INVEST - Pfizer to Repatriate US$24B of Offshore Capital

The Repatriation of Offshore Capital Continues

In her FiercePharma article earlier today Carly Helfand suggested that '

Pfizer’s finally getting what it always wanted in U.S. tax reform.' According to Carly, analysts are watching to see what Pfizer plans to do next. 

In the fourth-quarter conference call, Pfizer CEO, Ian Read, suggested the company will repatriate US$24B but downplayed the possibility of a big M&A deal with the money Pfizer intends to bring home. 

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

Pfizer said it will invest about US$5B in capital projects in the US, contribute US$500M to its American pension plan, spend US$100M in bonuses for non-executive employees and contribute US$200M to the Pfizer Foundation. The Pfizer 4th Quarter report and earnings forecast was released earlier today. 

Pfizer, CFO Frank D’Amelio, said the repatriation will involve a US$15B tax payment to the US Treasury over the next 8 years and noted the effective tax rate on adjusted income will be about 17 percent next year, down from 20 percent this year.

Pfizer says the capital allocation decisions of 2017 enhanced shareholder value. In addition to investing in the business, they returned $12.7 billion directly to shareholders through a combination of dividends and share repurchases.  Pfizer anticipates share repurchases totaling $5.0 billion in 2018 that will be partially  offset due to dilution related to share-based employee compensation programs.

Pfizer reported ten approvals from the FDA, which is significantly more than the company has achieved in any year of the past decade. Read concluded the conference by saying:

“I believe our current management and business structure, the tireless dedication of our colleagues and the strong culture we have nurtured, position Pfizer especially well for continued success."

A number of analyst seemed to feel that capital would flow to the economy through shareholders rather than through direct acquisitions. Even so, these funds may contribute to new investment within the innovation framework of the digital economy.