S-4/A 1 d801850ds4a.htm AMENDMENT NO. 3 TO FORM S-4 Amendment No. 3 to Form S-4
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As filed with the Securities and Exchange Commission on February 6, 2020

Registration No. 333-234337

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 3

to

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

UPJOHN INC.

(Exact name of registrant as specified in its charter)

 

 

 

2834   Delaware           83-4364296

(Primary Standard Industrial

Classification Code Number)

 

(State or other jurisdiction of        

incorporation or organization)        

 

(I.R.S. Employer

Identification Number)

235 East 42nd Street

New York, New York 10017

(212) 733-2323

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Michael Goettler

President

Upjohn Inc.

235 East 42nd Street

New York, NY 10017

(212) 733-2323

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

With a copy to:

 

Douglas Lankler

Executive Vice President,

General Counsel

Pfizer Inc.

235 East 42nd Street

New York, NY 10017

(212) 733-2323

 

Edward D. Herlihy

David K. Lam

Gordon S. Moodie

Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, NY 10019

(212) 403-1000

 

Brian Roman

Global General Counsel

Mylan N.V.

c/o Mylan Inc.

1000 Mylan Boulevard

Canonsburg, PA 15317

(724) 514-1800

  

Mark I. Greene

Thomas E. Dunn

Aaron M. Gruber

Cravath, Swaine & Moore LLP

825 8th Avenue

New York, NY 10019

(212) 474-1000

 

 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this registration statement becomes effective.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

 

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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EXPLANATORY NOTE

On July 29, 2019, Pfizer Inc. and Upjohn Inc. (“Newco”) entered into a Separation and Distribution Agreement, and, on the same day, Pfizer, Newco, Mylan N.V. and certain of their affiliates entered into a Business Combination Agreement. These agreements provide for Pfizer to combine its global, primarily off-patent branded and generic established medicines business (the “Upjohn Business”) with Mylan in a Reverse Morris Trust transaction. The principal transactions to effect the Reverse Morris Trust transaction include the following:

 

   

Separation. Pfizer will contribute the Upjohn Business to Newco, so that the Upjohn Business is separated from the remainder of Pfizer’s businesses (the “Separation”).

 

   

Distribution. Following the Separation, Pfizer will distribute to its stockholders all of the issued and outstanding shares of Newco common stock held by Pfizer by way of either, at Pfizer’s option, a spin-off or a split-off (the “Distribution”). In a spin-off, Pfizer will effect the Distribution by distributing on a pro rata basis all of the shares of Newco common stock then held by Pfizer to Pfizer stockholders entitled to shares of Newco common stock in the Distribution as of the record date of the Distribution. In a split-off, Pfizer would offer its stockholders the option to exchange all or a portion of their shares of Pfizer common stock for shares of Newco common stock in an exchange offer, resulting in a reduction in shares of Pfizer common stock outstanding. If the exchange offer is undertaken and consummated, the remaining shares of Newco common stock then held by Pfizer, if any, would be distributed on a pro rata basis to Pfizer stockholders whose shares of Pfizer common stock remain outstanding after the consummation of the exchange offer.

This document assumes that the Distribution will occur through a spin-off. If a split-off is ultimately selected by Pfizer, Newco will file a registration statement on Form S-4 for the split-off, and Pfizer will file a Schedule TO for the split-off.

 

   

Combination. Immediately following the Distribution, Newco and Mylan will engage in a strategic business combination transaction in which Mylan shareholders will receive shares of Newco common stock (the “Combination”). The Combination shall occur through the following steps:

 

   

First, Mylan will engage in a legal triangular merger under Dutch law (the “Mylan Merger”), in which Mylan will merge with and into Mylan II B.V. (“Mylan Newco Sub”), with Mylan Newco Sub surviving as a wholly owned subsidiary of Mylan I B.V. (“Mylan Newco”). In the Mylan Merger, each Mylan ordinary share would be replaced by one Mylan Newco ordinary share. The Mylan Newco ordinary shares will not be listed. The Mylan Newco ordinary shares will be in existence only until the dissolution and liquidation of Mylan Newco has been completed as described below. After the Mylan Newco Liquidation Distribution (as defined below) has been made, we do not expect there to be any further distributions in respect of the Mylan Newco ordinary shares, nor do we expect any Mylan Newco shareholder meeting to be held at which Mylan Newco shareholders could exercise voting rights.

 

   

Second, Mylan Newco will sell and transfer to Utah Acquisition Sub Inc., which is an indirect, wholly owned subsidiary of Newco (“Acquisition Sub”), all of the outstanding shares of Mylan Newco Sub in exchange for a note that is mandatorily exchangeable into a number of shares of Newco common stock (the “Exchangeable Note”) (such sale and transfer, the “Share Sale”).

 

   

Third, Mylan Newco will be dissolved and liquidated in accordance with Dutch law and each holder of Mylan Newco ordinary shares (i.e., former holders of Mylan ordinary shares) will, upon distribution of the Exchangeable Note, receive one share of Newco common stock for each Mylan Newco ordinary share held by such holder, subject to any applicable withholding taxes, including any Dutch dividend withholding tax (the “Mylan Newco Liquidation Distribution”) (such liquidation, the “Mylan Newco Liquidation”).

