Pfizer has been in pursuit of AstraZeneca since May; nothing has come of the deal and now that the US authorities are cracking down on US-based companies acquiring foreign firms in order to avoid higher levels of taxation at home, the takeover is looking unlikely. Pfizer’s £69.4 billion bid for AstraZeneca was rejected back in May, with the US drugmaker hoping to domicile itself in the UK for tax purposes. President Obama introduced new tax laws to stem this exact practice.
Pfizer was not the only company to spot the tax loop, AbbVie had been courting London-listed Shire for the same reason, but since the change in the tax laws it has now pulled its bid. Pfizer is unlikely to renew its interest in AstraZeneca.
The company is expected to announce revenue of $12.27 billion and earnings per share of $0.55 for its third quarter, lower than July’s figures of $12.7 billion and $0.58 which exceeded analysts’ estimates.
Pfizer has blamed declining sales on increasing competition from generic brands of drugs it previously owned patents to. On a positive note, sales of its biggest drug Lyrica rose by 16% in the second quarter. Its full-year revenue forecast was lowered to a range of $48.7 billion to $50.7 billion, from $49.2 billion to $51.2 billion.
Equity analysts remain bullish on Pfizer. Out of the 28 recommendations 18 are buys, eight are hold and two are sells, and the average price target is $34.17.
It would appear that Pfizer is worried it doesn’t have enough patented drugs in its portfolio and is hoping to boost profits by availing a tax loop, which seems like a get rich quick scheme. Investing time and money into research and development needs to be its priority.
The stock hit $32.95 in March, a level the share price hasn’t seen in nearly a decade. The share price has been in decline since May, and following its the second-quarter announcement it has spent most of its time in the $28-$30 range. Good numbers and a positive outlook could push the price to $30.18, however if the company has no plans to counteract falling revenue it could decline to the recent low of $27.26.