Biotech Winners of a Repatriation Holiday

My Foolish colleague Morgan Housel had a good article yesterday about the pros and cons of a holiday on the repatriation tax that keeps companies from bringing foreign-earned funds into the U.S. without substantial taxation. Like Morgan, I'm all for it, although I have a hard time seeing it happen when politicians can't even agree to raise the debt ceiling. Still, a biotech Fool can dream, can't he? All that cash The big five American drugmakers have an outlandish amount of cash sitting on their balance sheets. The companies don't break out how much of the cash is held overseas, but it's safe to assume that it's a good chunk of the total. Even if they sell more drugs in U.S. than anywhere else, they're also using a lot of the stateside cash to pay for dividends to avoid the repatriation tax. That foreign cash is useful when acquiring large corporations. Merck's acquisition of Schering-Plough, Pfizer's acquisition of Wyeth and even the smaller Lilly acquisition of ImClone Systems all allowed the companies to bring cash home. The foreign cash could also be used to acquire drugmakers based abroad. Ireland-based Amarin (Nasdaq: AMRN) and Elan (NYSE: ELN) and Israel-based Protalix BioTherapeutics (AMEX: PLX) are all often mentioned takeover targets; the fact that the companies could be acquired with overseas funds probably won't be a major factor in the big pharma's decision to acquire them, but the ease of paying for them probably plays at least a minor role. But what about U.S.-based biotechs? They're stuck with whatever is left after paying out dividends and whatever else the companies have to pay with their greenback-denominated cash flow. Unless, of course, the Big Pharma players were suddenly able to bring all that cash they have stashed overseas back home. It would be payday for biotech investors.... Read more