If the Mylan Merger is not consummated within the period specified by Section 2:318(1) of the Dutch Civil Code (which is, generally, six months after the announcement in a Dutch nationally distributed daily newspaper


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that the merger proposal with respect to the Mylan Merger has been deposited with the Dutch Trade registry and disclosed for public inspection), then, unless otherwise mutually determined by Pfizer, Newco and Mylan, the Combination will occur through the following steps, which do not involve the Mylan Merger:

 

   

First, Mylan will sell and transfer to Acquisition Sub all of Mylan’s assets and liabilities, in exchange for the Exchangeable Note (the “Asset Sale”).

 

   

Second, Mylan will be dissolved and liquidated in accordance with Dutch law and each holder of Mylan ordinary shares will receive, upon the distribution of the Exchangeable Note, one share of Newco common stock for each Mylan ordinary share, subject to any applicable withholding taxes, including any Dutch dividend withholding tax (the “Mylan Liquidation Distribution”) (such liquidation, the “Mylan Liquidation”).

Newco is filing this registration statement on Form S-4 (Reg. No. 333-234337) to register the shares of Newco common stock under the U.S. Securities Act of 1933, as amended (the “Securities Act”), that will be issued and distributed in the Mylan Newco Liquidation or Mylan Liquidation. Pursuant to the instructions of Form S-4, the document which forms a part of this registration statement is also deemed filed pursuant to Mylan’s obligations under Regulation 14A in connection with the extraordinary general meeting of Mylan shareholders to approve the Combination.

Newco is filing a separate registration statement on Form 10 (File No. 000-56114) to register the shares of Newco common stock under Section 12(g) of the U.S. Securities and Exchange Act of 1934, as amended (the “Exchange Act”). The Form 10 contains a preliminary information statement to be used in connection with the Distribution of Newco common stock to the Pfizer stockholders.

This document currently assumes that the Distribution will occur through a pro rata spin-off to the Pfizer stockholders. However, Pfizer may elect to effect the Distribution by way of a split-off instead of a spin-off if it determines that doing so would be in the best interests of Pfizer and its stockholders based on market conditions prior to closing as well as corporate finance and timing considerations, including, but not limited to, the relative valuation and market price of shares of common stock of Pfizer and Mylan, the implied valuation of the Upjohn Business, the likelihood of demand from Pfizer stockholders for shares of Newco common stock to be issued in the Distribution, and the assessment by Pfizer and its financial advisors of the likelihood of sufficient tenders of shares of Pfizer common stock in a split-off. If a spin-off is selected by Pfizer, all Pfizer stockholders will receive from Pfizer, on a pro rata basis, a number of shares of Newco common stock so that Pfizer stockholders will hold 57% of the fully diluted outstanding shares of Newco common stock following the Combination. If a split-off is selected by Pfizer, Pfizer will offer its stockholders the option to exchange shares of Pfizer common stock for shares of Newco common stock in an exchange offer, resulting in a reduction in Pfizer’s outstanding shares. If the exchange offer is undertaken and consummated, the remaining shares of Newco common stock Pfizer holds, if any, would be distributed on a pro rata basis to Pfizer stockholders whose shares of Pfizer common stock remain outstanding after the consummation of the exchange offer. If a split-off is ultimately selected by Pfizer, then Newco will file a separate Form S-4 for the split-off, and Pfizer will file a Schedule TO for the split-off.

It is not expected that Pfizer’s decision to effect the Distribution through a split-off instead of a spin-off would have a material impact on the combined company or on Mylan’s shareholders.


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The information in this document is not complete and may be changed. A registration statement relating to the securities described in this document has been filed with the U.S. Securities and Exchange Commission. These securities may not be issued until the registration statement filed with the U.S. Securities and Exchange Commission is effective. This document does not constitute an offer to sell or the solicitation of offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

PRELIMINARY—SUBJECT TO COMPLETION—DATED FEBRUARY 6, 2020

PROXY STATEMENT/PROSPECTUS

TO MYLAN SHAREHOLDERS

On July 29, 2019, Pfizer Inc. and Upjohn Inc. (“Newco”) entered into a Separation and Distribution Agreement, and, on the same day, Pfizer, Newco, Mylan N.V. (“Mylan”) and certain of their affiliates entered into a Business Combination Agreement. These agreements provide for Pfizer to combine its global, primarily off-patent branded and generic established medicines business (the “Upjohn Business”) with Mylan in a Reverse Morris Trust transaction. The Separation, Distribution and Combination (each as defined below) are referred to collectively in this document as the “transactions.” As used in this document, each of “Newco” and the “combined company” refers to Upjohn Inc., which has been newly formed to effect the transactions. Effective as of the closing of the transactions described below, Newco will be renamed “Viatris” and will operate both Mylan and the Upjohn Business. Upon closing of the transactions described below, Newco will be an independent, publicly-traded company. The principal transactions to effect the Reverse Morris Trust transaction include the following:

 

   

Separation. Pfizer will contribute the Upjohn Business to Newco, so that the Upjohn Business is separated from the remainder of Pfizer’s businesses (the “Separation”).

