10:28 AM, Jul 29, 2019 — Pfizer (PFE) on Monday reported second-quarter revenue that missed expectations as it also agreed to combine its off-patent Upjohn business with Mylan (MYL) in an all-stock reverse Morris trust transaction.
New York-based Pfizer said adjusted diluted earnings rose to $0.80 per share for the most recent quarter, up from $0.77 from the prior year and the Capital IQ consensus for $0.75. Revenue slid to $13.26 billion from $13.64 billion, shy of the Street’s view for $13.43 billion.
Revenue at Pfizer’s biopharmaceuticals business rose 6% operationally to $9.6 billion, driven by sales growth of its Ibrance, Eliquis and Xeljanz treatments, which was offset by declines in sales of Enbrel and Prevnar. Upjohn revenue fell 7% to $2.8 billion, led lower by a 20% operational decline in China.
US revenue under Upjohn fell 9%, pushed down by lower Viagra sales after the treatment’s December 2017 patent expiration and Lyrica, with saw volumes decline due to wholesale destocking ahead of that drug’s patent expiration.
Consumer healthcare revenue rose 1% operationally to $862 million as 4% growth in international markets offset a 2% decline in the US.
Pfizer cut its guidance for the year to reflect its anticipated Aug. 1 formation of a consumer healthcare joint venture with GlaxoSmithKline (GSK) and the expected near-term completion of its Array BioPharma acquisition. The company now expects revenue for the year to come in at between $50.5 billion to $52.5 billion from its April view of $52 billion to $54 billion, below the Street’s view of $53.45 billion. Adjusted diluted EPS it expected to be between $2.76 from $2.86, down from $2.83 to $2.93 and below market expectations of $2.91.
Meanwhile, Pfizer said Upjohn’s combination with UK-headquartered Mylan will “transform and accelerate each business’s ability to service patients needs and expand their capabilities across more than 165 markets by bringing together two highly complementary businesses.”
Under terms of the deal, each Mylan share will be converted into one share of the new company. Pfizer will own 57% of the combined company while Mylan will own the remaining 43%. Mylan shares surged more than 14% in early trading while Pfizer slid 2.5%
The transaction will be performed through a reverse Morris trust, which will see Upjohn spun or split off to Pfizer shareholders and combined with Mylan. Pfizer said that is expected to be tax free to it and its shareholders while taxable to Mylan shareholders. The deal is expected to close in mid-2020.
Pfizer said the new company will have pro forma revenues between $19 billion to $20 billion in 2020 and adjusted earnings before interest, tax, depreciation and amortization in a $7.5 billion to $8 billion range. Phased synergies of $1 billion a year are expected to be realized by 2023.
“We are creating a new champion for global health — one poised to bring world-class medicines to patients across a wide range of therapeutic areas,” said Pfizer Chief Executive Albert Bourla. “I believe that Mylan’s unique profile and strategy has made it the obvious partner of choice in creating this powerful combination.”
Mylan Chairman Robert Coury will be the executive chairman of the new company while Upjohn President Michael Goettler will be CEO. Upjohn will issue $12 billion of debt near around the time of the separation with Pfizer retaining the gross debt proceeds.
Companies: Pfizer, Inc.
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