking from 23% to 17%.

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That’s not to say Pfizer didn’t have its fourth-quarter bumps in the road, though. One notable one? Sales of Ibrance, which has been a top growth-provider over the last few years, missed the mark by $241 million thanks to a one-time price adjustment related to European reimbursement agreements.

Executives, though, insisted that the drug’s growth is still strong on the continent, pointing to a 20% volume increase over the third quarter. Over 29,000 patients have received Ibrance in Europe, COO Albert Bourla said, compared with the 20,000 that received the therapy in the first year of its U.S. launch.

“What you need to be focused on, if you don’t mind me saying so, is what does this set up for the future of Ibrance,” Read told analysts on the call. “We have managed to establish wide reimbursement and pricing at what we believe for the European market is comparative analogs.”