 

   

Distribution. Following the Separation, Pfizer will distribute to its stockholders all of the issued and outstanding shares of Newco common stock held by Pfizer by way of pro rata dividend (the “Distribution”). The number of shares of Newco common stock that will be distributed in the Distribution will be such that, after the Combination described below, Pfizer stockholders as of the record date of the Distribution will hold 57% of the fully diluted outstanding shares of Newco common stock following the Combination (as defined below). References in this document to the percentage ownership of fully diluted outstanding shares of Newco common stock by Pfizer stockholders and former Mylan shareholders upon completion of the transactions assumes that such percentages are determined excluding any overlaps in the pre-transaction securityholder bases.

 

   

Combination. Immediately following the Distribution, Newco and Mylan will engage in a series of steps to combine their businesses, and in which Mylan shareholders will receive one share of Newco common stock for each Mylan ordinary share, subject to any applicable withholding taxes, including any Dutch dividend withholding tax (the “Combination”). The number of shares of Newco common stock that will be issued in the Combination will be such that, after the Combination, Mylan shareholders as of immediately before the Combination will hold 43% of the fully diluted outstanding shares of Newco common stock following the Combination.

It is expected that there will be approximately 1.2 billion shares of Newco common stock outstanding immediately after the Combination (calculated based on the estimated maximum number of 526,700,740 Mylan ordinary shares expected to be exchanged for Newco common stock in connection with the Combination). Newco common stock will be listed on the NASDAQ Global Select Market under a ticker symbol to be determined.

This document constitutes a prospectus of Newco for the Newco common stock being issued in the Combination, as well as a proxy statement in connection with the extraordinary general meeting of Mylan shareholders (the “EGM”) being held to approve of the Combination. The Mylan board of directors unanimously recommends that the Mylan shareholders vote “FOR” the approval and adoption of the Combination Proposal (consisting of the Mylan Merger Resolution, the Share Sale Resolution, the Mylan Newco Liquidation Resolutions, the Alternative Transaction Resolutions and the Discharge Resolution); “FOR” the adoption of the advisory Compensation Proposal; “FOR” the adoption of the advisory Proposal Regarding Procedures for Determining Board Composition; and “FOR” the adoption of the advisory Stockholder Special Meetings Proposal (each as defined in the accompanying document).

 

 

Please review this document carefully. You should carefully consider the matters discussed under the heading “Risk Factors” beginning on page 51.

Neither the U.S. Securities and Exchange Commission nor any state securities regulator has approved or disapproved the transactions described in this document, or determined if this document is accurate or adequate. Any representation to the contrary is a criminal offense.

The date of this document is                     , 2020, and it is being mailed to Mylan shareholders on or about                     , 2020.


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LOGO

[DATE]

Dear Mylan N.V. Shareholders:

Mylan is committed to setting new standards in healthcare. Over the course of Mylan’s history, and in particular during the past decade, Mylan has become a global leader in the pharmaceutical industry—one with a leading operations platform, diversity in its portfolio across broad therapeutic areas and geographies and significant renown for the efficiency of its manufacturing, supply and distribution network and the quality of its products. In addition to cultivating numerous organic growth drivers, Mylan has a long history of successful large-scale integrations that have advanced its ability to fulfill its mission of reaching the world’s population of seven billion, while simultaneously remaining competitive in a continuously consolidating pharmaceutical industry.

Mylan has been highly active and strategic in evaluating quality companies and assets within the industry to identify those that would most effectively build on and further transform its operating platform and commercial presence, complement its existing strengths and capabilities, enhance its financial flexibility, further strengthen its competitive position, expand its global presence, promote the long-term sustainable success of the business and enhance shareholder value and/or provide benefits to other stakeholders, including employees, creditors, customers, suppliers, relevant patient populations and communities in which Mylan operates.

In light of Mylan’s belief that the U.S. public markets have underappreciated and undervalued the durability, differentiation and strengths of Mylan’s global and diversified business, the Board of Directors of Mylan (the “Mylan Board”) formed a Strategic Review Committee (the “Mylan Strategic Review Committee”) in August 2018 to actively evaluate a wide range of available strategic alternatives to unlock the true value of Mylan’s platform. Over the course of the following months, the Mylan Strategic Review Committee, along with the Mylan Board, Mylan management and external advisors, undertook an extensive review of multiple ways to unlock value for Mylan’s shareholders and other stakeholders, including a review of companies and assets for potential transactions and other strategic and financial alternatives. The strategic review also involved a review of Mylan’s standalone strategy, including expanding the geographic reach of Mylan’s existing product portfolio and future pipeline, particularly in the Asia-Pacific region and emerging markets, and opportunities to accelerate this standalone strategy whether through a business combination transaction or other opportunity.

This review culminated on July 29, 2019, when Mylan, Pfizer Inc. and Upjohn Inc. (“Newco”) entered into a series of agreements, including a Business Combination Agreement, that provide for Mylan and Pfizer’s global, primarily off-patent branded and generic established medicines business (the “Upjohn Business”) to engage in a strategic business combination transaction. The combination of Mylan and the Upjohn Business is expected to create a unique company with no direct pharmaceutical peer set. Bringing the two highly complementary businesses together is expected to transform and accelerate each business’s ability to serve patients’ needs and expand their capabilities across more than 165 markets.

