In this investment research report, analysts Jonathan Angestjärna and Panu Pikkanen evaluate investment opportunities in U.S. pharmaceuticals after the introduction of the new U.S. tax bill. For most of its provisions, the new U.S. Tax Bill came into effect on January 2018. The changes include a lower tax rate on repatriated funds and a move to a hybrid version of territorial taxation. The new rate on repatriation is forecasted to lead to significant amounts of funds being transferred back to the United States and used in M&A or share buybacks. This effect can reasonably be expected to cause a price spike especially in U.S. industries that traditionally hold significant amounts of assets abroad – the pharmaceutical industry is an archetypal example. The move to hybrid territoriality in effect means that assets generated in foreign subsidiaries will be taxed, when they could previously be mostly circumvented by tax planning: the view of the analysts is that this may lead to a reduced competitiveness amongst the corporations, which may have a measurable downward effect on the stock prices of U.S. pharmaceutical companies in 2019.

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