Pharma is cash rich abroad, but debt will rise

October 15, 2008 — 10:44am ET |
By Christe Bruderlin-Nelson

Amidst consistent reports that there is plenty of cash in the U.S. pharmaceutical industry, analysts are fretting about the challenges of accessing that cash–due to the serious tax implications–for use in the U.S.

But will companies need much cash? Well, it’s more likely than not, since big pharma as a whole is poised for acquisitions (e.g. Eli Lilly will borrow a few billion to purchase ImClone), particularly in light of the fact that some leading companies have quite weak pipelines and are facing patent expirations.

Overall, Moody says the industry looks fairly safe, despite the U.S. financial crisis, but others say that because of the potential tax hit, U.S. drug companies are more likely to go into debt than to repatriate cash.  

The Moody report looked at nine companies; Amgen, Bristol-Myers Squibb, Eli Lilly, Genentech, Johnson & Johnson, Merck, Pfizer, Schering-Plough and Wyeth, noting that almost 70 percent of the companies’ rise in investments is in offshore cash and that bring it back could cost nearly 30 percent in taxes.

– see the Wall Street Journal story
– read the related Wall Street Journal blog post

Related Articles:
Moody’s downgrades Euro-Pharma
U.S. pharma in a blue Moody over bad credit
Detractors question Lilly’s ImClone buy
Pharma cash to feed more M&A
E&Y: Pharma neglects working capital
French biotechs optimistic about investment, pipelines

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