Prior to the closing of such business combination transaction, Pfizer will distribute to its stockholders all of the issued and outstanding shares of Newco common stock held by Pfizer. Immediately following this distribution to Pfizer stockholders, Newco and Mylan will engage in a series of steps to combine their businesses, and in which Mylan shareholders will receive one share of common stock of Newco for each Mylan ordinary share, subject to any applicable withholding taxes, including any Dutch dividend withholding tax (the “Combination”). Newco will be renamed “Viatris,” effective as of closing of the Combination.

When the transactions are completed, Mylan shareholders as of immediately prior to the Combination will hold 43% of the fully diluted outstanding shares of common stock of Newco.


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The strategic business combination transaction is expected to result in a combined company with increased scale and expanded capabilities as compared to Mylan or the Upjohn Business on a standalone basis. It is expected to drive a sustainable, diverse and differentiated portfolio of prescription medicines, complex generics, over-the-counter products and biosimilars, supported by commercial and regulatory expertise, established infrastructure, best-in-class R&D capabilities and high-quality manufacturing and supply chain excellence.

The Upjohn Business will contribute complementary market access and enhanced commercial capabilities to Mylan’s existing business, including the experience in growth markets that the management and employees of the Upjohn Business will bring to the combined company. The strategic business combination transaction will accelerate Mylan’s standalone strategy of meaningfully expanding the geographic reach of Mylan’s existing broad product portfolio and future pipeline, particularly in the Asia-Pacific region and emerging markets.

Indeed, Newco, which will be renamed “Viatris” effective as of closing of the Combination, will represent more than just a new name. Once the transactions close, it will have a new strategy and operating model as compared to Mylan today, with a more balanced geographic exposure, a further differentiated product portfolio and a stronger foothold in key emerging markets. It will have an even stronger balance sheet and a focus on capital return through anticipated dividends and stock repurchases. Newco will also be a Delaware-organized company with a stockholder-centric governance model.

One thing that will not change is Mylan’s steadfast commitment to providing high quality medicine to patients and the communities we serve. The combination of Mylan and the Upjohn Business will create a new champion for global health - one poised to bring medicine to more patients around the world.

In conclusion, Mylan is highly confident in the proposed combination of Mylan and the Upjohn Business, and that it will provide compelling strategic and financial value to Mylan’s shareholders and other stakeholders.

We look forward to your full support.

 

 

Very truly yours,

 

   
  LOGO     LOGO
  Robert J. Coury     Heather Bresch
  Chairman     Chief Executive Officer
  Mylan N.V.     Mylan N.V.

After careful consideration and deliberation, the Mylan Board unanimously approved the Business Combination Agreement and Mylan’s execution, delivery and performance of the Business Combination Agreement and the consummation of the transactions contemplated thereby. The Mylan Board accordingly unanimously recommends that the Mylan shareholders vote “FOR” the approval and adoption of the Combination Proposal (consisting of the Mylan Merger Resolution, the Share Sale Resolution, the Mylan Newco Liquidation Resolutions, the Alternative Transaction Resolutions and the Discharge Resolution); “FOR” the adoption of the advisory Compensation Proposal; “FOR” the adoption of the advisory Proposal Regarding Procedures for Determining Board Composition; and “FOR” the adoption of the advisory Stockholder Special Meetings Proposal. Mylan encourages you to read the accompanying document and the documents incorporated by reference therein, carefully and in their entirety. In particular, we urge you to read carefully the section entitled “Risk Factors” beginning on page 51 of the accompanying document.

The accompanying document is dated                     , 2020 and is first being mailed to the shareholders of Mylan on or about                     , 2020.


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NOTICE OF EXTRAORDINARY GENERAL MEETING OF MYLAN SHAREHOLDERS

To Be Held on April 27, 2020

Dear Mylan N.V. Shareholders:

We are pleased to convene an extraordinary general meeting of shareholders (the “EGM”) of Mylan N.V., which will be held on April 27, 2020 at                     , Central European Time (CET), at                     , with the following agenda:

 

   

Opening of the EGM;

 

   

Information regarding a strategic business combination involving Mylan and Pfizer Inc.’s Upjohn Business, which is its global, primarily off-patent branded and generic established medicines business (the “Combination”);

 

   

Approval of the following matters relating to the Combination (collectively, the “Combination Proposal”) (voting item):

 

   

Approval of the Mylan Merger: Resolution to enter into and effectuate a legal triangular merger (juridische driehoeksfusie), whereby Mylan, as disappearing company, will merge with and into Mylan II B.V. (“Mylan Newco Sub”), as acquiring company, and whereby Mylan I B.V. (“Mylan Newco”) will allot shares in its capital to Mylan shareholders at the time of such merger in accordance with the merger proposal that will be deposited with the Dutch trade registry and disclosed for public inspection, prepared by the respective boards of directors of Mylan, Mylan Newco and Mylan Newco Sub (the “Mylan Merger”) (the “Mylan Merger Resolution”);

 

   

