Alexion Pharma Skips Out on Paying U.S. Taxes, Wall Street Says Hurrah!

Alexion Pharmaceuticals (ALXN) is up 21% to $162.11 Thursday, not because of another "beat and raise" quarter, but because the company is moving operations to Ireland so that it can avoid higher U.S. corporate taxes. 

In 2014, Alexion's corporate tax rate will be 11-12%, much lower than the mid-20% tax rate expected by investors and analysts. And Alexion's tax rate will remain low forever now that "technical operations" are domiciled in Ireland. Alexion said Thursday that its tax rate will rise to 13-14% in 2015 and 16-18% in 2016 and beyond. -- still well below what the company would pay in the U.S.

Alexion is just the latest drug company to pursue the strategy of "inversion" -- the relocation of corporate headquarters or business operations from the U.S. to more tax-friendly countries like Ireland. Many companies invert by acquiring Irish-based businesses. Alexion is doing something different. It acquired a factory in Ireland where its drugs are packaged into vials. By establishing this factory in Ireland, Alexion was then able to transfer "technical operations" and key patents on its main drug Soliris from the U.S. and Switzerland to its Irish affiliate. 

And with that move, Alexion avoids paying higher U.S. corporate taxes. Wall Street cheers. 

On a call with investors this morning, Alexion CEO Leonard Bell insisted the company's decision to "realign its corporate structure" was done to better serve patients. Bell was reading from a script, no doubt crafted by his lawyers and spin doctors because the company knows running away to Ireland to shaft Uncle Sam may make good business sense, but looks lousy from a public relations perspective.

On the call, Bell didn't say if he'd be leaving his tony home in Connecticut, where Alexion is officially headquartered, to live in a garret above his new Irish vialing plant.

Somehow, I doubt it. Alexion's taxes are the only thing really moving.

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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