Who won and who lost in tax reform? AbbVie, of course, but Regeneron, Roche, AstraZeneca and more

Biopharma companies and their accountants have been poring over the details of U.S. tax reform ever since the government ushered it through late last year. Now it's clear that pharma on the whole will get a boost, but some drugmakers will reap far more savings than others. And some will actually have to pay more.

Tax reform's biggest gainers in biopharma are Regeneron and AbbVie, according to their 2017 results and 2018 guidance, while AstraZeneca, Novartis and others expect to pay a higher overall tax rate this year.

The short answer on whether reform stands to help or hurt a company is that it depends on the drugmaker's overall footprint, PwC U.S. pharmaceutical and life sciences tax leader Kathy Michael said in an interview. There are some "winners and losers" with the changes, she said.

Regeneron reported a 27% tax rate in 2017 and expects a 15% to 19% tax rate this year, the drugmaker said. AbbVie, for its part, expects an "astonishing" tax rate of 9% this year, as characterized by Leerink analyst Geoffrey Porges in a note after the drugmaker reported its results. That's less than half its 18.9% rate in 2017. 

RELATED: AbbVie hikes 2018 forecast and promises shareholder rewards, thanks to U.S. tax changes 

Other drugmakers expecting to benefit this year include Amgen, Pfizer, Eli Lilly, Roche and Gilead. Their tax rates for 2018 should drop between 1.5 and 6.6 percentage points from 2017 levels, the companies disclosed in recent weeks. Before tax reform, Pfizer said it expected a 23% tax rate for 2017, significantly higher than its projection of 17% for next year.

Merck said it expects a benefit of "a few points" from tax reform, but that 2017 is a poor comparator because one-time items helped the drugmaker last year. It's expecting a 19% to 20% tax rate in 2018, down from what the company says is a better comparator: a 22% rate in 2016.

J&J also benefited from one-time items in 2017, the company said, bringing its tax rate for the year to 17.2%. It's expecting to pay an overall rate between 16.5% and 18% this year.

RELATED: Merck expects a flat tax rate in 2018 as peers see benefit from reform 

On the flip side, AstraZeneca expects to see a 2 to 6 percentage point increase in its tax rate, according to the drugmaker's recent fourth-quarter results release. The company's tax rate was 14% in 2017, and it expects an overall rate of 16% to 20% this year. Other companies expecting slight increases to their tax rates include Allergan, Teva and Novartis.

For the analysis, FiercePharma looked at 2017 rates and 2018 projections for the largest biopharma companies ranked by 2016 sales, plus other large U.S. players Allergan and Regeneron. Bayer was excluded, as it has not reported full-year 2017 results. Many of the companies took one-time charges in the fourth quarter due to the tax changes, increasing their rates for the year. The impact of those payments was excluded by using company-provided non-GAAP and adjusted rates.

Bristol-Myers Squibb, Merck and Johnson & Johnson project 2018 tax rates that were similar to what they paid in 2017.

Projected tax rate increases:

Company Projected percentage point increase Projected 2018 tax rate (%)
Allergan 1.4 14
Teva Pharmaceutical Industries 1.7-3.7 17-19
Novartis 1.9 16
AstraZeneca 2-6 16-20

Projected tax rate decreases:

Company Projected percentage point decrease Projected 2018 tax rate (%)
GlaxoSmithKline 1-2 19-20
Sanofi 1.5 22
Gilead Sciences 1.5-3.5 21-23
Roche 3-6.6* "The low 20s"
Eli Lilly 2.5 18
Pfizer 3 17
Amgen 3-4 14-15
Regeneron 8-12 15-19
AbbVie 9.9 9

*Roche executives guided for "the low 20s" as a 2018 tax rate, so the projected decrease is an estimation.

Several drugmakers that expect savings touted new investment plans. AbbVie plans to spend $2.5 billion on U.S. capital projects, accelerate pension funding and donate $350 million to charity. The company is also boosting nonexecutive compensation and plans to return some benefits to shareholders. On the company's fourth-quarter call, CEO Richard Gonzalez said investors can expect a "combination of acceleration of the dividend growth and more share buybacks.”

Asked whether tax reform will have a net positive impact on jobs in the industry, Michael said "we definitely think that it will."

"Not only that, [we think it will] increase research and development and increase M&A activity," she added.

After releasing its results, Amgen said it plans a $300 million plant in the U.S.—with the site yet to be named—that will create 300 jobs.

Pfizer is planning $5 billion in U.S. "capital projects" over five years, including manufacturing expansions, execs said after the New York drugmaker reported its results. The company also donated $200 million to the Pfizer Foundation, made a $500 million contribution to its pension plan this year and set aside $100 million for bonuses. That's all in addition to a $10 billion share buyback program authorized by the drugmaker's board last month—making the benefits to investors a major chunk of its spending plans.

Merck plans to "invest in sustainable long-term value-creating opportunities," announcing $12 billion in spending in capital projects over the next 5 years; $8 billion of that outlay is slated for the U.S. The drugmaker also donated to the Merck Foundation and plans to provide a bonus to eligible staffers in the second quarter.

RELATED: Pfizer pats itself on the back for tax reform lobbying, do-gooder investments

Gilead CFO Robin Washington said the bill doesn't "fundamentally change our capital allocation priorities," but that it does "enable Gilead to invest in sustainable long-term value-creating opportunities, which include investing in R&D, expanding U.S.-based manufacturing, and creating additional jobs in the U.S."

Referencing savings from the bill, J&J CEO Alex Gorsky said on the company's fourth-quarter call that "we think that the wise thing to do is to invest a good portion of that back into R&D."

Pharmas will also likely use excess cash to pay down debt and increase earnings per share, Michael said. Further, the tax bill will disincentivize inversions going forward, according to PwC's New York metro pharmaceutical and life sciences tax leader, Ben Proce.

Besides Pfizer, other companies to announce share buyback programs recently include Celgene for $5 billion, Amgen for $10 billion and AbbVie for $10 billion. AbbVie also boosted its dividend by 35%, it announced Thursday.