When Senator Carl Levin, Democrat of Michigan states that, “It’s become increasingly clear that a loophole in our tax laws allowing these inversions threatens to devastate federal tax receipts, we have to close that loophole,”it is more than just political rhetoric. His statement clearly encapsulates the recent rush by Pfizer Inc. (NYSE:PFE) the New-York based giant pharmaceuticals to acquire rival UK-based pharma company AstraZeneca plc (ADR) (NYSE:AZN) for a whopping $106 billion, so as to circumvent high taxes laws in the US.
Why Other companies want to follow Pfizer
According to experts, European destinations, especially Ireland have become tax havens for many US-based companies. Ireland and similar countries offer companies multiple benefits: easy access to European markets and the immediate advantage of low-taxes if they moved headquarters from US cities to local Irish cities.
Options before Pfizer
However, for Pfizer Inc.(NYSE:PFE) the reasons for such a flight away from US is related more to the coup of cancer drugs which Astra Zeneca currently holds and its pipeline. Pfizer has been in cycles of disappointment for several years now; due to lack of any valid and worthy drug development, besides the failed attempts at acquiring other products or companies.
Why Astrazeneca should reject Pfizer’s Offer
Astrazeneca, one of the premier UK-based research and development based pharmaceuticals is definitely caught in a well-structured Pfizer offer. Even as executives of Pfizer address concerns and queries of British parliamentary committee, bettering earlier assurances with more cash offer, it is evident that AstraZeneca plc (ADR) (NYSE:AZN) would definitely be the loser, if this deal were to be solemnized.
One of the main casualties of such a take-over would be high-quality research and development of drugs.
Pfizer Inc. (NYSE:PFE) with some of the latest acquisitions has proved that it is focused only on building profits for shareholders and not focussed on research and development of new drugs because of centralized research and cutting back on independent qualitative research.
AstraZeneca plc (ADR) (NYSE:AZN) with several drugs in Phase-3 trials should reject Pfizer’s offer solely on the issue of lack of research and development encouragement over any other monetary, temporary benefits.