The U.S. Department of Treasury appears to have scuttled Pfizer's planned merger with
It's a blow to
Frazier said repeatedly in public forums that he thought the distraction of a tax inversion might not be worth the benefit.
Here's Frazier on Merck's second quarter 2012 earnings call:
I would say that Merck is not interested in pursuing a business development deal either solely or primarily for the specific purpose of tax inversion. Obviously, every company takes a very different path to drive long-term shareholder value.
As we have said before, our goal is to be the premier research-driven biopharmaceutical company. Our strategy is built on innovation in the pipeline.
And here he is in September 2014, at the Morgan Stanley Unplugged Conference:
Now with respect to Merck and tax inversions, I have been very clear that if you look at the size of the kinds of transactions that would make us eligible for an inversion, we don't see that as consistent with our strategy as a company. And we want to do deals for strategic reasons. We want to do deals that give us access to quality commercial assets and quality scientific assets. We don't see that the advantages that we would get from a tax inversion deal would either be durable long term because I think the U.S. government will do something positive or negative in response to the flight of capital, if you will, or flight of certainly headquarters from the United States.
That last statement--that if companies keep fleeing, the U.S. will do something about it, so there may not be long-term benefits for the inverters--look particularly prescient.
Frazier, who for the past year has been chairman of the board of directors of the drug industry's lobbying group, PhRMA, has also been very vocal in saying that the U.S. needs to change its tax laws to be more favorable so that companies don't try to flee, or, as importantly, hold cash and intellectual property in other countries.
Here's what he said on Bloomberg TV last December:
I think it's an important thing to focus on as a society. The U.S. tax system is frankly non-competitive in a global sense. And we have to come up with a tax system that allows U.S. companies to be in competition globally for talent, be in competition for investors, be in competition for IP assets and everything that makes this industry run. I think that deal should be something that serves notice to our policy makers that good American companies feel no choice but to do things like tax inversions in order to remain competitive globally.
Chief executives get a lot of pressure from investors to do things--deals, layoffs, big sweeping changes in strategy. There's an expectation that they'll create shareholder value, quickly. But this often misses the reality of running an organization that is built to last decades or centuries. Often, what CEOs deserve credit for is what they don't do. Maybe this was one of those cases.
