Pfizer Shares Drop Most in Decade After Mylan Deal, Weak Outlook
Pfizer Shares Drop Most in Decade After Mylan Deal, Weak Outlook
(Bloomberg) -- Pfizer Inc. shares took their largest drop in more than a decade, a day after announcing plans to combine its unit selling aging blockbuster drugs such as Lipitor and Viagra with generic drugmaker Mylan NV.
The 6.4% decline Tuesday was the company’s biggest since Jan. 26, 2009, the day it announced a $68 billion deal to buy rival Wyeth in the darkest hours of the financial crisis that shook Wall Street, days after Barack Obama was sworn in as president and just weeks ahead of the stock market hitting its bear-market low. That loss had been New York-based Pfizer’s biggest since Oct. 19, 1987, a dramatic marketwide sell-off known as Black Monday.
The deal with Mylan will combine Pfizer’s Upjohn unit with the generics maker in an all-stock transaction that will leave current Pfizer shareholders with 57% of the new company.
On Monday, New York-based Pfizer also cut its sales and adjusted earnings forecast, saying that a consumer products joint venture with GlaxoSmithKline Plc would reduce its expected 2019 revenue by $1.5 billion, to $50.5 billion to $52.5 billion. Adjusted earnings are expected to be lower, as well, the company said.
Pfizer also gave new targets for the main company’s remaining assets and the new business that disappointed some, including analysts at Bank of America and Morgan Stanley who downgraded the stock and cut their price targets.
“Although we view the Upjohn exit to Mylan as a strategically sound deal, new
2020 management disclosures revealed earnings power that is much weaker
than we realized,” Morgan Stanley’s David Risinger said in a note to clients, cutting his rating to the equivalent of hold.
The new company will inherit Mylan’s challenges, including several years of declining prices for generic drugs, and manufacturing issues at a key plant. The generic drugmaker and its executives have also been named in civil suits that state authorities have called one of the largest cases of collusive price-fixing in history. Mylan has said that its executives and the company have acted properly and within the bounds of the law.
Pfizer CEO Albert Bourla said Monday that his company is satisfied with his company’s analysis of legal risks associated with the price-fixing allegations.
--With assistance from Myah Ward.
To contact the reporter on this story: Riley Griffin in New York at rgriffin42@bloomberg.net
To contact the editor responsible for this story: Drew Armstrong at darmstrong17@bloomberg.net
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