As the U.S. government pushes for cheaper drugs, a drug maker just made a move that is really smart, or really, really dumb.
The world’s largest drug maker just announced that it will combine with the makers of the EpiPen, to create an international company focused on low-price medications.
Pfizer said its off-patent brand Upjohn will merge with generic drug maker Mylan in the all-stock transaction.
Now we have a major drug maker gaining control of a generic drug company Mylan. But wait, this consolidation could end up giving Pfizer control of generic drug pricing which of course it would raise the prices. They have to know that regulators are going to be watching what Pfizer does with Mylan’s generic drug pricing closely. Should drug makers be allowed to even buy generic drug makers? The entire balance of a generic drug maker creates a cheaper version of the drug once the patent expires seems to be breached here.
No analysts are rushing out with upgrades of Pfizer stock yet which suggests a lot of people are unsure how this is going to shake out. Could we have the Trump Administration move to block the deal?
Pfizer said it will own 57 percent of the new company and Mylan shareholders will own the other 43 percent. Pfizer said the boards of directors for both companies have already approved the move.
“The new company … will not only accelerate our mission to serve the world’s changing health needs, but also further unlock the true value of our platform,” Mylan Chairman Robert Coury said in a statement.
“We are creating a new champion for global health,” Pfizer CEO Albert Bourla said.
Last month, Pfizer bought drug maker Array BioPharma for $11.4 billion to improve its position in the cancer therapy field.
The new company, which has not yet been named, is expected to generate revenues of up to $20 billion. The deal is expected to be completed next year.
Pfizer just reported a 30% rise in quarterly profit, helped by demand for its branded treatments such as Ibrance, Eliquis and Xeljanz.
Revenue fell 1.5% to $13.26 billion.
Pfizer does not meet the requirements for inclusion in the GST portfolio. However a short-term swing trade might be possible.
The fundamentals on Pfizer look weak which is why it’s making huge acquisitions over the last couple of months in an effort to improve its revenue growth.
Disclosure: I do not hold any position in PFE.