Pfizer and Mylan Merge to Form Viatris, Creating the World’s Largest Generic Drug Company Valued at $50 Billion

Pfizer Upjohn, which established its headquarters in Shanghai less than two months ago, is set to "sell" itself!

On July 29, Pfizer Inc. announced that its off-patent branded and generic medicines business unit, Pfizer Upjohn, would merge with Mylan to create a new global pharmaceutical company. Under the terms of the all-stock, reverse Morris trust transaction, each share of Mylan stock will be converted into one share of the new company. Pfizer shareholders will own 57% of the combined entity, while Mylan shareholders will hold 43%.

Regarding the new company’s management, Mylan’s current Chairman, Robert J. Coury, will serve as Executive Chairman; Michael Goettler, current Group President of Pfizer Upjohn, will serve as Chief Executive Officer; and Mylan’s current President, Rajiv Malik, will serve as President.

This also means that the previously rumored so-called “sale” by Pfizer was not a divestiture in the traditional sense; the new company remains under Pfizer’s leadership, and the merger will instead bring greater global scale and regional coverage for off-patent drugs and generics.

• Pfizer Upjohn “Joins Forces” with Mylan

Public information shows that in 2018, Pfizer split its business into three parts: biopharmaceuticals, Upjohn (Pfizer's mature medicine division), and consumer healthcare. Among them, Upjohn inherited the main assets of Pfizer’s former mature medicines division, including more than 20 branded drugs and generic drugs whose patents had expired, covering areas such as cardiovascular diseases, pain and neurological disorders, mental illnesses, urological diseases, and ophthalmic diseases—non-communicable diseases (NCDs).

Such as Lyrica, Lipitor, Norvasc, Celebrex, Viagra, Effexor, and Zoloft. Pfizer’s first-quarter 2019 report showed that Pfizer Upjohn generated $3.1 billion in revenue, primarily driven by the strong performance of these best-selling products in emerging markets such as China.

As reform measures such as the “4+7 Volume-Based Procurement” continue to advance, originator drugs with expiring patents face competition from domestic companies. Under the pressure of continuous price reductions and shrinking markets, how to develop mature businesses has become a challenging issue. Some analysts believe that Pfizer’s strategic alliance with Mylan can be seen as a mutually beneficial move, as well as a breakthrough effort by multinational pharmaceutical companies to deepen their presence in the mature drug market.

It is understood that Mylan, a company founded in the United States, specializes in the production of generic drugs, specialty pharmaceuticals, and active pharmaceutical ingredients (APIs). Following its acquisitions of India’s Matrix Laboratories Limited and Germany’s Merck KGaA in 2007, it became the world’s second-largest generic drug manufacturer. In 2014, Mylan further acquired Abbott Laboratories’ generic drug business for $5.3 billion. The company currently offers more than 7,500 marketed products, including antiretroviral therapies relied upon by over 40% of HIV/AIDS patients worldwide.

Regarding the merger, Pfizer stated that with an increasing number of off-patent originator drugs facing comprehensive price reductions, the combination of two highly complementary businesses will enable the new company to transform and accelerate its ability to meet patient needs, while expanding its capabilities in over 165 markets.

Specifically, Mylan will bring a diversified portfolio of products in key therapeutic areas such as central nervous system and anesthesia, infectious diseases, and cardiovascular diseases. Pfizer Upjohn will contribute multiple branded drugs, including Lipitor, Celebrex, and Viagra, along with proven commercialization capabilities, including leadership positions in China and other emerging markets.

Key Product Lines of the Merged Company (Source: Pfizer Official Website)

The new company is expected to generate revenues of $19 billion to $20 billion in 2020, with profits ranging from $7.5 billion to $8 billion. Upon completion of the merger, the new entity will also become the world’s largest generic drug company, reshaping the competitive landscape of the global off-patent and generic pharmaceutical market.

• Off-Patent Drugs to Undergo Major Changes

Amid the current “patent crisis,” an increasing number of generic drugs are entering the competitive landscape, and multinational pharmaceutical companies’ originator drugs are poised to lose their competitive edge in both their home markets and China.

