Pfizer benefits from tax reform, still vague on M&A
- Pfizer Inc. announced 2017 full-year and fourth quarter earnings on Tuesday that were essentially flat year-over-year, with revenues coming in at $52 billion and $13 billion, respectively.
- The company said it's still evaluating the impact of the recent tax code changes on financial guidance for 2018, but that it expects revenues of $53.5 billion to $55.5 billion for the year. Pfizer expects to make a decision regarding its Consumer Health business during 2018.
- Pfizer's biosimilar version of Johnson & Johnson's Remicade gained some ground during the fourth quarter and now makes up 5.6% of the infliximab market. Inflectra previously held 4.9% of the market. Pfizer said the growth came from closed systems like Veteran's Affairs.
Pfizer’s flat earnings for the year and the quarter were largely expected and created little buzz for investors and analysts. But the company’s insights into what it will do with its cash and how it plans to spend said cash were of keen interest.
The big pharma played a key role in pushing the recent tax changes forward — its $100 billion attempts to defect from the U.S. helped highlight how much U.S. corporations detested the high corporate tax rates in the country.
In response to the lowering of the tax rate, as well as lower tax rates on bringing home ex-U.S. cash, Pfizer is spending quite a bit of money.
Pfizer is increasing its U.S. investment, including $5 billion in capital projects and manufacturing. The company plans to invest $500 million in its stateside pension plan and $100 million in one-time bonuses to non-executive Pfizer employees.
It is also doing $5 billion in share buybacks, as well as increasing its dividend 6% to 34 cents per share. The buybacks and the dividend bump will result in more than $13 billion being returned to shareholders.
Tax reform has been good to Pfizer; it got a $10.7 billion tax cut in the fourth quarter. The company previously guided a tax rate of 23% for 2018, but has revised that down to 17%.
Pfizer now also expects to repatriate the bulk of its overseas cash — as much as $24 billion.
With all that cash in hand, Pfizer CEO Ian Read said the company is still looking at potential deals.
"We will continue to look for value in the BD space and when we find it, we have the capacity and capability to act on it," said Read, noting that tax reform would likely change the valuations of certain takeover targets.
"We believe we have the capacity to do the small deal and the big deal when the moment arises," he added, but gave the caveat that Pfizer "feels no pressure" to make a deal immediately.
In response to the announcement made earlier this year that Pfizer would back out of neuroscience, the big pharma revealed which compounds it discontinued since the end of October. The discontinuations included eight early- and mid-stage neuro compounds in areas like Alzheimer’s disease, epilepsy, and Parkinson’s disease.
It also stopped studying its PD-L1 inhibitor Bavencio (avelumab) in gastric cancer after a previously announced failure in that indication. The company dumped three other early-stage cancer compounds, as well as a Phase 1 NASH compound and another in hyperlipidemia.
- Pfizer Earnings Statement
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