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Pfizer is planning a combination of patent-pending drug business and Mylan

A man walks past Pfizer's world headquarters in New York.

Andrew Kelly | Reuters

Pfizer, the world's largest drug manufacturer, plans to divest its drug business without patenting and combine it with generic drug manufacturer Mylan, according to a person familiar with the matter.

The deal, expected to be announced Monday, will cause Pfizer shareholders to own most of the new company, with Mylan shareholders owning just over 40%, said the person, who declined to be named because the plans are not yet public. The Wall Street Journal first reported the news.

The combined company, which will sell Mylan's EpiPen and Pfizer's Viagra, will be renamed and domiciled in the United States. The deal will be structured into what is known as a reverse Morris trust, with Pfizer's Upjohn business divested and then combined with Mylan.

The combined company could generate annual sales of more than $ 20 billion. Mylan reported sales of $ 1[ads1]1.4 billion in 2018, and while Pfizer has not released full-year numbers for its China-based Upjohn unit, sales in the first quarter were just over $ 3 billion. Pfizer's total revenue in 2018 was $ 53.6 billion.

Mylan's shares are 76% lower than the high 2015 study of EpiPen price rises, pressure on US generic drug prices and an industry drug price collusion study. The deal is "the best case outcome" for Mylan, said Jared Holz, the health care strategist at Jefferies. Mylan said last year that it had formed a strategic review committee to evaluate alternatives for the company's future.

Pfizer investors are more mixed about the deal, according to Holz, who said he has received shareholder feedback since the magazine's first report on Saturday morning,

It should mark a further move under new CEO Albert Bourla to streamline Pfizer's focus on branded drugs and vaccines. In December, the company agreed to combine its consumer health business, which sells Advil among other brands, with GlaxoSmithKline in a joint venture where GSK has a majority controlling interest. In June, Pfizer said it would spend $ 11.4 billion to acquire cancer drug manufacturer Array BioPharma.

The Mylan deal, Holz said, could be "dilutive for short-term earnings because of how profitable Upjohn is for Pfizer."

The new company is managed by Pfizer's Michael Goettler, currently president of the Upjohn business. Mylan chairman Robert Coury will be executive chairman, and Mylan CEO Heather Bresch will step down.

Holz called the management mix positive for the deal, noting that Mylans had "one of the most independent leadership teams in all health care."

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