Pfizer, Inc. PFE and Mylan MYL announced that the European Commission (EC) has granted final approval for the proposed merger of Pfizer’s Upjohn unit with Mylan to create a new generic pharmaceutical company to be called Viatris. The deal was announced in July last year.
Pfizer’s Upjohn is a global, off-patent branded and generic established medicines business, which includes off patent legacy brands like Lipitor, Celebrex and Viagra, as well as certain generic medicines.
In April, the EC had granted conditional approval to the merger, which was contingent upon the completion of the sale of some of Mylan’s products in Europe. The companies have satisfied EC’s condition and received necessary approvals in Australia and New Zealand. All required clearances have been obtained with only approval in the United States pending. The transaction is on track to close in the fourth quarter of 2020.
Per the terms of the deal, each Mylan share would be converted into one share of the new company. Pfizer shareholders will own 57% of the combined company while Mylan’s stockholders will get a 43% stake in the new entity.
From Mylan’s perspective, the deal is considered a strategic move. Mylan had previously undertaken a strategic review of its business due to challenging business conditions in North America and pricing pressure. The decision to merge with Upjohn came as a result of this review. The transaction will allow Viatris to meaningfully expand the geographic reach of Mylan’s existing broad product portfolio and future pipeline — including significant investments in complex generics and biosimilars — into new growth markets where Upjohn has existing sales infrastructure and local market expertise.
Together Mylan and Upjohn, with brands like EpiPen, Lipitor and Viagra, expect to generate revenues between $19 billion and $20 billion.
However, Pfizer’s stock declined on the day the deal was announced probably as Upjohn unit is a cash-rich business and its divestiture will reduce the company’s cash flow. However, the spin-off of Upjohn coupled with the Consumer Healthcare joint venture with Glaxo GSK will make Pfizer a smaller company with a diversified portfolio of innovative drugs and vaccines.
Pfizer merged its Consumer Healthcare segment, an over-the-counter medicines business, with Glaxo’s unit in July 2019 to form a new joint venture.
Merger and acquisition activity has relatively dried up this year due to the coronavirus pandemic. However, earlier this week, Gilead Sciences GILD proposed acquisition of Immunomedics for approximately $21 billion, the largest deal this year. The news has revived hopes that more such merger deals may be witnessed in the coming months.
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