Approval of the Share Sale: Resolution to approve, under Section 2:107a of the Dutch Civil Code, the sale and transfer by Mylan Newco, immediately following the time at which the Mylan Merger becomes effective (the “Mylan Merger Effective Time”), of all issued and outstanding shares in the capital of Mylan Newco Sub to Utah Acquisition Sub Inc. (“Acquisition Sub”) or its designated nominee (the “Share Sale”) (the “Share Sale Resolution”);

 

   

Approval of the Mylan Newco Liquidation: Resolution to, effective as of the time at which the Share Sale becomes effective, approve and effectuate (i) the dissolution of Mylan Newco (ontbinding) and its subsequent liquidation (vereffening) in accordance with Sections 2:19 and 2:23b of the Dutch Civil Code, (ii) the appointment of Stichting Liquidator Mylan (the “Liquidator”) as liquidator (vereffenaar) of Mylan Newco and (iii) the appointment of an affiliate of Upjohn Inc. (the “Liquidation Custodian”) as custodian of the books and records of Mylan Newco in accordance with Section 2:24 of the Dutch Civil Code (the “Mylan Newco Liquidation Resolutions”);

 

   

Approval of the Alternative Transaction Structure: Resolution to, if the Mylan Merger is not consummated within the period specified by Section 2:318(1) of the Dutch Civil Code, (i) approve, under Section 2:107a of the Dutch Civil Code, the sale, transfer, assignment and delivery by Mylan to Acquisition Sub or its designated nominee of all of the right, title and interest of Mylan in, to and under all of its assets (the “Asset Sale”), and (ii) approve and effectuate, as soon as practicable following the Asset Sale, (x) the dissolution of Mylan (ontbinding) and its subsequent liquidation (vereffening) in accordance with Sections 2:19 and 2:23b of the Dutch Civil Code, (y) the appointment of the Liquidator as liquidator (vereffenaar) of Mylan and (z) the appointment of the Liquidation Custodian as custodian of the books and records of Mylan in accordance with Section 2:24 of the Dutch Civil Code (the “Alternative Transaction Resolutions”); and

 

   

Approval of the Discharge of Directors: Resolution to, effective upon the Mylan Merger Effective Time or the effective time of the Asset Sale (which shall be 6:00 p.m., New York City time, on the date of the Asset Sale), as applicable, provide full and final discharge to each member of the Board of Directors of Mylan (the “Mylan Board”) for their acts of management or supervision, as applicable, up to the date of the EGM; provided that no discharge shall be given to any director for


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acts as a result of fraud (bedrog), gross negligence (grove schuld) or willful misconduct (opzet) of such director (the “Discharge Resolution”);

 

   

Adoption of the Advisory Compensation Proposal (advisory voting item): Non-binding, advisory resolution to adopt the compensation that will or may be paid or become payable to Mylan’s named executive officers in connection with, or following, the consummation of the Combination (the “Compensation Proposal”);

 

   

Adoption of the Advisory Proposal Regarding Procedures for Determining Board Composition (advisory voting item): Non-binding, advisory resolution to adopt certain features of Newco’s governance which will replace the corresponding features of Mylan’s governance, effective upon the closing of the Combination, relating to (i) the right of stockholders to nominate directors and make other stockholder proposals at stockholder meetings and (ii) director terms and stockholder removal of directors (the “Proposal Regarding Procedures for Determining Board Composition”); and

 

   

Adoption of the Advisory Stockholder Special Meetings Proposal (advisory voting item): Non-binding, advisory resolution to adopt certain features of Newco’s governance which will replace the corresponding features of Mylan’s governance, effective upon the closing of the Combination, relating to the right of stockholders to call special meetings of stockholders (the “Stockholder Special Meetings Proposal” and, together with the advisory Proposal Regarding Procedures for Determining Board Composition, the “Governance Proposals” and, collectively with the Combination Proposal and the advisory Compensation Proposal, the “Proposals” and each, a “Proposal”).

 

   

Questions; and

 

   

Closing of the EGM.

No business will be voted on at the EGM except such items as are listed as voting items in the agenda above. Please refer to the accompanying document for further information with respect to the items to be voted on at the EGM.

Record Date:

Pursuant to Dutch law, March 30, 2020 is the record date for the EGM in respect of our ordinary shares; no record date applies in respect of our preferred shares. This means that holders of Mylan ordinary shares as of the close of business on March 30, 2020 and holders of Mylan preferred shares as of April 27, 2020, if any, are entitled to receive this notice of the meeting and vote at the EGM and any adjournments or postponements of the EGM. The accompanying document is dated                     , 2020 and is first being mailed to the shareholders of Mylan on or about                     , 2020. As of the close of business on February 4, 2020, the last practicable trading day for which information is available as of the date of this document, there were 516,149,574 Mylan ordinary shares and no Mylan preferred shares outstanding and entitled to vote.

Important Meeting Information:

If you plan to attend the EGM in person, you must register in advance. See the question titled “How can I attend the EGM?” on page 11 of the accompanying document for information about the location, format and process for registering to attend the meeting.

Voting Information:

Please know that your vote is very important, and you are encouraged to vote promptly. Please carefully review the accompanying document for the EGM and follow the instructions below to cast your vote on all of the voting matters.


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How to Vote: Please vote using one of the following advance voting methods. Make sure to have your proxy card or voting instruction form in hand and follow the instructions.

