Pfizer close to merging off-patent drug business with Mylan: report

According to people familiar with the matter, Pfizer is in negotiations to combine its Upjohn off-patent drugs business with generic drugmaker Mylan in a deal that could be announced as early as July 29, The Wall Street Journal reported. One of the sources indicated that under the potential stock deal, shareholders in Mylan would own a little more than 40% of the combined company, with Pfizer investors holding the rest.

If the deal goes through, the current head of Pfizer's Upjohn unit, Michael Goettler, would become chief executive of the new entity, which would be based in the US, while Mylan chairman Robert Coury would serve as executive chairman, one of the people said. However, the person added that Mylan's current chief executive Heather Bresch would step down. Meanwhile, Pfizer would also receive about $12 billion in proceeds from a new debt sale, one of the sources added.   

According to The Wall Street Journal, Pfizer CEO Albert Bourla, who took over the drugmaker's helm at the start of the year, approached Coury about a potential combination with Mylan in May. Prior to that, Pfizer had explored spinning out its Upjohn business, which generated sales of $3.1 billion in the first quarter, down $45 million from the year-ago period. Representatives for both companies declined to comment on the merger speculation.

Analyst Sam Fazeli of Bloomberg Intelligence said the combination would "[create] one of the biggest companies in the specialty-generic space, giving them the best clout in a very competitive market." According to the analyst, such a move by Pfizer "makes sense" given that "large pharma needs to focus its resources on developing and selling innovative medicines and these other businesses such as consumer health and legacy products are a distraction. This is the current trend."

Pfizer spun off its Zoetis animal-health unit in 2013 and last December agreed to merge its consumer-health arm with that of GlaxoSmithKline.

Meanwhile, Mylan said last year that it was launching a strategic review amid slowing sales in North America, but has provided few details so far on what changes might result. The company is also grappling with an ongoing shortage of its EpiPen (epinephrine) emergency allergy auto-injectors due to manufacturing problems at a Pfizer unit that produces all EpiPens sold globally at a single facility in the US. Wells Fargo analyst David Maris recently suggested that Mylan, which is scheduled to release its second-quarter results on July 31, must explain to investors "why the next five years will look substantially different" than its last five.

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