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Coronavirus Puts The Brakes On Mylan-Upjohn Merger logo

 

Citing the “the unprecedented circumstances surrounding the COVID-19 pandemic,” Mylan today announced that the company’s planned merger with Pfizer’s Upjohn mature brands and off-patent division will be delayed into the second half of this year, with both firms still committed fully to the transaction.

“Associated delays in the regulatory review process” mean that the merger, which is to produce a combined company called Viatris, will now not close by midway through this year, as Mylan most recently guided in its year-end earnings call. (Also see "Mylan’s ‘Durable’ Model Has Helped Weather Storms" - Generics Bulletin, 9 Mar, 2020.)

Meanwhile, Mylan has also pushed back a related extraordinary general meeting of shareholders that was set to take place on 27 April by two months to 30 June, aligning with Mylan’s annual general meeting of shareholders scheduled for the same day.

The company is domiciled in The Netherlands, one of the hardest-hit regions in Europe in the coronavirus pandemic, where more than 400 people are confirmed to have died and almost 7,500 cases have been confirmed.

Mylan shareholders are yet to vote on the proposed combination, with Pfizer shareholders not required to do so. “Further details about the time and location of the EGM and AGM will be announced once those have been finalized,” the firm said.

“There are no additional changes to the previously announced terms or plans regarding the transaction,” Mylan underlined. “The two companies remain highly confident in the benefits of the pending transaction to their respective shareholders and other stakeholders.”

Mylan added that itself, Pfizer and Upjohn were continuing to “work closely on integration planning and are making significant progress toward 'day one' readiness.”

Together, Mylan noted, “the companies continue to progress toward a successful close. The primary focus of both companies remains the health and safety of their dedicated and valued employees who are working tirelessly towards completion of this transaction while also maintaining their responsibility to meet patient needs during this extraordinary time.”

Analysts Wary Of Combination Benefits

Mylan and Pfizer first disclosed their merger in late July last year, forecasting that their combined operations would turnover almost $20bn this year and capture around $1bn in synergies by 2023. (Also see "Pfizer To Merge Off-Patent Business With Mylan" - Generics Bulletin, 29 Jul, 2019.)

Upjohn group president Michael Goettler was named to head up the combination and join the new company’s board, while Mylan president Rajiv Malik would also take a seat on the board and keep the same role. However, Mylan’s CEO Heather Bresch announced she would depart the company after almost three decades of service.

The name Viatris was unveiled in November, shortly before the company’s board was fully fleshed out. Mylan chairman Robert Coury will chair the board, joining Goettler and Malik, as well as former Pfizer CEO Ian Read as part of a 13-strong board of directors at Viatris.

To prepare itself for the merger, Mylan unveiled a far-reaching restructuring plan that had been in the works since late 2018; including to cut hundreds of products in the US, reallocate commercial resources to the most responsive brands around the world, and create a network of centers of excellence and consolidate production capacity. (Also see "Mylan Reforms As It Prepares To Become Viatris" - Generics Bulletin, 15 Nov, 2019.)

“Our transformation work is focused on unlocking latent value within Mylan's organization and delivering economic profit, while maintaining our commitment of providing access,” commented Bresch at the company’s recent year-end annual earnings call.

As Generics Bulletin’s sister publication Scrip discussed last month, however, analysts are not uniformly convinced that the merger be the turnaround Mylan needs after years of bolt-on and larger acquisitions. (Also see "Transformation Into Viatris Not Seen As The Solution Mylan Needs" - Scrip, 28 Feb, 2020.)

Mylan, like many players with a large presence in the US generics market, has suffered in recent years from the challenges facing the sector, with customer consolidation and market dynamics continuing to put pressure on the prices older commodity products.

Internal problems have also weighed the company down, including manufacturing setbacks at its key facility in Morgantown, West Virginia.

“Mylan is 'pitching' the long-term trajectory of a 'different' company. However, the argument for the growth of Viatris is tenuous,” noted Bernstein’s Ronny Gal.

“The idea that [it] can grow a business focused on maximizing old brands, combine it with [a generics] company, source new products via acquisition and brand building is untested and the team tasked with executing it is yet to have a track record.”

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