The Associated Press

Pfizer, the country's largest drugmaker, is creating a hybrid new drug company by combining its off-patent branded drug business with the generic pharmaceutical company Mylan.

Pfizer's Upjohn, which sells one-time blockbusters like Viagra and Lipitor that have lost patent protection, will be spun off and then it will combine with Mylan, a $10 billion company.

The complex deal, expected to close in the middle of next year, will create a company with estimated 2020 revenue in excess of $19 billion, with sales in more than 165 countries. The name for the new company has yet to be determined.

The two companies have worked together for years. Pfizer manufactures Mylan's EpiPen, an auto-injector used to halt life-threatening allergic reactions. Mylan was heavily criticized, and its CEO Heather Bresch was brought before Congress two years ago, to answer questions about the price of the EpiPen, which had jumped five-fold to $600 for two EpiPens. They have been in short supply for more than a year because of quality problems and upgrades at a Pfizer factory. Mylan has a significant presence in Morgantown, West Virginia.

The new company will be run Michael Goettler, now head of Upjohn, and will have Mylan's current board chairman, Robert Coury as its executive chairman. Bresch, the Mylan CEO for eight years and who had been with the company for 28 years, will retire when the deal closes. Her parents are U.S. Sen. Joe Manchin of West Virginia and former West Virginia First Lady Gayle Manchin.

Upjohn, the name of one of the companies Pfizer gobbled up during a spate of acquisitions in the 1990s and 2000s, sells off-patent and generic drugs that include the stars that drove Pfizer's growth: pain killers Celebrex and Lyrica, Norvasc for high blood pressure, Effexor for severe heartburn, Xanax for anxiety and Zoloft for depression.

The strengthening ties between Pfizer and Mylan come at a precarious time for big drugmakers, who face enormous pressure to cut high prices for brand-name drugs. Also, Pfizer just got generic competition to one of its biggers sellers, Lyrica.

Likewise, years of pressure from wholesalers to reduce prices for generic drugs, which comprise most of Mylan's portfolio, have crimped its profits and driven its share price down 50% in the past year.

That enabled Pfizer to "combine businesses at a more attractive price," Edward Jones analyst Ashtyn Evans said, adding that Pfizer has wanted to become a smaller, more innovative company and now has a strong pipeline of experimental new drugs.

Shareholders of Pfizer will receive 0.12 share of the new company for each Pfizer share they hold and will own 57% of the combined new company; Mylan shareholders will own 43%, receiving one share of the new company for each of their Mylan shares.


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