By Bill Berkrot and Divya Grover
(Reuters) - Pfizer Inc said on Tuesday it expected to pay tax at an adjusted rate of about 17 percent this year, higher than some investors had expected, sending its shares down more than 3 percent.
Shares of the largest U.S. drugmaker jumped last Friday after rival AbbVie Inc projected a new adjusted tax rate of just 9 percent and rose to their highest level since 2002 on Monday on hopes that Pfizer might benefit to a similar extent.
Drugmaker stocks were also broadly lower on Tuesday after Amazon.com Inc, Berkshire Hathaway Inc and JPMorgan Chase & Co said they would form a healthcare company aimed at cutting costs for U.S. employees.
"What you're getting is a selloff based on people anticipating it was going to be lower," SunTrust Robinson Humphrey analyst John Boris said of the new tax rate.
U.S. companies across the board are set to profit this year after the tax overhaul signed into law in late December slashed the corporate rate to 21 percent from 35 percent, and many have already forecast lower adjusted rates.
AbbVie set its estimate particularly low compared with other U.S. companies, projecting its adjusted tax rate would rise to about 13 percent over five years. Pfizer said it expects the 17 percent rate to be sustainable.
Pfizer Chief Executive Ian Read had long lobbied for cutting U.S. corporate taxes and twice had large deals thwarted that would have placed Pfizer under European tax rules.
NO DEAL PRESSURE
Because of the new, low tax rate, Read said he was now under no pressure to do immediate deals, but remained open to acquisitions large and small under the right circumstances.
Pfizer is expected to entertain bids for its consumer health business, which could be worth $20 billion, although it said it may still decide to keep it..
How that turns out could influence other business development decisions, Read said in a telephone interview. "However, it wouldn't stop us from moving quickly if we saw an opportunity."
If pricing pressure on medicines continues to mount, Pfizer could do major deals, Read said, but added that there is "a sense of urgency" to accelerate earnings per share growth.
The company forecast 2018 profit well ahead of Wall Street estimates and increased its dividend to 34 cents a share. Combined with share buybacks, that will return more than $13 billion to shareholders, Chief Financial Officer Frank D'Amelio said.
REPATRIATION
Pfizer recorded a $10.7 billion gain from the tax overhaul and said it was reviewing capital allocation plans under the new code.