Currently, Pfizer is also facing the issue of impending patent expirations for several blockbuster drugs in major markets, including core products such as varenicline, sunitinib, and pregabalin. Recently, the U.S. FDA approved the first generic versions of Pfizer’s flagship product, pregabalin (Lyrica), from a total of nine pharmaceutical companies (see Sina Medicine report for details:Pfizer’s Lyrica Falters! Nine Generic Drugs Approved Simultaneously). It is reported that pregabalin achieved sales of USD 4.97 billion in 2018. GlobalData predicts that following the launch of generic versions, Lyrica’s sales will decline sharply, reaching an estimated USD 950 million by 2024.

Furthermore, Pfizer’s top three selling products in China—Lipitor (atorvastatin), Sulperazon, and Norvasc (amlodipine besylate tablets)—have long since expired their patent protection. Although Lipitor’s sales in China remained as high as RMB 10 billion in 2018, accounting for more than one-third of Pfizer’s total revenue in the country, Pfizer lost this substantial market share after the implementation of the “4+7” volume-based procurement program. Atorvastatin tablets manufactured by Beijing Jialin Pharmaceutical won the bid with an 83% price reduction, while amlodipine besylate tablets produced by Zhejiang Jingxin Pharmaceutical secured the bid with a 49% price cut, thereby displacing Pfizer’s Lipitor and Norvasc from this significant market segment.

Pfizer was not alone in facing this situation; other multinational pharmaceutical companies, including Roche, GSK, AstraZeneca, and Eli Lilly, were also affected.

Previously, Amgen and Allergan announced the launch of Mvasi and Kanjinti in the U.S. market, which are biosimilars of Roche’s Avastin and Herceptin, respectively. For many years, Roche’s blockbuster oncology “troika”—Rituxan, Herceptin, and Avastin—has dominated the sales charts for oncology drugs both domestically and internationally. The approval of these biosimilars marks the end of the “reign” of these two drugs.

Looking back at China, affected by policies such as volume-based procurement, the market and prices of a batch of imported original research drugs that have passed their patent period are facing significant impacts. The influence of the new measures for medical insurance payment standards subsequently introduced will also become apparent. The era of selling expired patented drugs at high prices is gone forever.

From a global perspective, the market for off-patent drugs is not “friendly,” whether in China or the United States, compelling multinational pharmaceutical companies to “join forces for mutual support” and accelerate the integration of product and market resources.

According to the Financial Times, in recent years, large pharmaceutical companies have increasingly turned to mergers and acquisitions, either divesting non-core assets or acquiring innovative drugmakers, as their own products face imminent loss of patent protection. All major companies are striving to be among the top three players in their respective operational categories.

Pfizer’s partnership with Mylan will help Pfizer focus on higher-value innovative drugs and continue its series of moves to restructure its product portfolio through acquisitions and divestitures. Earlier in June, Pfizer acquired Array BioPharma, a company specializing in the development of cancer treatments, for $11.4 billion, and spun off its consumer products division to form a joint venture with similar assets divested by its UK counterpart, GlaxoSmithKline.

• Overview of Multinational Pharmaceutical Companies Divesting Former Blockbuster Drugs

On April 23, Eli Lilly announced that it had signed an agreement with Eddingpharm to sell the rights to its antibiotic products Ceclor (cefaclor) and Vancocin (vancomycin hydrochloride for injection) in mainland China, as well as the Ceclor manufacturing plant located in Suzhou.

This transaction signifies the divestiture of Eli Lilly’s antibiotic product portfolio. As the patents have expired, the rights in mainland China primarily encompass the production and sales of two brands.

On July 9, Fosun Pharma announced the acquisition of GSK’s Suzhou manufacturing plant and the well-known product lamivudine tablets (Epivir) for RMB 250 million. Fabio Landazabal, Senior Vice President of GSK Emerging Markets and Acting General Manager for China, stated that the transfer of the Suzhou production facility and the Epivir brand aims to integrate GSK’s supply chain network, enabling the company to focus more on innovative drugs and vaccines in China.