 

SHAREHOLDERS OF RECORD

(shares registered on the books of Mylan via American Stock Transfer)

 

  

BENEFICIAL OWNERS

(shares held through your bank or brokerage account)

LOGO

 

Via Internet

 

Visit the web address on your proxy card

 

  

LOGO

 

Via Internet

 

Visit the web address on your voting instruction form

 

LOGO

 

By phone

 

Call the telephone number on

your proxy card

 

  

LOGO

 

By phone

 

Call the telephone number on

your voting instruction form

 

LOGO

 

By mail

 

Sign, date and return

your proxy card

  

LOGO

 

By mail

 

Sign, date and return

your voting instruction form

All Mylan shareholders of record may vote in person at the EGM. Beneficial owners may vote in person at the EGM if they have a legal proxy, and follow the instructions described in the response to the question titled “How do I vote if I am a beneficial owner of Mylan ordinary shares and hold them in street name?” on page 16 of the accompanying document.

After careful consideration and deliberation, the Mylan Board unanimously approved the Business Combination Agreement and Mylan’s execution, delivery and performance of the Business Combination Agreement and the consummation of the transactions contemplated thereby. The Mylan Board accordingly unanimously recommends that the Mylan shareholders vote “FOR” the approval and adoption of the Combination Proposal (consisting of the Mylan Merger Resolution, the Share Sale Resolution, the Mylan Newco Liquidation Resolutions, the Alternative Transaction Resolutions and the Discharge Resolution); “FOR” the adoption of the advisory Compensation Proposal; “FOR” the adoption of the advisory Proposal Regarding Procedures for Determining Board Composition; and “FOR” the adoption of the advisory Stockholder Special Meetings Proposal. For more information regarding the recommendations of the Mylan Board, see “The Transactions—Recommendation of the Mylan Board of Directors; The Mylan Board’s Reasons for the Combination” beginning on page 105 of the accompanying document.


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Mylan encourages you to read the accompanying document and the documents incorporated by reference therein, carefully and in their entirety. In particular, we urge you to read carefully the section entitled “Risk Factors” beginning on page 51 of the accompanying document. If you have any questions concerning the Proposals, would like additional copies of the accompanying document or need help voting your Mylan shares, please contact Mylan’s proxy solicitor:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, NY 10022

+1 (877) 750-9499 (toll free)

+1 (212) 750-5833 (banks and brokers)

By Order and on behalf of the Mylan Board,

Joseph F. Haggerty

Corporate Secretary

Mylan N.V.


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ABOUT THIS DOCUMENT

This document forms a part of a registration statement on Form S-4 (Registration No. 333-234337) filed by Newco with the U.S. Securities and Exchange Commission (the “SEC”) to register under the U.S. Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the “Securities Act”), the issuance of shares of Newco common stock to the Mylan shareholders pursuant to the Business Combination Agreement. It constitutes:

 

   

a proxy statement under Section 14(a) of the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the “Exchange Act”), and a notice of meeting and action to be provided to the Mylan shareholders in connection with the EGM at which Mylan shareholders will consider and vote on each of the Proposals to give effect to the transactions contemplated by the Business Combination Agreement; and

 

   

a prospectus of Newco under the Securities Act to be provided to the Mylan shareholders with respect to the shares of Newco common stock to be issued to Mylan shareholders in the Combination.

Mylan has supplied all information contained in or incorporated by reference into this document relating to Mylan and Mylan Newco. Pfizer has supplied all information contained in or incorporated by reference into this document relating to Pfizer, the Upjohn Business and Newco. Mylan and Pfizer have both contributed information relating to the proposed transactions.

As permitted by SEC rules, this document does not contain all of the information that you can find in the registration statement or its exhibits. For further information pertaining to Newco and the shares of Newco common stock to be issued in connection with the proposed transactions, reference is made to that registration statement and its exhibits. Each statement contained in this document is qualified in its entirety by reference to the underlying documents. You are encouraged to read the entire registration statement. You may obtain copies of the registration statement, including documents incorporated by reference into the registration statement (and any amendments to those documents) by following the instructions under “Where You Can Find Additional Information.”

TRADEMARKS AND SERVICE MARKS

Mylan, Pfizer and Newco each owns or has rights to various trademarks, logos, service marks and trade names that each uses in connection with the operation of its business. Mylan, Pfizer and Newco each also owns or has the rights to copyrights that protect the content of their respective products. Solely for convenience, the trademarks, service marks, trade names and copyrights referred to in this document are listed without the , ® and © symbols, but such references do not constitute a waiver of any rights that might be associated with the respective trademarks, service marks, trade names and copyrights included or referred to in this document.

 

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WHERE YOU CAN FIND ADDITIONAL INFORMATION

This document incorporates by reference certain business, financial and other information about Mylan from certain documents filed with the SEC that have not been included herein or delivered herewith. Mylan files reports (including annual, quarterly and current reports that may contain audited financial statements), proxy statements and other information with the SEC.

Copies of Mylan’s filings with the SEC are available to investors without charge by request made to Mylan in writing or by telephone with the following contact information:

Mylan N.V.

