Bottom Line: AbbVie succeeds where Pfizer has failed

Michael Bow
Follow Michael
HOW PFIZER’S chief executive Ian Read must be looking enviously at his US pharmaceutical counterpart Rick Gonzalez this morning.

Read, you'll remember, was the plucky Scot hauled over to the UK by MPs into a blaze of publicity about his dastardly plan to take over UK drug giant AstraZeneca.

In contrast, Gonzalez has swept quietly and methodically into the UK to snap up ADHD drug maker Shire with remarkably little fanfare, clinching the deal at the fifth time of asking. The contrast of outcomes couldn’t be starker but they have shared the same logic: tax inversion.

AbbVie Shire will move its tax base from Chicago to London once the deal completes – slashing the tax rate from 22 per cent to 13 per cent within two years.

Moving to the UK instead of say, Ireland or Holland, where tax is also low, is driven by the fact that at least 20 per cent of a merged entity must be owned by investors from the host country. The City’s role as a financial hub neatly solves that problem.

The so-called patent box incentives – tax breaks for corporates who develop intellectual property in the UK – also play a role, and could boost the number of R&D jobs that AbbVie Shire brings over to the UK. These elements were also at play in Pfizer’s bid to snare Astra, but instead of strengths, they came to be seen as cynical corporate ploys.

Perhaps it was the overtly aggressive tactics of Pfizer. Perhaps it was the political climate at the time. But Gonzalez has managed to take the sting out of tax inversions. Ian Read should be taking notes.

Related articles