The combined entity after the merger of Pfizer's off-patent business and Mylan would become the largest generic drug maker globally, and may set the pace for the consolidation of an industry facing pricing pressure amidst competition and channel consolidation in US market.
In what is considered to be the biggest consolidation move in the generics industry, Pfizer is said to be in talks to merge its off-patent drugs business with Mylan in a stock deal, the Wall Street Journal (WSJ) reported on July 27, citing people familiar with the matter.
The deal is expected to be announced as early as July 29, the report said.
Mylan shareholders's would own a little more than 40 percent in the merged entity, with Pfizer's shareholders taking up the remainder.
Mylan’s market value currently stands at just under $10 billion, and its long term debt amounts to $13 billion.
Following the announcement of the deal, Mylan's CEO Heather Bresch and President Rajiv Malik, would be departing.
Malik is facing lawsuits which accuse him of taking part in an alleged price-fixing scheme.
Mylan had total revenues of $11.4 billion in 2018, which is down by 4 percent. But what is disconcerting is that its US sales dropped 18 percent to $4.1 billion.
Pfizer 2018 revenues were at $53.6 billion, growing operationally at 2 percent. The expiration of patents on some of its blockbuster drugs, and the subsequent entry of generics is the reason for the slower growth of Pfizer sales. The company also wants to focus more on innovative drugs and vaccines.
Pfizer's off-patent business consists of popular brands such as cholesterol lowering Lipitor, Viagra to treat erectile dysfunction, anti-neuropathic pain drug Lyrica, anti-hypertension medication Norvasc, and anti-pain Celebrex.
Consolidation in generic industry
The combined entity after the merger of Pfizer's off-patent business and Mylan would become the largest generic drug maker globally, and may set the pace for the consolidation of an industry facing pricing pressure amidst competition and channel consolidation in US market.
Last year India’s Aurobindo Pharma agreed to take up Sandoz's generic-drugs business in a deal worth up to $1 billion. Sandoz is the generic unit of Swiss drug maker Novartis.
Most large generic drug makers such as Teva, Sun Pharma, Lupin, Dr Reddy's, Endo and others are already rationalising their product portfolios and are focusing on niche, complex, specialty and biosimilars to beat the pricing pressure. But things are still evolving in US market, and we could see more such consolidation moves going forward.
Implications on India
The merger will have implications on Indian pharmaceutical companies as well. Much of Mylan's manufacturing infrastructure is based in India. The Indian manufacturing sites that makes active pharmaceutical ingredients (APIs) for formulations, including injectable formulations, are crucial to Mylan's cost efficient global supply chain.
The company is also a part of India's formulation business. It sells hepatitis-C, antiretrovirals and biosimilar drugs in India.
Pfizer on other hand is a listed company on Indian stock exchanges. The company has annual sales of Rs 2,030 crore, with a portfolio of over 150 products across 15 therapeutic areas.Pfizer has a manufacturing facility in Goa that produces more than a billion tablets annually and employs about 2,600 people.
The company in India sells branded generics (off-patented drugs), vaccines and consumer health products.
We will only come to know how the business in India will be restructured once the deal is consummated.
