Pfizer and Mylan announced they are combining two of their businesses to create a global powerhouse in the low-price drug market.
Pfizer said Monday it’s offloading Upjohn, its portfolio of drugs that are no longer protected by patents, including Viagra, Lipitor and Celebrex. It is combining Upjohn with rival Mylan, which makes EpiPens, to create a new company.
Under the terms of the deal, Pfizer shareholders would gain most control of the company with 57% ownership and Mylan shareholders would own the rest.
The new company will have a new, yet-to-be-announced name. The combined company is expected generate annual revenue of $20 billion and will be based in the United States. The Wall Street Journal first reported that talks were happening over the weekend.
The management team will include people from Mylan and Upjohn. Mylan’s current chairman, Robert Coury, will be its executive chairman and Upjohn’s current president, Michael Goettler, will be the CEO. Mylan’s current CEO, Heather Bresch, will retire after the deal closes.
Mylan’s stock is up 15% in early trading. Pfizer (PFE)’s stock is down nearly 3%.
Both drugmakers recently lost exclusive rights to manufacture drugs that were big money makers for the companies. Erectile dysfunction drug Viagra brought in an estimated $1.4 billion in annual sales for Pfizer before Teva Pharmaceuticals introduced a generic version of the pill in 2017 that quickly ate up market share.
The first generic competitor to Mylan’s EpiPen, the emergency treatment for allergic reactions, gained FDA approval last year. EpiPens were added to the FDA’s drug shortage list two years after Mylan increased the price of the product by more than 400%, leading to public outrage.
Mylan’s stock has lost 60% of its value over the past three years. Bresch’s departure is a “clear positive as far as healthcare shareholders are concerned,” Jefferies analyst Jared Holz told CNN Business.
He blames Mylan’s management for a “fairly significant discount” in the company’s stock valuation.
Other drugs in Pfizer’s Upjohn portfolio include anxiety medication Xanax, depression drug Zoloft, and Lipitor, which treats high cholesterol. Upjohn reported a multimillion drop in sales during the first quarter.
Pfizer, one of the largest drugmakers in world, is separately working to expand its portfolio of name brand drugs, and last month the company agreed to spend $11 billion to buy Array BioPharma, a small venture that is developing potentially lucrative cancer treatment drugs.
Pfizer is also launching a joint venture with GlaxoSmithKline (GLAXF) that will have an estimated $12.7 billion in annual sales. That deal, expected to close in the second half of this year, will bring together Pfizer’s big over-the-counter products like Centrum and Caltrate with GSK’s top brands, including Excedrin and Nicorette.
– CNN Business’ Matt Egan and Jackie Wattles contributed to this report.