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Home / Business / Pfizer Nears Deal to combine off-patent drug business with Mylan

Pfizer Nears Deal to combine off-patent drug business with Mylan



Pfizer
Inc.


PFE 0.98%

is in talks to merge their patenting drug business with the generic medicine manufacturer Mylan NV, according to people familiar with the matter, in an agreement that would create A giant global seller of cheaper medicines.

The agreement, which is not completed, can be announced already on Monday if an agreement is reached, the people said. The companies have discussed a stock agreement whereby the Mylan shareholders would own slightly more than 40% of the new entity and the Pfizer shareholders the rest, one of the people said. Pfizer would also receive around $ 1

2 billion in dividends from a new sale of debt, said that person.

Mylan's market value is currently just under $ 10 billion.

The agreement would bring together two businesses whose sales have slowed down since former major sellers lost patent protection and began competition at lower prices. For Pfizer, these Lipitor include cholesterol pills and male-impotence medication Viagra. The companies are committed to combining it with Mylan, known for the EpiPen emergency allergy, to provide a path to reignite sales growth.

Michael Goettler, who runs Pfizer's drug business, would become CEO of the combined company if the deal goes through, and Mylan chairman Robert Coury would be CEO, said one of the people.

Current Mylan boss Heather Bresch wanted to go, said the person. The Combined Company Wanted in the United States

To kill off-patent business will strengthen Pfizer's manager Albert Bourla's efforts to focus on patent-protected prescription drugs and vaccines. Pfizer is in the later stages of developing a number of new products, each of which can exceed $ 1 billion in annual sales if approved and accelerate growth.

The deal can trigger further changes in the generic medicine industry, shaken by competition from Indian manufacturers and under pressure from the US group buying and distributing the drugs and growing.

The press has damaged the sales and shares of Mylan and other leading generic drug manufacturers, particularly Teva Pharmaceutical Industries Ltd. The Mylan share has dropped by about 75% from the high spring of 2015.

Industry employees have speculated that consolidation would flee by letting companies cut costs, swing to faster-growing products such as copies of biotechnology drugs and build booklets to Confront the big buyers.

India last year

Aurobindo Pharma
Ltd.

agreed to buy parts of

Novartis

Generic drug stores worth up to $ 1 billion.

Both Pfizer and Mylan, who are incorporated in the Netherlands but run from Pittsburgh, had sought ways to strengthen their slow business. In May, Mr. Bourla took with him the idea of ​​a combination with Mr. Coury, said one of the people familiar with the deal.

Previously, Pfizer had explored spinning its off-patent medicine business, which it calls Upjohn and is based in Shanghai, and notes it on the Hong Kong stock exchange. Upjohn's first-quarter sales were down $ 45 million from the previous year, to below $ 3.1 billion.

Upjohn's products, which besides Lipitor and Viagra include painkillers lyrica, were once household names and generated billions of dollars in annual revenue for Pfizer, helping to make it one of the world's largest drug manufacturers on sale.

However, their sales have declined since generic rivals hit the market and burdened the company as it attempts to increase growth by launching new brands and vaccines against cancer, heart disease and other conditions.

To focus on fast-growing branded medicines, Pfizer has cast animal health and other non-business ventures, as it does to add innovative treatments.

Currently, the New York-based company is combining its consumer health business with

GlaxoSmithKline


GSK 0.89%

PLCs in a joint venture that will eventually be spun off. Last month, it was agreed to buy cancer drugs

Array BioPharma
Inc.

$ 10.6 billion.

Meanwhile, Mylan's board has conducted a strategic review as the company is trying to revive sales by entering more complex – and higher-priced – generics and copies of biotechnology drugs.

The Mylan management has spied on the company's pipeline of new products. Still, Wall Street has cooled the company in recent years largely because of the competition that has emerged for its top selling product, the EpiPen. Mylan criticized patients, doctors and lawmakers for raising the price nearly 550% between 2007 and 2016.

Mylan reported $ 2.5 billion in sales in the first quarter, down 7% from the previous year.

The company's generic drug portfolio has been hurt by general price pressure. And Mylan is burdened with about $ 14 billion in debt, much of it accumulated from deals for other addicts such as Sweden's Meda.

The company is also among several generic drug manufacturers under investigation by federal prosecutors and state attorneys investigating potential collaborations to fix prices for some medications. Mylan has said it does not know any evidence of injustice.

Pfizer and Mylan are already working together. Pfizer makes EpiPen injectors for Mylan. And the two companies jointly produce and sell generic medicines in Japan.

Write to Jonathan D. Rockoff at Jonathan.Rockoff@wsj.com and Cara Lombardo at cara.lombardo@wsj.com

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