Attention: Investor Relations

Building 4, Trident Place, Mosquito Way

Hatfield, Hertfordshire, AL10 9UL, England

Telephone: +44 (0) 1707-853-000

TO RECEIVE TIMELY DELIVERY OF THESE MATERIALS, YOU MUST MAKE YOUR REQUESTS NO LATER THAN FIVE BUSINESS DAYS BEFORE THE DATE OF THE EGM.

You may also obtain printer-friendly versions of Mylan’s SEC reports at www.investor.mylan.com. However, Mylan is not incorporating the information on Mylan’s website other than the filings listed below into this document or the registration statement. Mylan’s filings with the SEC are available to the public over the internet at the SEC’s website at www.sec.gov, or at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call 1-800-SEC-0330 for further information on the public reference facilities.

The SEC allows certain information to be “incorporated by reference” into this document. This means that Mylan can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is deemed to be part of this document, except for any information modified or superseded by information contained directly in this document or in any document subsequently filed by Mylan that is also incorporated or deemed to be incorporated by reference herein. This document incorporates by reference the documents set forth below that Mylan has previously filed with the SEC and any future filings by Mylan under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, from the date of this document to the date that the EGM is held, except, in any such case, for any information therein that has been furnished rather than filed, which shall not be incorporated herein. Subsequent filings with the SEC will automatically modify and supersede information in this document. These documents contain important information about Mylan and its financial condition.

This document, and the registration statement of which this document forms a part, hereby incorporate by reference the following documents that Mylan has filed with the SEC:

 

   

Mylan’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on February 27, 2019, as amended by Amendment No.  1 to the Annual Report on Form 10-K/A for the fiscal year ended December 31, 2018, filed with the SEC on April 30, 2019;

 

   

Mylan’s Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2019, June 30, 2019 and September 30, 2019, filed with the SEC on May  7, 2019, July 29, 2019 and November 5, 2019, respectively;

 

   

Mylan’s Definitive Proxy Statement, filed with the SEC on May 24, 2019;

 

   

Mylan’s Current Reports on Form 8-K, filed with the SEC on February 11, 2019, June 21, 2019 (except for Item 7.01), July  29, 2019 (relating to the announcement of the Combination), July  29, 2019 (describing the material agreements relating to the Combination) and November 20, 2019; and

 

   

the description of Mylan’s ordinary shares contained in Mylan’s registration statement on Form S-4 filed on November 5, 2014, including any amendments or reports filed for the purpose of updating such description.

 

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If you have any questions about the proposed transactions, please contact Mylan’s Investor Relations Department by written request to InvestorRelations@mylan.com or by contacting Investor Relations Department at:

Mylan, Inc.

c/o Investor Relations

405 Lexington Avenue, 52nd Floor

New York, NY 10174

NONE OF MYLAN, PFIZER OR NEWCO HAS AUTHORIZED ANYONE TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ABOUT THE PROPOSED TRANSACTIONS OR ABOUT MYLAN, PFIZER OR NEWCO THAT DIFFERS FROM OR ADDS TO THE INFORMATION IN THIS DOCUMENT OR THE DOCUMENTS THAT MYLAN PUBLICLY FILES WITH THE SEC. THEREFORE, NONE OF MYLAN, PFIZER OR NEWCO TAKES RESPONSIBILITY FOR, NOR CAN PROVIDE ASSURANCES AS TO THE RELIABILITY OF, ANY OTHER INFORMATION THAT OTHERS MAY GIVE YOU.

IF YOU ARE IN A JURISDICTION WHERE OFFERS TO EXCHANGE OR SELL, OR SOLICITATIONS OF OFFERS TO EXCHANGE OR PURCHASE, THE SECURITIES OFFERED BY THIS DOCUMENT ARE UNLAWFUL, OR IF YOU ARE A PERSON TO WHOM IT IS UNLAWFUL TO DIRECT THESE TYPES OF ACTIVITIES, THEN THE OFFER PRESENTED IN THIS DOCUMENT DOES NOT EXTEND TO YOU. IF YOU ARE IN A JURISDICTION WHERE SOLICITATIONS OF A PROXY ARE UNLAWFUL, OR IF YOU ARE A PERSON TO WHOM IT IS UNLAWFUL TO DIRECT THESE TYPES OF ACTIVITIES, THEN THE SOLICITATION PRESENTED IN THIS DOCUMENT DOES NOT EXTEND TO YOU.

