...We view Mylan's merger as defensive, given the company is experiencing mid-single-digit generic drug price declines in the U.S., diminishing earnings contribution from its highly profitable branded EpiPen product, and challenges related to price fixing and opioid litigation, and governmental inquiries. Mylan announced a strategic review last summer to unlock shareholder value while maintaining an investment-grade rating. Merging with Upjohn should provide Mylan more flexibility to grow its difficult-to-manufacture chemically-complex biosimilar drug business and to pay down debt taken on for its Meda AB acquisition in 2016, while increasing diversification geographically and in branded drugs. UpJohn has high margins and solid cash flows due to its diversified portfolio of off-patent branded drugs and international presence. The combined entity's margins are likely to be meaningfully higher than Mylan's on a standalone basis. Pfizer will monetize the business, with the pending transaction...
