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Pfizer is to merge off-patent drug unit with Mylan
[NEW YORK] Pfizer agreed Monday to combine its off-patent drugs division, which controls treatments like the statin Lipitor, with the pharmaceutical company Mylan, creating a potential powerhouse in the business of medicines without patent protections.
The transaction comes as falling prices increase pressure on generic drugmakers, a development that has been mostly overlooked in the United States as consumers grapple with the escalating price of branded treatments. The deal also raises questions about whether it will spur other acquisitions in the sector.
Generic drugmakers like Mylan and Teva have struggled in part because pharmacies and wholesalers have been teaming up, increasing their power to bargain for lower prices. That has forced such companies consider mergers as a way of regaining leverage.
Pfizer has shifted its focus in recent years to treatments expected to enjoy patent protections for years. That has meant striking big deals to acquire promising new drugs, like its US$10.6 billion takeover bid last month for Array BioPharma, a maker of specialised cancer treatments.
Pfizer's shift has also prompted it to dispose of its lower-margin businesses. Last year, for example, it agreed to combine its consumer health care division with that of GlaxoSmithKline.
Under the terms of the deal announced Monday, Pfizer will spin off the off-patent unit, Upjohn, which makes drugs whose patents have expired, and combine it with Mylan in an all-stock deal.
The combined business, which will eventually be renamed, is expected to have about US$19 billion to US$20 billion in annual sales. The companies anticipate annual cost savings of US$1 billion by 2023 as a result of the deal.
"We are creating a new champion for global health - one poised to bring world-class medicines to patients across a wide range of therapeutic areas," Albert Bourla, Pfizer's chief executive, said in a statement.
Heather Bresch, who had led Mylan when it was the target of outrage over the climbing cost of its EpiPen emergency allergy treatment in 2016, will step down as chief executive. She will be succeeded by the head of Upjohn, Michael Goettler.
Robert Coury, Mylan's chairman, will become executive chairman of the combined business.
The transaction is expected to close by the middle of next year, pending the approval of regulators and Mylan shareholders.
Pfizer shares were down close to 3 per cent in early trading Monday, at US$41.89. Mylan shares were up about 14 per cent, at US$21.04.
Teva shares were up 4 per cent in premarket trading, suggesting that investors anticipate that it may also pursue a deal.