Pfizer Agreed To Merge Its Off-Patent Drugs Business With Mylan

Pfizer and Mylan are betting that combining Pfizer’s off-patent business, called Upjohn, with Mylan—known for the EpiPen emergency allergy shot—will provide a pathway to reignite sales growth.

Shareholders of Pfizer will own 57% of the new business and the rest of it will be owned by shareholders of Mylan. The new company is expected to have between $19 billion and $20 billion revenue on a pro forma basis.


The deal brings together two businesses whose sales have slowed since former big sellers lost patent protection and began facing lower-priced competition. For Pfizer, these include Lipitor cholesterol pills and the male-impotence drug Viagra.

Pfizer shares fell 2.9% to $41.82 in morning trading Monday, while Mylan gained 13% to $20.85. Talks of the deal were first reported by The Wall Street Journal on Saturday. The deal could trigger further changes in the generic-drug industry, shaken by competition from Indian makers and under pricing pressure from the groups in the U.S. that buy and distribute the drugs and have been getting bigger.

The squeeze has hurt the sales—and shares—of Mylan and other leading generic drugmakers, notably Teva Pharmaceutical Industries Ltd. Mylan stock has dropped by about 75% from its high in the spring of 2015.

The new company, which will be renamed and rebranded, will be based in the U.S. Mylan is incorporated in the Netherlands but run from Pittsburgh. Pfizer’s Upjohn off-patent drugs business is based in Shanghai.

The deal would further Pfizer Chief Executive Albert Bourla’s efforts to focus on patent-protected prescription drugs and vaccines. Pfizer is in the later stages of developing a number of new products, each of which could surpass $1 billion in yearly sales if approved, accelerating growth.

Michael Goettler, who runs Pfizer’s off-patent drugs business, will become chief executive of the combined company, and Mylan Chairman Robert Coury would be executive chairman. Rajiv Malik, current Mylan President, who will serve as president.

Mylan Chief Executive Heather Bresch will retire after the deal closes, which is expected to happen in the middle of 2020, the companies said Monday. Ms. Bresch, who has been with Mylan since 1992, became the pharmaceutical company’s chief executive in 2012. Ms. Bresch appeared before Congress in 2016 when Mylan drew criticism from patients, doctors and lawmakers for raising the price on EpiPen nearly 550% between 2007 and 2016.


In May, Mr. Bourla broached the idea of a combination with Mr. Coury, a person familiar with the deal said. Earlier, Pfizer had explored spinning out its off-patent drugs business, which it calls Upjohn and is based in Shanghai, and listing it on the Hong Kong stock exchange.

The deal announced Monday is expected to be tax free to Pfizer and Pfizer shareholders, and taxable to Mylan shareholders. The new company intends to initiate a dividend of approximately 25% of free cash flow beginning the first full quarter after close.

Pfizer also reported its second-quarter results Monday. The company’s profit rose 30% to $5.05 billion on revenue that slipped 1.5% to $13.26 billion. Of that revenue, $2.81 billion came from the Upjohn business, which was down 11%.

Upjohn’s products, which besides Lipitor and Viagra include painkiller Lyrica, were once household names and generated billions of dollars in yearly revenue for Pfizer, helping make it one of the world’s biggest drugmakers by sale.

Currently the New York-based Pfizer is combining its consumer-health business with GlaxoSmithKline PLC’s in a joint venture that will eventually be spun off. Last month it agreed to buy cancer drugmaker Array BioPharma Inc. for $10.6 billion. Mylan’s board, meanwhile, has been conducting a strategic review as the company tries to revive sales by moving into more complex and higher-price generics and copies of biotech drugs.

Mylan management has touted the company’s pipeline of new products. Yet Wall Street has cooled on the company in recent years in large part because of the competition that has emerged for its top-selling product, the EpiPen.

Mylan reported $2.5 billion in first-quarter sales, down 7% from a year earlier. Mylan also is burdened by roughly $14 billion in debt, much of it accumulated from deals for other drugmakers like Sweden’s Meda.

The new company will have about $24.5 billion in outstanding debt when the deal closes. Mylan is also among several generic drugmakers under investigation by federal prosecutors and state attorneys general probing potential collusion to fix the prices on some medicines. Mylan has said it knows of no evidence of wrongdoing.

Pfizer and Mylan already work together. Pfizer makes EpiPen injectors for Mylan. And the two companies jointly make and sell generic drugs in Japan.

Stock Market News – Mylan shares are soaring after earnings at the generic drugmaker top forecasts


Shares of generic drugmaker Mylan N.V. shot up 14.1% on Tuesday after third-quarter profit topped analysts’ estimates. Adjusted earnings in the quarter were $1.25 a share, beating forecasts by 6 cents.

Revenue in the quarter fell 4% to $2.86 billion from $2.99 billion a year earlier. Leading the decline were North American sales, which fell some 14% to $1.01 billion, but European sales were largely flat at $1.04 billion and the company’s net sales elsewhere in the world ticked up 4% to $773.7 million.

Calling Mylan’s third-quarter health “in line” with expectations, CEO Heather Bresch touted in a statement the company’s 475 new products offered over the year. “As we look ahead, we’re very optimistic about our long-term growth prospects as we have secured almost all regulatory approvals necessary for our key 2019 product drivers around the world.” Mylan also ended the quarter with strong adjusted free cash flow at $2.02 billion for the nine months ended Sept. 30, up from $1.91 billion in 2017.

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Mylan Reports – Third Quarter 2018 Financial Highlights

U.S. GAAP diluted earnings per ordinary share (“U.S. GAAP EPS”) of $0.34, up 113% over the prior year period. Total revenues of $2.86 billion, down 4% compared to the prior year period and adjusted diluted earnings per ordinary share (“adjusted EPS”) of $1.25, up 14% over the prior year period.

Revenue Highlights: Rest of World segment net sales of $773.7 million, up 4%, up 11% on a constant currency basis. Europe segment net sales of $1.04 billion, flat, up 2% on a constant currency basis. North America segment net sales of $1.01 billion, down 14%, down 13% on a constant currency basis, primarily due to the combined impact of the implementation of new accounting standards, lower volumes including EpiPen® Auto-Injector sales, the divestiture of certain contract manufacturing assets, the loss of exclusivity of a product and actions associated with the restructuring and remediation program at the Morgantown manufacturing facility.


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U.S. GAAP net cash provided by operating activities for the nine months ended September 30, 2018 of $1.71 billion, up 9% compared to $1.57 billion in the prior year period. Adjusted free cash flow for the nine months ended September 30, 2018 of $2.02 billion, up 6% compared to $1.91 billion in the prior year period. Mylan is not providing forward looking guidance for U.S. GAAP reported financial measures or a quantitative reconciliation of forward-looking non-GAAP financial measures. Please see “Non-GAAP Financial Measures” for additional information.

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Mylan CEO Heather Bresch said: “Mylan’s third quarter performance was in line with our expectations and we delivered solid year-over-year growth. Our confidence in the company’s bright future extends well beyond any single factor or particular quarter, including the current, short-term macro market turbulence our industry is experiencing. Year-to-date, we have launched nearly 475 new products across our segments, including a record number of complex generics and biosimilars for Mylan. These medicines represent many different therapeutic categories, channels and dosage forms. We remain committed to our full-year 2018 guidance, and this confirmation is not dependent on any single product approval or launch. As we look ahead, we’re very optimistic about our long-term growth prospects as we have secured almost all regulatory approvals necessary for our key 2019 product drivers around the world.”