Pfizer to merge its generics drug business with Mylan
BENGALURU: Drugmaker Pfizer Inc. has agreed to spin off its generic drugs business and combine it with Mylan, a move that leaves Pfizer with more profitable innovative drugs, including cancer drug Ibrance and pneumonia vaccine Prevnar.
The move, which brings blockbuster treatments Viagra, Epipen and Lipitor under one umbrella, is part of a years-long effort by Pfizer to split into three parts—innovative medicines, lower margin generic drugs business and consumer healthcare.
Pfizer and Glaxosmithkline Plc said in December they would combine their consumer health businesses.
Under new chief executive officer (CEO) Albert Bourla, Pfizer has also been beefing up its cancer treatment pipeline as some of its older treatments face competition.
The new company, to be based in the US and incorporated in Delaware, will be led by Michael Goettler, president of Pfizer’s generics unit, Upjohn.
Mylan said CEO Heather Bresch, who took the helm in 2012 and faced regulatory scrutiny for the high price of Epipen, will retire after the deal closes and chairman Robert Coury will become the executive chairman of the new company.
“(The deal) reduces exposure to the US generics market (and) it brings access to sales and marketing talent from the Upjohn side that Mylan can leverage to market products both in the US and outside,” SVB Leerink analyst Ami Fadia said.
Mylan, which has a market capitalization of $9.5 billion, last year announced plans to review its business as it grapples with low prices of generic drugs and declining sales of its Epipen emergency allergy treatment.
Mylan’s shares have lost about a third of its value in 2019 through Friday’s close. The stock jumped 15% to $21.15 in early trading on Monday, while Pfizer slipped nearly 2% to $42.34.
“We think it is clear Mylan needed to do something to change direction,” Wells Fargo analyst David Maris said, adding the deal is a recognition that Pfizer wanted out of generics and Mylan recognized its need to change.
Pfizer’s generic business has a much higher operating margin than Mylan’s, Maris added.
STRING OF DEALS
The pharmaceutical industry has been under pressure to keep prices down, which has led to a stream of small and large deals including Bristol-myers Squibb Co.’s plan to buy Celgene Corp. and Abbvie Inc.’s deal for Allergan Plc .
Pfizer shareholders will own 57% of the new company and Mylan shareholders the rest. Each Mylan share will be converted into one share of the new company under the all-stock deal.
Separately, Pfizer reported its quarterly report on Monday, a day earlier than planned.
The company cut its profit and revenue forecast for the year, largely due to the joint venture with GSK last year.