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Pfizer to merge off-patent unit with generic drugmaker Mylan

Mylan to combine with Pfizer's off-patent medicines unit Pfizer Mylan merger: Pfizer to combine drug units in new generic business
Gustavo Carr | 30 July, 2019, 19:23

A huge growth spurt.

The biggest US -based drugmaker announced the latest move on Monday - combining its Upjohn business, which sells off-patent former blockbuster drugs, with generic drugmaker Mylan into a new company to be created next year - as it reported a 30% jump in second-quarter profits.

That enabled Pfizer to "combine businesses at a more attractive price", Edward Jones analyst Ashtyn Evans said, adding that Pfizer has wanted to become a smaller, more innovative company and now has a strong pipeline of experimental new drugs.

The boards of directors of both Mylan and Pfizer have unanimously approved the transaction.

Pfizer shareholders would own 57% of the combined new company and Mylan shareholders the rest, the companies said.

In 2016, Mylan revealed the SEC had launched its own investigation related to EpiPen and sought copies of its communications with the U.S. Centers for Medicare and Medicaid Services and documents related to the Medicaid rebate program.

That new entity will offer a diverse portfolio of pharmaceuticals.

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Mylan taps into key therapeutic areas, such as central nervous system and anesthesia, infectious disease and cardiovascular, according to the press release.

Pfizer's Upjohn, which sells one-time blockbusters like Viagra and Lipitor that have lost patent protection, will be spun off and then it will combine with Mylan, a $10 billion company.

The new company will be incorporated in DE and run operations in Pittsburgh, Hyderabad, India, and Shanghai, Upjohn's current base. The new publicly traded company would have sales of about $19 billion to $20 billion in 2020, the drugmakers said in a statement. Bresch, the Mylan CEO, will retire when the deal closes.

The deal resolved claims that Mylan avoided higher rebates to state Medicaid programs by misclassifying EpiPen as a generic product, even though it was marketed and priced as a brand-name product. Bresch was called to testify before Congress in 2016, as the controversy put Mylan at the center of the ongoing USA debate over the high cost of prescription medicines. Pfizer's stock is unchanged.

Change could be good for Mylan investors, as the stock is down almost 40 percent from where it was two years ago and 27 percent so far this year, even after an 8 percent boost that came Monday after the deal was announced. "She said in a news release from Mylan: "... as the company prepares to set out on this exciting new journey under the next era of leadership, I too have made a decision to pursue a new chapter - one that will continue to be focused on serving people, patients and public health".

Pfizer CFO Frank D'Amelio said on a conference call that the streamlined company will grow sooner and faster beginning in 2020 than it would have otherwise.

Pfizer said it now expects full-year earnings in the range of $2.76 to $2.86 per share, down 7 cents from its prior forecast, and revenue in the range of $50.5 billion to $52.5 billion, down $1.5 billion from its earlier forecast.