Pharmaceutical Shares Drop As New US Tax Law Takes Effect

UK pharmaceutical companies drag down FTSE after US tax crackdown

The shares of UK listed pharmaceutical companies Shire and AstraZeneca have fallen sharply this morning, this comes after the US Treasury introduced a new law to curb tax avoidance by US companies, who are looking to acquire overseas rivals in a so called “inversion” deal.

Shire and AstraZeneca’s stocks are the biggest fallers on the FTSE 100 this morning both being down more than 5%. This is also reflected with several other UK listed pharmaceutical companies being down as well.

The rapid decrease in share price is due to the US government announcing overnight that it intends to crack down on “inversion deal”, these deals have seen a number of US companies reduce their tax bill by acquiring companies where the rate of corporation tax is much lower than the US.

This announcement from the government has been widely expected as its been a political debate for numerous months however the crackdown has been far stricter than what was anticipated and could make any inversion deal much less profitable for US firms.

Both AstraZeneca and Shire have seen recent boosts in their share price; Shire with the agreement of a takeover from Abbvie and AstraZeneca with the constant rumours that Pfizer will again make another offer to takeover the company. Pfizer were widely expected to return later this year with another offer and try again, but the new law could jeopardise Pfizer’s renewed attempts to take over its UK rival.

The news could also jeopardise an agreed deal which was going to see AbbVie buy UK-listed Shire for  £34 billion. Although there was a clause in the takeover offer if such law was to be introduced and Abbvie were to pull out they would still have to pay a significant fee to Shire.

This new law is surely going to have a lot of people especially in the UK supporting the US governments decision however with every decision I’m sure there will be a lot of opposition. So the next few moves that the big US pharma companies make could be very interesting.

Alex Carson

PiR Resourcing leaders in senior life science resourcing. For more news and information, you can follow us on Twitter and LinkedInFor all our latest roles in the Life Science sector please click here.

 

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