Pfizer May Buy Low and Smart in Generics Gambit
July 27 2019 - 3:52PM
Dow Jones News
By Charley Grant
Pfizer Chief Executive Albert Bourla knows a deal when he sees
one.
The pharmaceuticals giant is in talks to merge its off-patent
drugs business with generics manufacturer Mylan, The Wall Street
Journal reported. The companies have discussed a stock deal in
which Pfizer shareholders would own the majority of the new
company, which would include well-known drugs like EpiPen, Lipitor
and Viagra.
The generics industry has hit a rough patch: Consolidation of
major drug-buying consortia has led to falling prices for
manufacturers in the U.S. That has eroded revenues and led to
severe share-price declines for companies in the sector. Adding
scale is one possible way to contend with those harsh realities.
Mylan also has a large presence overseas and a well-regarded
pipeline of new products, such as cheaper versions of expensive
biologic medications.
Should the deal reach the finish line, it certainly helps that
Mr. Bourla is buying low. Mylan's shares were down more than 75%
from their 2015 peak as of Friday -- par for the course in the
beleaguered sector. Over that time Pfizer's shares are up by more
than 20%.
Familiarity increases the odds of success. The companies already
work together on manufacturing EpiPen, which should limit headaches
from integrating operations. And while industry sales aren't
growing, the generics drugs business still generates significant
cash flow. The new company will thus be able to carry significant
leverage on its balance sheet. Pfizer plans to issue $12 billion in
fresh debt in conjunction with the deal.
Just as importantly for Pfizer, the deal accomplishes a goal
that the company has discussed in various forms for years:
separating its business of newer drugs with patent protection from
its maturing products. Spinning out older drugs may increase the
valuation of newer medicines in its portfolio such as the pneumonia
vaccine Prevnar 13 or prostate cancer drug Xtandi.
To that end, Pfizer agreed last month to buy cancer specialist
Array BioPharma for more than $10 billion and agreed last December
to combine its consumer-health business with GlaxoSmithKline and
eventually spin it out. A possible deal with Mylan would be
entirely consistent with this strategy.
That ought to keep Pfizer shares, which have rallied about 13%
over the past year, in healthy spirits.
Write to Charley Grant at charles.grant@wsj.com
(END) Dow Jones Newswires
July 27, 2019 15:37 ET (19:37 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
Mylan NV (NASDAQ:MYL)
Historical Stock Chart
From Mar 2024 to Apr 2024
Mylan NV (NASDAQ:MYL)
Historical Stock Chart
From Apr 2023 to Apr 2024