Pfizer plan may involve spinning out Lipitor and Viagra in €18bn combination with Mylan
A proposed deal between Pfizer and Mylan, pharma giants which between them employ around 4,500 people across Ireland could see the spin out of blockbuster and profitable drugs Lipitor and Viagra into a separate company.
And the transaction may have implications for Ireland in general because much of the investments that have flowed into the country have been US pharmaceutical companies.
Pfizer, which employs 3,200 in six Irish locations — including 600 in Ringaskiddy in Cork, from where it exports bulk pharmaceuticals — plans to combine its business that sells older blockbuster medicines such as Lipitor and Viagra with generic drugmaker Mylan, in a deal that will reshape the brand-name and off-patent pharmaceutical industries.
Under the terms of the all-shares transaction, Mylan investors would get 43% of the new entity and Pfizer investors the rest. The new publicly traded company will have sales of about $19bn to $20bn (€18bn) in 2020, the drugmakers said.
Both Pfizer and Mylan have been trying to reshape themselves in the face of a rapidly shifting pharmaceutical market.
The deal will let Pfizer focus its considerable muscle on making new medicines, while Mylan gets a financial lifeline after a rocky stretch. Mylan employs around 1,250 at facilities in Dublin and in Connemara in Galway.
Pfizer, which had $54bn in sales in 2018, had previously pondered both industry-shaking megadeals and a potential breakup. But it recent years it has been slimming itself into a sleek maker of innovative therapies for cancer and other diseases.
At the same time, Mylan, with $11.4bn in sales last year, has been looking for ways to realign its business in an intensively competitive generic-drug industry that’s punished its profits and its shares.
Mylan investors embraced the deal, sending shares up as much as 19% to the highest level since November. Still, the stock is well below the all-time peak reached in 2015.
Pfizer shares fell 2% at one stage. “I’ve listened very, very carefully to shareholders,” Mylan chairman Robert J. Coury said. “This transaction checks every single box that they have discussed with me.”
The deal will spin out Pfizer’s Upjohn unit and then combine it with Mylan. The new company will have about $24.5bn in debt and an investment-grade credit rating, the companies said.
The transaction is expected to close in mid-2020. The company will be renamed. A combination would create the largest specialty-generic drug company.
For Mylan, it provides a management shakeup and significant cash generation. For Upjohn, it provides diversification and a pipeline.
Some analysts were sceptical that joining Upjohn with Mylan would solve either side’s sales challenges. “The combined company is bigger, but we are not sure it is better and integration risks are not minimal,” said Wells Fargo analyst David Maris.
However, while Pfizer shareholders will end up with a larger slice of the equity, Mylan will have tighter control of the new company’s board. With Mr Coury as executive chairman, Mylan will also get to name eight other board members.
Michael Goettler, who runs Pfizer’s off-patent drug unit, will become chief executive officer of the combined company; Mr Coury will be executive chairman. Current Mylan CEO Heather Bresch will depart after the deal closes, while Mylan chief financial officer Ken Parks will also leave.
The venture will also be less reliant on the generic pills that have been a mainstay of Mylan’s business but that have also become a drag amid falling prices and increasing competition.
It will only get about a third of its sales from traditional generic pills, executives said on the conference call, while the rest will come from injected or infused solutions and versions of complex biotechnology drug called biosimilars.
