Will Pfizer Try Again for AstraZeneca?

Source: Getty Images

Source: Getty Images

There is a misconception among investors that Pfizer (NYSE:PFE) was only trying to acquire AstraZeneca (NYSE:AZN) to gain access to a country with a corporate tax rate of 21 percent, far lower than the 35 percent rate in the U.S. While this rate was a huge role in attracting Pfizer, it alone did not validate the $117 billion that Pfizer was willing to pay. Therefore, as you dig deeper, it’s clear that Pfizer lost more than just a tax rate.

Pfizer belongs to a group of pharmaceutical companies known as “big pharma,” a group that has suffered in recent years due to patent expirations. Specifically, Pfizer’s stock is still lower by more than 15 percent over the last decade, as the loss of the cholesterol drug Lipitor has been irreplaceable for the company.

If losing Lipitor, among other drugs, weren’t bad enough, Pfizer faces patent expirations on countless other blockbuster products.

Drug U.S. Patent Expiration U.S. Sales Europe Patent Expiration Worldwide Sales
Lyrica 2018 $1.9 billion 2014 $4.59 billion
Celebrex 2015 $1.9 billion 2014 $2.9 billion
Zyvox 2015 $688 million 2016 $1.35 billion

Moreover, the drug Viagra, which earned worldwide sales of $1.8 billion last year will lose exclusivity in 2017 to Teva Pharmaceuticals, due to a previously announced agreement. Therefore, Pfizer not only desired a lower tax rate, but needed revenue and profits as well.