Bristol-Myers Squibb, the drugmaker behind cancer medications like Opdivo, will devote the extra cash from a GOP tax break to its current strategy of aligning growth through new products and acquisitions with investor payouts.
The New York-based company’s tax rate next year, which reflects a mix of levies including U.S. income tax, will be between 20 percent and 21 percent this year, Chief Financial Officer Charles Bancroft told investors on Monday. That would be the lowest since at least 2014, according to the company’s financial statements.
“We expect our tax rate to be in the high teens within the coming years,” he added, and “we see no change to our balanced approach” to capital spending. “2017 was a very active year in which we executed over 50 transactions.”
The projected benefits from the GOP-led tax overhaul, which cut the top corporate rate to 21 percent from 35 percent to buoy U.S. economic growth, come at a cost. Expenses related to the law, which also charges a one-time fee on assets overseas, totaled $2.9 billion, prompting the pharmaceutical firm to post a quarterly loss, as did companies from Google parent Alphabet to Citigroup.
Bristol-Myers Squibb’s loss of $2.32 billion compared with profit of $894 million a year earlier. Excluding the tax charge, profit of 68 cents a share was slightly higher than the 67-cent average estimate from analysts surveyed by FactSet.
Competitors Allergan, Gilead, and Celgene may offer further insight into their own plans for using the proceeds from the tax break when they report quarterly earnings later this week.
Some blue-chip pharmaceutical companies will start investing more of a $200 billion cash stockpile, much of it held overseas, in dealmaking now that they can move the money back to the U.S. at a lower cost, debt-ratings firm Moody’s has predicted.
The new tax law allows U.S. companies to bring assets back without a penalty after a mandatory one-time fee of 15.5 percent on cash holdings and 8 percent on the remainder.
Under the previous structure, the Internal Revenue Service typically would have assessed levies of about 30 percent every time companies moved overseas cash to the U.S., prompting firms that could get money less expensively through capital markets to simply pay for acquisitions with debt, Moody’s noted.
The tax bill changes the playing field for U.S. corporations considerably, “both because the accumulated cash can be accessed more tax efficiently and, separately, because ongoing future cash flows can be accessed more tax efficiently,” Michael Levesque, a senior vice president at the New York-based firm, told the Washington Examiner.
Bristol-Myers, however, is likely to be less aggressive on both investor payouts and acquisitions than some of its peers, Moody’s projected. The company repurchased about $2.5 billion of its shares last year and said in December it would raise its quarterly dividend by one penny a share to 40 cents.
