Pfizer logo The latest movefollows Pfizer's decision in December to separate itsconsumer-health business in a joint venture with GlaxoSmithKline.(Photo: AP)

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Pharmaceutical behemoth Pfizer Inc. has transformed itself undernew leadership through a series of spinouts and joint ventures,mitigating risk by placing some units at arm's length whilecontinuing to reap rewards from them.

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Chief Executive Officer Albert Bourla, 57, who took the helm inJanuary after serving as the drugmaker's operations chief, hasrapidly transformed the company through a new deal-making strategy. His next majorstep is a plan to combine Pfizer's less-lucrativeoff-patent drug business with Mylan NV to form a generic-druggiant.

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Related: Drugmakers AbbVie and Allergan strike $63M mergerdeal

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Bourla envisions Pfizer as a smaller, more nimble companyfocused on innovative medicines and vaccines, unburdened bybusinesses with little or no innovation potential. He's intent onmaking Pfizer a stronger competitor for new cancer therapies. InJune, Pfizer agreed to buy Array BioPharma Inc., a biotechnologycompany with oncology drugs and experimental therapies, for $11.4billion.

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To clear the way, Bourla's new plan would combine Pfizer'soff-patent drug business Upjohn — the maker of widely usedmedications including Lipitor for cholesterol, Viagra for maleimpotence and Xanax for anxiety — with Mylan. In the potentialstock deal, Mylan investors would get 40 percent of thecompany and Pfizer investors would get the remainder, according topeople familiar with the matter who asked not to be identifiedbecause the negotiations are private.

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Mylan rose as much as 30 percent in trading beforeregular U.S. markets opened. The drugmaker's euro bonds rose 4.6cents to a record high. Teva Pharmaceutical Industries Ltd., theworld's biggest maker of generic drugs, gained as much as 3.9% inIsrael, while rival Perrigo Co. added 1 percent in London.Pfizer shares fell 0.7 percent in pre-market trading.

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Teva, Perrigo and other makers of generic drugs have been underpressure from falling U.S. prices. Questions have swirled aroundNovartis AG's Sandoz generic unit: the company last year agreed tosell parts of the business in the U.S. and said in May that itwould cut as many as 900 jobs at the concern.

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New York-based Pfizer is getting Mylan at a significant discountto its heyday: The generic drugmaker's stock has lostthree-quarters of its value since 2015 as the generics marketstruggles with price erosion and sales slump in North America. Itsstock-market value as of July 26 was $9.5 billion, dwarfed byPfizer's $240 billion.

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Michael Goettler, who runs Pfizer's off-patent drug unit, wouldbecome CEO of the combined company, and Mylan Chairman Robert Courywould be executive chairman, the people said. Current Mylan CEOHeather Bresch would depart. Mylan President Rajiv Malik, who facescivil suits accusing him of taking part in an alleged price-fixingscheme, would ultimately leave the combined company, one of thepeople said. Mylan is run from Canonsburg, Pennsylvania, with alegal address in England.

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The merger would allow Pfizer to move an obsolete business offthe balance sheet while still generating multimillion-dollarcashflows to subsidize its ever-growing pipeline. The combinedcompany will grant the off-patent legacy drugs a larger platformwith global reach.

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Off-patent drugs

Future sales growth for Pfizer's off-patent drugs is heavilydependent on emerging markets in China and Asia, Bourla said at aconference in January. “This is a very predictable business. It'slow-risk, high cash-flow business,” he said. Mylan's Bresch hasalso said that China offers her generic drugmaker an outlet.

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This isn't Pfizer's only recent spinout. In December, as Bourlatransitioned into his new role, the company decided to separate itsconsumer-health business in a joint venture with GlaxoSmithKlinePlc that combines products ranging from Sensodyne toothpaste toAdvil. The deal allowed Pfizer to exit a business after a yearlongsale process failed to find a buyer, and focus on itspharmaceutical operations.

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Bourla has said he is looking to accelerate Pfizer's growthpotential rather than deliver immediate value to shareholders. Thenew strategy is a departure from former CEO Ian Read'swide-reaching approach to deals with near-term paydays.

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Read spearheaded acquisitions of Hospira Inc. and MedivationInc. Many other attempts to remake the drugmaker were thwarted,though. Pfizer failed in separate $100-billion-plus attempts toacquire AstraZeneca Plc and Allergan Plc. Read also proposed, thenpulled back on, a breakup of the company.

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“Our dogma until a few years back was revenues now or soon whenwe're looking at business development opportunities – that was ourbias,” Bourla said in January. “Right now, I think this is not whatwe will need.”

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