4. Mylan/Pfizer's Upjohn

Mylan is buying Pfizer Upjohn's global footprint, especially in China. (Mylan)

Mylan/Pfizer's Upjohn
Deal value:
$12 billion
Date announced: July 29, 2019

In July 2018, Pfizer unveiled a reorganization that put off-patent branded drugs—including old stalwarts Lipitor, Lyrica and Norvasc—and oral generics into a unit with “substantial autonomy” within the group. That move raised suspicions that a sale or spinoff could be next.

Almost at the same time, Mylan, under shareholder pressure, initiated a strategic review that then-CEO Heather Bresch characterized as “nothing not on the table.” It came as the generics giant was facing industrywide pricing pressure in the U.S., manufacturing woes at its West Virginia plant and its latest EpiPen PR crisis.

It didn’t take long before the two companies found common ground. On July 29, the two companies announced that Pfizer’s established medicines business, known as Upjohn, would merge with Mylan. Upjohn would issue $12 billion in debt, and the proceeds would go to Pfizer.

For Pfizer, the deal caps off years of effort refocusing its business. As it bulks up in innovative pharmaceuticals—including the $11.4 billion Array BioPharma deal featured elsewhere in this report—it has spun off animal health unit Zoetis and recently merged its consumer health unit with GlaxoSmithKline’s in preparation for a spinoff.

Why, though, is Mylan wading still deeper into the generics sector? Disastrous deals such as Amneal’s merger with Impax Laboratories and Teva’s acquisition of Actavis offered some pretty tough lessons, after all. To hear Mylan executives tell it, though, the company is getting a geographic footprint far beyond the difficult U.S. market.

Only 15% of the combined company’s revenue is now coming from the U.S., while roughly 45% is generated by Asia-Pacific and emerging markets, then-Upjohn chief Michael Goettler told investors during a conference call in July. And the company’s future is not just about cheap generics, either.

“Keep in mind that the generic portfolio from legacy Mylan is strongly and rapidly shifting towards more complex and hard-to-make generics, which further solidifies these segments,” Goettler said. “And importantly, two-thirds of the new revenue coming through the pipeline will be from prescription brands, over-the-counter medicines and biosimilars.”

However, Upjohn’s strong presence in China could spell trouble. Upjohn’s sales in the country plummeted 20% in the second quarter, mainly because of a volume-based drug procurement program then under testing for 25 drugs in 11 major Chinese cities. Now that authorities are rolling out the price-cutting scheme across the country and are on track to cover more off-patent drugs, pressure on foreign drugmakers' older drugs will only intensify.

But Upjohn appears to have it under control: Third-quarter China sales grew 2% operationally. And Pfizer has projected that total Upjohn revenue next year could reach $7.5 billion to $8 billion, even counting the effects of Lyrica’s loss of exclusivity in the U.S. and the expanded China program.

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Goettler argued that Upjohn’s scale and commercial experience—including a 5,000-strong sales force—in China could also help Mylan with its existing and pipeline drugs. Calling the bulk procurement program a chance to “rebase” over the next year or two, he said the new firm could then grow just fine.

“For the combined company, China represents 11%,” he said during the July call. “So any kind of headwind, any kind of volatility we have, the company overall has now enough levers to compensate for that, to weather through that.”

Goettler is now slated to become the new company’s CEO as Bresch hits the exit after a 28-year run. And it’s not just the old CEO that needs to go—the drugmaker has abandoned the tainted Mylan name and adopted Viatris, a recycled moniker. Mylan Chairman Robert Coury will stay on in the same role at the combined company, as Ian Read, Pfizer’s executive chairman and former CEO, takes up a board seat.

4. Mylan/Pfizer's Upjohn