Mclaren And Pfizer Puqiang Successfully Merged, And Huizhi, A New Global Generic Drug Giant, Was Officially Born

More than a year after the announcement of divestiture of generic drug business, mylan N.V. and Pfizer Upjohn, Pfizer's business unit, successfully merged, and viatris Inc., NASDAQ Stock Code: VTRs), was officially established on November 16, 2020.

McLaren and puqiang announced the merger on July 29, 2019, and obtained the final regulatory approval on October 30, 2020. Huizhi started normal trading on NASDAQ on November 17, 2020 (the first full trading day after the end of trading), with the stock code of VTRs.

So far, Pfizer "lost" its generic business unit and successfully turned its attention to the biopharmaceutical business.

Divestiture of non patent business

In 2019, Pfizer's revenue fell 1% to $51.8 billion year-on-year due to the impact of non patent brands and generic drugs and consumer health businesses. The operating revenue of puqiang, a non patent brand and generic pharmaceutical business unit, decreased by 16%, and its revenue reached US $10.2 billion, while puqiang China increased by 7%.

Albert, Pfizer chairman and CEO After taking office for one year, GSH's (GSH) joint venture has been a bright spot in terms of its R & D (R & D) line, which is beneficial to Pfizer's (Pfizer's) business line after its establishment in 2019. We also announced the final agreement to merge puqiang and Melan to create a new global pharmaceutical company, viatris. " After "cutting off" puqiang and "selling" its health business, "new Pfizer will be a small, science based company focused on innovation."

On October 27, Pfizer announced its performance in the first three quarters of 2020. Puqiang's business still declined, with revenue of $5.944 billion in the first nine months, a sharp drop of 30%. But surprisingly, in the first half of the year, the general strength grew by 17%.

Viatris is a new global healthcare company, according to both sides of the merger.

On July 29, 2019, Pfizer and mylan both announced a final agreement to merge mylan with Pfizer's generic brand and generic division Upjohn to create a new global pharmaceutical company.

The new company will expand its capabilities in more than 165 markets by bringing together two highly complementary businesses, the two sides said. For mylan, the significance of this transaction is to expand the product coverage market through Pfizer's channel advantages, including generic drugs and bio generics, so as to enter new growth markets.

In 2018, Pfizer divided its business into three parts: biopharmaceuticals, Pfizer puqiang and health medicine. Pfizer is a global business group focusing on brand drugs and generic drugs with expired patents, including 20 solid oral preparation brands with expired patents, including lerika, Lipitor, loxostat, Viagra and Celebrex, as well as some generic drugs.

Pfizer puqiang's business focuses on non communicable diseases (NCDs) including cardiovascular and cerebrovascular diseases, pain and neurological diseases, mental diseases, urinary diseases and eye diseases.

Pfizer's divestiture of its generic drugs and its merger with mylan have made its scale effect increasingly strong in emerging markets. Under the influence of a series of policies, such as drug restriction and fee control, medical insurance payment reform, drug proportion control, volume purchase, medical insurance negotiation, local foreign-funded pharmaceutical enterprises are affected.

According to the report "strategic response of multinational pharmaceutical enterprises in the context of China's pharmaceutical reform" released by Ernst & young, the proportion of original research drugs that have passed the patent period in China's market as a whole exceeds 80% or even higher. With the regulation of a series of policies, the proportion of innovative drugs will gradually increase in the future, and the proportion of original research drugs that have passed the patent period will show a downward trend. For multinational pharmaceutical enterprises, the proportion of sales of original research drugs after patent period basically reaches 80%. For multinational pharmaceutical enterprises mainly focusing on general medicine, the proportion of original research drugs after patent period is higher, even more than 90%.

Take Pfizer as an example. Although Lipitor, which was listed in China in 2000, has already passed the patent period, its sales volume in China in 2018 is still as high as 10 billion, more than one third of Pfizer's sales in China. This phenomenon is unimaginable in the European and American markets.

The top three drugs sold by Pfizer in China, including Lipitor, shupushen and luohuoxi, have already passed the patent period. The top three drugs sold by Pfizer in China, such as AstraZeneca, Bayer, Sanofi and Roche, are also non patent drugs.

The government's determination to reduce prices and control costs is firm, and the trend of drug price reduction is irreversible. In addition to the impact of drug prices in 11 cities with volume procurement, it will further radiate the whole country and form price linkage. The government hopes to realize the substitution of generic drugs for the original drugs that have passed the patent period. Therefore, the market share of generic drugs will be rapidly increased through the evaluation of transnational drug prices.

New generic drug giant

Both sides expect the new company's revenue to reach $19 billion to $20 billion in 2020. It is estimated that the adjusted EBITDA will be between $7.5 billion and $8 billion in 2020, including a phased synergy effect of about $1 billion per year by 2023. Free cash flow is expected to exceed $4 billion in 2020.

Huizhi promises that shareholders will enjoy a dividend of at least 25% of free cash flow (based on GAAP operating cash flow minus capital expenditure) starting from the first full quarter of the operation of the new company, and expects to increase the dividend thereafter. In addition, the new company will gradually reach the target leverage ratio (2.5 times) and strive to maintain the "investment grade" rating.

Robert J. Coury, executive chairman of Huizhi, said, "today, we celebrate the establishment of Huizhi. This is the result of more than a decade of strategic, thoughtful work to build a global company with breadth and depth to enable patients and healthcare systems around the world to access quality medicines more efficiently. "

With about 45000 employees worldwide, Huizhi is headquartered in the United States and has global centers in Pittsburgh, Shanghai, China and Hyderabad, India. Huizhi's global product portfolio includes more than 1400 approved compounds and biological products, covering a wide range of treatment fields (involving non communicable diseases and infectious diseases), including globally recognized iconic brands, generic drugs, complex generic drugs, brand drugs, as well as an increasing variety of biological analogues and various over-the-counter drugs.

It is reported that Huizhi is in the process of implementing a global restructuring plan to achieve a $1 billion synergy and ensure that the new company has efficient organization and resource allocation. Specific parameters of the plan are being defined, including staffing and other options.

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