Mylan’s Mastermind Clutches the Reins as Pfizer Makes Its Move

(Bloomberg) -- Mylan NV Chairman Robert J. Coury is known for keeping a firm hand on the day-to-day at the generic-drug empire he built -- and he signaled no desire to loosen his grip while unveiling his company’s deal with Pfizer Inc.

Pfizer plans to combine its Upjohn business that sells drugs such as Lipitor and Viagra with Mylan, the companies said Monday, in a deal that will help both companies sculpt a future that looks different from their past. Pfizer wants to focus on innovative new medicines, while Mylan seeks a bigger global footprint and wider portfolio of drugs, along with a lighter debt load.

Mylan’s Mastermind Clutches the Reins as Pfizer Makes Its Move

But Coury’s dominion over Mylan, which will get a new name after the companies are combined, appears unlikely to change.

While Pfizer shareholders will control 57% of the new company’s shares, Coury will be executive chairman -- a title he held in Mylan’s heyday. Michael Goettler, who currently runs Upjohn, will be chief executive officer.

“I have never been the ‘traditional’ in any capacity that I’ve served,” Coury said on a Monday conference call with investors, when asked about his role. “And this executive chairman role, it is a real active role, quite frankly.”

Coury said he would remain focused on deals, strategy and talent. He will have large sway over the new company’s board, where Mylan will appoint eight other members and Pfizer will name three. Goettler will also have a seat.

While Mylan has been hammered by the brutal competitive landscape in the generics industry in recent years, Coury carried himself as the one with the upper hand on Monday.

Pfizer, “they weren’t the easiest people to work with, I’ll tell you, when it came to corporate governance,” Coury said during a spirited investor call alongside Pfizer executives including CEO Albert Bourla. “There had to be a lot of give and take with Albert and myself and I think we’ve really reached a right place.”

Coury went on.

“I don’t make this s--- up, you know that,” he said, using an expletive.

During a follow-up interview with Pfizer executives, Bourla said it was Mylan’s weakness that drew New York-based Pfizer to the company.

“It caught my attention that Mylan wasn’t doing very well,” Bourla said in an interview with Bloomberg. “It wasn’t their underlying business, which was very strong, but people were confused about the strategy and they were disappointed and frustrated with their governance because they were incorporated in the most shareholder-unfriendly place in the Netherlands.”

The new company will be incorporated in Delaware. “It’s now in the most friendly-to-shareholders jurisdiction,” Bourla said. “We felt that the most important thing to make sure shareholders have control.”

China Muscle

Executives at both Pfizer and Mylan see the greatest potential for growth in China and emerging markets in Asia. The new company expects only 55% of its revenue will come from the U.S. and Europe; 45% will come from China and other emerging markets.

Goettler noted that China is the second-largest pharmaceutical market in the world and that Pfizer already has an established footprint in the region.

Coury, however, said Mylan is bringing more to the table.

“If you really look at the two companies, Upjohn by itself didn’t have the engine,” he said in a heated back-and-forth. “We are bringing the engine to Upjohn, but especially in China.”

The new company will be less reliant on the generic pills that have been a mainstay of Mylan’s business. It will only get about one-third of its sales from traditional generic pills, executives said on the call, while the rest will come from infused drugs and biosimilars.

The deal also gives Mylan a financial lifeline to address its more than $13 billion in long-term debt. The new company will refinance to take advantage of lower interest rates. It will have $24.5 billion in debt and an investment-grade credit rating, the companies said.

End Foretold

Coury and Mylan Chief Executive Officer Heather Bresch, who plans to depart once the deal is closed, have been trying to reshape the drugmaker, and the Pfizer pact marks the end of a yearlong strategic review.

Mylan shares have lost three-quarters of their value since 2015, hurt by generics-market forces but also manufacturing issues and questions about the company’s alleged involvement in a price-fixing conspiracy.

“I’ve listened very, very carefully to shareholders,” Coury said. “This transaction checks every single box that they have discussed with me.”

Mylan shares jumped as much as 19% to $21.88, the highest level since November.

One reason that investors have embraced the deal, said Wells Fargo analyst David Maris, is that it does away with a Dutch governance structure that had shielded Mylan from outside pressure. While Coury will remain in control for now, returning Mylan to a U.S. address could also give shareholders greater leverage if they want changes.

The deal closes a tense chapter for Mylan with a denouement that may have been foreshadowed years ago. Amid the crosshairs of a hostile takeover in 2015, Coury floated the idea of selling the company to Pfizer.

©2019 Bloomberg L.P.

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