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AP

Mylan, Pfizer to create new company

Mylan, the generic pharmaceutical company that was founded in West Virginia and remains one of the state’s largest private employers, will be combined next year with a spinoff company from Pfizer, the nation’s largest drugmaker.

The new company, which has not been named, will combine Mylan’s generic drug business with Pfizer’s Upjohn, which sells one-time blockbuster drugs like Viagra, Lipitor, Xanax and Zoloft that have lost patent protection.

The complex deal, expected to close in the middle of next year, will create a company with estimated 2020 revenue in excess of $19 billion, with sales in more than 165 countries.

The two companies have worked together for years. Pfizer manufactures Mylan’s EpiPen, an auto-injector used to halt life-threatening allergic reactions. Mylan was heavily criticized, and its CEO, Heather Bresch, was brought before Congress two years ago, to answer questions about the price of the EpiPen, which had jumped five-fold to $600 for two EpiPens. They have been in short supply for more than a year because of quality problems and upgrades at a Pfizer factory.

Bresch, the daughter of Sen. Joe Manchin, D-W.Va., said she will retire when the deal to combine the two companies closes in mid-2020.

The new company will be incorporated in Delaware and run operations in Pittsburgh; Hyderabad, India; and Shanghai, Upjohn’s current base.

It was not clear Monday what the move will mean for Mylan’s facility in Morgantown. The company is West Virginia’s sixth-largest private employer, according to the latest tally from WorkForce West Virginia.

West Virginia Commerce Secretary Ed Gaunch, who was in Raleigh County on Monday, said he had not been notified about the Mylan-Pfizer agreement.

“I have not heard a word,” he said.

Mylan, which had moved its legal location from Pennsylvania to Hertfordshire, England, will move back to the Pfizer corporate offices, which are based in New York. Pfizer spent several years unsuccessfully trying to buy drugmakers based in lower- tax European countries so it could move there on paper and reduce its U.S. tax bill. It stopped doing so after the U.S. tax overhaul last year changed the economics of such a maneuver.

“We believe that this transaction checks all the boxes,” Pfizer CEO Albert Bourla said. Bourla, who took over in January, said Pfizer’s huge sales force in China will be able to boost sales there of products made by Mylan, which has a limited presence in that huge market.

Mylan is primarily a generic drugmaker, selling a broad mix of pills and shots for infectious diseases and heart conditions. Bourla said Mylan also has a strong pipeline of drugs in development, mainly complex generics that are difficult to manufacture and biosimilars, near-copies of expensive biologic drugs.

The strengthening ties between Pfizer and Mylan come at a precarious time for big drugmakers, which face enormous pressure to cut prices for brand-name drugs. Also, Pfizer just got generic competition to one of its biggest sellers, Lyrica.

Likewise, years of pressure from wholesalers to reduce prices for generic drugs, which comprise most of Mylan’s portfolio, have crimped its profits and driven its share price down 50 percent in the past year.

That enabled Pfizer to “combine businesses at a more attractive price,” Edward Jones analyst Ashtyn Evans said, adding that Pfizer has wanted to become a smaller, more innovative company and now has a strong pipeline of experimental new drugs.

“Growth from new, innovative products will have a bigger impact,” she said, “growing off a smaller base.”

Pfizer Inc. investors will be getting shares in the new company tax free — and that entity will be offering a dividend, as well.

Shareholders of Pfizer will receive 0.12 share of the new company for each Pfizer share they hold and will own 57 percent of the combined new company; Mylan shareholders will own 43 percent, receiving one share of the new company for each of their Mylan shares.

The new company will be run by Michael Goettler, now head of Upjohn, and will have Mylan’s current board chairman, Robert Coury, as its executive chairman.

Upjohn brings in roughly 23 percent of Pfizer’s total sales, which amounted to $53.6 billion last year.

Upjohn will issue $12 billion in debt at or prior to separation, with gross debt proceeds kept by Pfizer. The new company will have about $24.5 billion in total debt outstanding at closing.

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