April 7, 2016
By Mark Terry, BioSpace.com Breaking News Staff
Despite the abandonment of the Pfizer -Allergan deal as the result of new U.S. Treasury rules, three Pfizer executives will be given $1 million cash bonuses tied to the deal.
The U.S. Treasury department published a new set of rules on April 4 that make it harder for U.S. companies to conduct tax inversions. This squarely affected the $160 billion Pfizer-Allergan deal, which was expected to wrap up in the first half of this year.
Although some analysts expected Pfizer to fight the government on this issue and attempt to complete the merger, in less than two days Pfizer officially called off the deal.
Several executives, including Pfizer’s chief executive officer, Ian Read, were receiving bonuses related to the merger. The large golden parachutes weren’t exactly unexpected, but one aspect that caught many observers off guard was the company’s plan to pay the severance taxes on the compensation packages.
Pfizer agreed to exit packages for five of its top executives totaling $300 million if any of them should not be given a position after the merger.
Now, three of Pfizer’s executives will each receive $1 million, dubbed “retention awards.” The recipients are Mikael Dolsten, president of worldwide research and development, John Young, group president of global established pharma business, and Albert Bourla, head of global innovative pharma business.
The Pfizer board indicated in a March 15 proxy statement that the retention awards were granted to the executives because they believed they “would have an important role in consummating the combination with Allergan and successfully integrating the two businesses.” And the awards would be given even if, as it did happen, the merger was canceled.
Bourla was recently promoted to this position on Feb. 8, taking over from Geno Germano. Previously he was group president, vaccines, oncology and consumer healthcare.
There’s no word at the moment on whether Allergan is offering similar retention bonuses. Allergan’s chief executive officer, Brent Saunders, was going to become president and chief operating officer of the newly merged Pfizer plc, had the deal gone through. His exit package is priced at about $140 million. Allergan’s executive chairman, Paul Bisaro, was eligible for an exit package about $80 million, although Allergan did not plan to reimburse him for the excise tax.
Allergan has kept on rolling, not letting any moss grow in the meantime, announcing today a licensing deal with Heptares Therapeutics, a subsidiary of Sosei Group Corporation, that could hit $3.3 billion. The deal is for up to 10 compounds for a variety of central nervous system disorders, including Alzheimer’s disease.
As for Pfizer, this is the second major tax inversion deal to fall apart, the first being its bid for U.K.-based AstraZeneca in 2014. It’s not clear yet if the company will continue with business as usual or potentially split into two companies, one focused on research and development and new drugs, the other to focus on older, mature brands. Although it’s possible the company might look around for another possible tax inversion deal, most analysts think that’s unlikely.
“The fact that the company is talking about the original split-up decision timeline of last 2016 almost seems to suggest they have given up on inversion,” said Tim Anderson, a senior analyst for Sanford C. Bernstein & Company, in a note to investors.
