Pfizer set to unveil Mylan merger and spin-off

Pfizer is expected to announce a $10bn plus deal to acquire generics firm Mylan, merge it with own off-patent operations and spin out the combined division.

Rumours mounted at the end of last week about a potential deal, and Pfizer has now brought forward its Q2 earnings call by a day, and is expected to unveil the transaction in its presentation today.

The deal will help streamline Pfizer, focusing it around its more profitable prescription medicines division, and provide it with extra capital to spend on more bolt-on acquisitions – or something bigger – within the biotech and pharma sphere.

In June Pfizer acquired small molecule specialist Array for $11bn, helping it bolster further its innovative drugs pipeline.

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The spin-out will represent the biggest strategic move yet by chief executive Albert Bourla, who took the helm in January after having served as its operations chief. The deal won't come as a surprise to investors, as Bourla has prepared the company for spin-offs by seperating out its business units into financially standalone divisions.

Pfizer has already done a deal with GSK to create a new spin-off consumer health division, with the full separation of the 'Established Medicines' unit the natural next step.

Mylan’s share price has risen 30% in the last few days in expectation of an announcement, which will create a generics giant to rival market leader Teva in size. Its biggest off-patent brands would include drugs such as Pfizer’s Lipitor, Viagra and Mylan’s Epipen.

The profits in the generics sector have plunged in recent years as prices in the US market in particular have come under pressure.

The Wall Street Journal reports that Michael Goettler, current head of Pfizer’s off-patent drugs business, would become CEO of the combined company, with Mylan chairman Robert Coury taking on the executive chairman role.

Current Mylan chief executive Heather Bresch – who shouldered blame for the controversy over the Epipen price rises in the US two years ago - would depart, sources say.

Mylan has lost three-quarters of its value since 2015 as the generics market struggles with price erosion and declining revenues in the US.

The merger is likely to have knock-on effects for the other big players in the market, which in addition to Teva include Perrigo and Sandoz.

The latter is a division of Swiss pharma company Novartis, which cut 900 jobs at the generics and biosimilars division in May.