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Pfizer is expected to announce on Monday that it will combine its off-patent drug business with Mylan, the generics drugmaker with a market value of $9.5bn, according to people familiar with the matter.
The US drugmaker is expected to spin-off the new unit to create a much larger seller of off-patent and generic medicines, including former blockbuster brands Lipitor and Viagra.
Mylan shareholders will hold just over 40 per cent of the new venture, and Pfizer would also receive close to $12bn in proceeds from the sale of debt, the people said. The deal is expected to be all-stock.
The plans would also see Mylan’s chief executive Heather Bresch depart, after leading the company for seven years.
Big pharma has been increasingly turning to mergers and acquisitions in recent years to either sell non-core assets or buy innovative drugmakers as their own products are close to lose patent protection. All major companies are focusing on becoming one of the top three in whatever category they operate.
Pfizer’s transaction with Mylan is the latest in a wave of large pharma and healthcare deals this year, including Bristol-Myers Squibb’s $90bn acquisition of biotech Celgene, Roche’s $4.8bn takeover of gene therapy company Spark Therapeutics and Johnson & Johnson’s $3.4bn acquisition of surgical robotics specialist Auris Health. AbbVie last month signalled its intention to buy Allergan, the maker of Botox, for $63bn.
Shares in Mylan have fallen by three-quarters since their peak in 2015, as the generics maker struggled with declining prices in the US. It also caused controversy by dramatically raising the price of EpiPens, used to treat allergic reactions.
In August 2018, Mylan’s board of directors announced it would undertake a strategic review of its options, because it feared US public markets were undervaluing the company. Last quarter, the company said sales of its multiple sclerosis drug were worse than expected, and it failed to received approval to make a generic version of Advair, an asthma medicine developed by UK pharmaceutical company GlaxoSmithKline.
If the deal goes through, Michael Goettler, who runs Upjohn, Pfizer’s off-patent drugs business based in Shanghai, will become chief executive of the new venture, while Robert Coury, Mylan’s chairman, would become its executive chairman, the people said. The deal was first reported by The Wall Street Journal.
Pfizer has been trying to reposition itself as a smaller company focused on more innovative medicines and vaccines. To this end, it is spinning off its consumer health business into a joint venture with GSK’s consumer business. It is also making acquisitions to bolster its position in advanced areas such as oncology, buying Array BioPharma, a Colorado-based drugmaker, in June for $10.6bn.
Pfizer has been under political pressure, including from US president Donald Trump, about raising drug prices, including for erectile dysfunction treatment Viagra and other drugs in the Upjohn business.
The new Pfizer venture will focus on drugs where exclusivity has expired. It will combine generic medicines, often made by different companies than the original drug, with off-patent drugs, which Pfizer used to sell as key brands before their patent protection ended.
