Upjohn – a division of Pfizer, Inc. and Mylan N.V. announced an agreement to combine together and create a new US-based global pharmaceutical firm. The new firm would create a giant global supplier of lower-priced medicines across the globe and fulfill the world’s need for medicine. Under the agreement terms, each share of Mylan would be converted as one share of the new firm. The shareholders of Pfizer would own 57% of the new firm whereas 43% would be owned by Mylan shareholders of the new firm. The unanimous transaction is approved by the boards of directors of both Mylan and Pfizer. The transaction is expected to close in mid-2020. The transaction will be done through Reverse Morris Trust and would be tax-free to Pfizer shareholders and taxable to Mylan shareholders.
Pfizer shares fell nearly 2% whereas the shares of Mylan shot up by 20% with the announcement. The new firm is set to generate 20 Bn US$ sales each year. The off-patent drugs business of Pfizer along with leadership positions in China and other emerging markets. It has introduced its no longer patent-protected drugs including Lipitor, Viagra, and Celebrex to the portfolio table. Broad portfolio such as infectious disease and cardiovascular, central nervous system, anesthesia, etc. was introduced by Mylan across many regions. It also has a high-quality manufacturing, robust pipeline, and supply chain excellence.
The US-based new firm is expected to achieve 19 US$ Bn to 20 US$ Bn in the pro forma 2020. The adjusted EBITDA is to be in the range of 7.5 US$ Bn to 8.0 US$ Bn, including phased synergies of around 1 US$ Bn annually to be realized by 2023. The free cash flow for pro forma 2020 is expected to be more than 4 US$ Bn. Further, the new firm will be focusing on the return of capital to shareholders, while maintaining a solid investment-grade credit rating. Michael Goettler, who is currently Group President at Upjohn and running the Pfizer’s off-patent drug unit, would become CEO of the new firm. The agreement will strengthen Pfizer’s focus on branded drugs and vaccines as it streamlines its business by folding its consumer health business into a joint venture with GlaxoSmithKline.