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Biotechs boosted by fund repatriation

The US biotechnology sector stands to benefit from the repatriation this year of up to 57bn formerly tied up in Ireland, says a prominent fund manager.

Framlington biotech fund manager Gareth Powell says some major pharmaceutical companies have found themselves with a wealth of cash to make acquisitions following a change in US government rules over the repatriation of corporate profits.

Many US pharmaceuticals set up operations in Ireland to benefit from corporation tax of only 12.5 per cent. To repatriate funds to the US, they previously had to pay 35 per cent tax. However, for one year, this has been reduced to 5.5 per cent in an effort by Washington to stimulate corporate activity.

Pfizer has used some of its cash to buy Vicron, an anti-infectives company, at an 84 per cent premium. Powell’s fund, like all others in the biotech sector, has a heavy US weighting and stands to benefit from such moves.

Powell says: “Biotech looks very exciting for the next year as, under the US government’s terms, the repatriated money cannot be used for stocktaking or share buybacks. This is a good catalyst for the big pharmaceutical firms to look at merger and acquisition opportunities.”

Plan Invest managing director Michael Owen says: “The repatriation rules stand to help many US businesses and I do expect some exciting take-overs in the biotech sector.”

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