Pfizer and the Spinoff of Upjohn

Name: Pfizer and the Spinoff of Upjohn (English version)
SKU: A0320003

Andrew Inkpen

Product #:A0320003

Supplier:Thunderbird

Discipline:General Management

Details:Case (PDF) • 12 pages • 2020-01-01

Subjects:

Leadership and managing people Management

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In July 2019, Pfizer announced that it would spin off its Upjohn division and merge it with Mylan, a specialty and generic drugs firm. Within Pfizer, the Upjohn business unit was a conduit for Pfizer drugs going off-patent. Divesting the Upjohn business would allow Pfizer to focus on innovative drugs and exit the generics sector. Combining Upjohn with Mylan would create a new company that would compete in branded prescription drugs, generics, biosimilars, and over-the-counter medicines. Cost synergies from the merger of $1 billion were projected. Under the terms of the agreement, each Mylan share would be converted into one share of the new company. Pfizer shareholders would own 57% of the combined new company and Mylan shareholders would own 43%.

Learning Objectives

This case provides a strategic look inside a corporate spin-off. There are three main learning objectives. The first is to understand the structure and basis for competitive advantage in the pharmaceutical industry. The second is to use the industry analysis to examine the deal structure. Does it make sense for Pfizer to spin off the Upjohn division and reduce its presence in the off patent and generics drug sector? The third objective is to examine the Mylan-Upjohn merger. Are Pfizer shareholders better off with Upjohn spun off to Mylan? Will the merger achieve the proposed revenue and cost synergies?