By Jared S. Hopkins
Pfizer Inc. said on Monday it had agreed to merge its off-patent
drugs business with Mylan N.V., creating a new company that will be
one of the world's biggest sellers of lower-priced medicines in an
increasingly competitive market.
Shareholders of Pfizer will own 57% of the new, as-yet-unnamed
business, and the rest of it will be owned by shareholders of
Mylan. The new company is expected to have more than $19 billion in
yearly sales.
Mylan shares rose 14% Monday, while Pfizer was down 2%.
For the two companies, the deal is a bet that combining Pfizer's
off-patent drugs unit, called Upjohn, with Mylan will provide a
pathway to reignite growth.
Sales have slowed at each of the two businesses since former big
sellers, such as Pfizer's Viagra male-impotence pills and Mylan's
EpiPen emergency allergy treatment, began facing competition. Mylan
said its own second-quarter sales totaled $2.85 billion, an
increase of 2% from a year ago. Upjohn reported its second-quarter
earnings fell 11% from a year ago to $2.8 billion.
Upjohn revenue this year is projected to be just over $10
billion, Michael Goettler, who currently heads the business and
will lead the new company as chief executive, said on a conference
call with analysts.
"This combination creates a stronger company by combining the
best aspects of Pfizer's and Mylan's DNA," Pfizer Chief Executive
Albert Bourla said on the call.
Officials from the new company said on the call they expect
growth to come from bringing together the global footprints of each
of the businesses, Mylan's promising drug-development pipeline and
the new entity's portfolio of branded and generic drugs.
The officials said they are targeting $3 billion in total sales
from new product launches by 2023. More than half of the revenue
next year is projected to come from North America and Europe, with
the rest from Asia and emerging markets.
Mylan Chairman Robert Coury, who will become executive chairman
of the new company, said Upjohn fits Mylan "like a glove."
"I've listened very carefully to shareholders," he said. "This
transaction checks every single box that they have discussed with
me."
The new company will have about $24.5 billion in outstanding
debt when the deal closes, expected in the middle of next year.
It will face tough industry pressures as it tries to digest two
businesses and overcome heightened efforts to control drug costs,
Wells Fargo analyst David Maris said in a note to investors. "The
combined company is bigger, but we are not sure it is better and
integration risks are not minimal," Mr. Maris said.
The new company will be based in the U.S., a return of sorts for
Mylan after becoming a Dutch corporation in 2015 through an
acquisition, while keeping its headquarters in Pittsburgh. That
deal came amid a flurry of what are called inversions by U.S.
companies, in which they moved their tax headquarters overseas to
lower their tax burdens.
In its case, Mylan set up a foundation, called a "stichting" in
Dutch. The foundation effectively functioned as a poison pill to
fend off a takeover proposal by rival Teva Pharmaceutical
Industries Ltd. Mylan investors supporting Teva's takeout lashed
out.
Sanford C. Bernstein analyst Ronny Gal expressed concern whether
the Mylan executives joining the new company would repair relations
with shareholders that had frayed when Mylan incorporated in the
Netherlands. The new company will be domiciled in Delaware.
"Even within Delaware there is a range of governance structures
and we are yet to learn if the new company is structurally
responsive to shareholders. This remains a focus point for us," Mr.
Gal wrote in a note to investors.
For Pfizer, hiving off Upjohn would further efforts to double
down on fast-growing patent-protected prescription drugs and
vaccines. Mr. Bourla has expressed confidence the company will
bring to market in the coming years several new products with
blockbuster sales, accelerating growth.
While Mr. Goettler will become chief executive of the combined
company, Rajiv Malik, Mylan's current president, will serve as
president. Mylan Chief Executive Heather Bresch will retire after
the deal closes, the companies said Monday.
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. Pfizer reported net income of 89 cents a
share for the quarter, up from 65 cents a share a year earlier.
The drugmaker also lowered its full-year sales and earnings
guidance to $2.76 to $2.86 a share for the year on revenue of $50.5
billion to $52.5 billion, to reflect the formation of a joint
venture with GlaxoSmithKline PLC and a pair of recent deals.
Currently the New York-based Pfizer is combining its
consumer-health business with GlaxoSmithKline'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.
Meantime, Mylan has been trying to find new sales by developing
more complex generics and copies of biotech drugs.
Allison Prang and Michael Tobin contributed to this article.
(END) Dow Jones Newswires
July 29, 2019 13:37 ET (17:37 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
Mylan NV (NASDAQ:MYL)
Historical Stock Chart
From Aug 2024 to Sep 2024
Mylan NV (NASDAQ:MYL)
Historical Stock Chart
From Sep 2023 to Sep 2024