Pfizer will combine its generic-drug unit, Upjohn, with the beleaguered specialty drugmaker Mylan. The deal is the big pharma company’s latest step to narrow its focus to its innovative medicines business.
Combining Upjohn and Mylan will create a generics giant with revenues next year of close to $20 billion. The yet-to-be-named firm, of which Pfizer shareholders will own 57%, will market generic versions of once-blockbuster-selling drugs, including the cholesterol drug Lipitor, the erectile dysfunction treatment Viagra, and Lyrica, a nerve pain medication that just lost patent exclusivity last month.
▸ Ownership: Pfizer, 57%; Mylan, 43%
▸ Expected 2020 revenues: $19 billion–$20 billion
▸ Expected cost savings: $1 billion a year
▸ Employees: 45,000
▸ Drug doses produced annually: 80 billion
Hiving off the generics business is part of Pfizer’s ongoing effort to become leaner and more focused on finding new medicines. Pfizer recently shed its consumer health unit by creating a joint venture with GlaxoSmithKline that will eventually be spun off as a stand-alone company.
Pfizer is meanwhile beefing up its research engine and innovative drug portfolio. In June, it agreed to pay $10.6 billion for Array BioPharma, a purchase that brought it two marketed oncology drugs, Braftovi and Mektovi. The deal also added a highly skilled, small-molecule-focused research team that has generated for its partners a pipeline of 17 drug candidates in preclinical or clinical studies. A month earlier, Pfizer added rare-disease-focused Therachon for $340 million.
In a call with investors about the Mylan transaction, Pfizer CEO Albert Bourla said his team will continue to look for other deals. He’s eyeing “bolt-on opportunities that would be early-to-midstage opportunities”—deals in which the risk might be higher but chances are better of creating value without disrupting the organization.
The merger ends a yearlong strategic review by Mylan, which has struggled with pricing pressure and scandals, including a federal price-fixing probe and lawsuits over its opioid sales. CEO Heather Bresch, who became a face of pharma greed during congressional hearings over the price of the EpiPen, will retire when the merger is complete. Upjohn president Michael Goettler will be the CEO of the merged firm.