THE INFORMATION CONTAINED IN THIS DOCUMENT SPEAKS ONLY AS OF ITS DATE UNLESS THE INFORMATION SPECIFICALLY INDICATES THAT ANOTHER DATE APPLIES. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS DOCUMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE HEREOF. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN ANY DOCUMENT INCORPORATED BY REFERENCE HEREIN IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE OF SUCH DOCUMENT. ANY STATEMENT CONTAINED IN THIS DOCUMENT OR IN ANY DOCUMENT INCORPORATED INTO THIS DOCUMENT BY REFERENCE AS TO THE CONTENTS OF ANY CONTRACT OR OTHER DOCUMENT REFERRED TO IN THIS DOCUMENT OR IN OTHER DOCUMENTS THAT ARE INCORPORATED BY REFERENCE INTO THIS DOCUMENT ARE NOT NECESSARILY COMPLETE AND, IN EACH INSTANCE, REFERENCE IS MADE TO THE COPY OF THE APPLICABLE CONTRACT OR OTHER DOCUMENT FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT OR OTHERWISE FILED WITH THE SEC. ANY STATEMENT CONTAINED IN A DOCUMENT INCORPORATED OR DEEMED TO BE INCORPORATED BY REFERENCE INTO THIS DOCUMENT WILL BE DEEMED TO BE MODIFIED OR SUPERSEDED TO THE EXTENT THAT A STATEMENT CONTAINED HEREIN OR IN ANY OTHER SUBSEQUENTLY FILED DOCUMENT THAT ALSO IS OR IS DEEMED TO BE INCORPORATED BY REFERENCE INTO THIS DOCUMENT MODIFIES OR SUPERSEDES SUCH STATEMENT. ANY STATEMENT SO MODIFIED OR SUPERSEDED WILL NOT BE DEEMED, EXCEPT AS SO MODIFIED OR SUPERSEDED, TO CONSTITUTE A PART OF THIS DOCUMENT. NEITHER THE MAILING OF THIS DOCUMENT TO SHAREHOLDERS OF MYLAN, NOR THE TAKING OF ANY ACTIONS CONTEMPLATED HEREBY BY MYLAN AT ANY TIME WILL CREATE ANY IMPLICATION TO THE CONTRARY.

 

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TABLE OF CONTENTS

 

     Page  

WHERE YOU CAN FIND ADDITIONAL INFORMATION

     ii  

QUESTIONS AND ANSWERS ABOUT THE TRANSACTIONS

     1  

QUESTIONS AND ANSWERS ABOUT THE EXTRAORDINARY GENERAL MEETING AND VOTING

     11  

SUMMARY

     20  

SUMMARY HISTORICAL COMBINED FINANCIAL INFORMATION OF THE UPJOHN BUSINESS

     43  

SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF MYLAN

     45  

SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     47  

SUMMARY HISTORICAL AND PRO FORMA PER SHARE DATA OF MYLAN

     49  

HISTORICAL MARKET PRICE AND DIVIDEND INFORMATION

     50  

RISK FACTORS

     51  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     82  

INFORMATION ABOUT THE MYLAN EXTRAORDINARY GENERAL MEETING

     85  

THE TRANSACTIONS

     92  

MATERIAL TAX CONSEQUENCES

     142  

DESCRIPTION OF FINANCING

     154  

BUSINESS COMBINATION AGREEMENT

     155  

SEPARATION AND DISTRIBUTION AGREEMENT

     182  

ADDITIONAL TRANSACTION AGREEMENTS

     191  

INFORMATION ABOUT MYLAN

     197  

INFORMATION ABOUT THE UPJOHN BUSINESS

     198  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE UPJOHN BUSINESS

     204  

SELECTED HISTORICAL COMBINED FINANCIAL INFORMATION OF THE UPJOHN BUSINESS

     266  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION OF MYLAN AND THE UPJOHN BUSINESS

     269  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND EXECUTIVE OFFICERS OF MYLAN

     286  

DESCRIPTION OF NEWCO CAPITAL STOCK

     288  

COMPARISON OF THE RIGHTS OF MYLAN SHAREHOLDERS AND NEWCO STOCKHOLDERS

     292  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     300  

APPRAISAL RIGHTS

     301  

LEGAL MATTERS

     301  

EXPERTS

     301  

SUBMISSION OF FUTURE SHAREHOLDER PROPOSALS

     302  

MYLAN SHAREHOLDER PROPOSALS

     303  

INDEX—FINANCIAL STATEMENTS

     F-1  

ANNEXES

     A-1  


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QUESTIONS AND ANSWERS ABOUT THE TRANSACTIONS

The following are some of the questions that you may have regarding the transactions and brief answers to those questions. For more detailed information about the matters discussed in these questions and answers, see “The Transactions” beginning on page 92, “Business Combination Agreement” beginning on page 155 and “Separation and Distribution Agreement” beginning on page 182. These questions and answers, as well as the summary beginning on page 20, are not meant to be a substitute for the information contained in the remainder of this document, and this information is qualified in its entirety by the more detailed descriptions and explanations contained elsewhere in this document. You are urged to read this document in its entirety. Additional important information is also contained in the annexes to this document. You should pay special attention to the “Risk Factors” beginning on page 51 and “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 82.

 

Q:

Why am I receiving these materials?

 

A:

You are receiving these materials because you are a shareholder of record of Mylan on the Record Date (as defined below) for the EGM. Pfizer and Mylan have agreed to combine Pfizer’s Upjohn Business with Mylan in a series of transactions subject to the terms and conditions of the Separation and Distribution Agreement and the Business Combination Agreement. Copies of the Separation and Distribution Agreement and the Business Combination Agreement are attached as Annexes A and B, respectively. This document is:

 

   

a proxy statement under Section 14(a) of the Exchange Act and a notice of meeting and action to be provided to the Mylan shareholders in connection with the EGM at which Mylan shareholders will consider and vote on each of the Proposals to give effect to the transactions contemplated by the Business Combination Agreement; and

 

   

a prospectus of Newco under the Securities Act, to be provided to the Mylan shareholders with respect to the shares of Newco common stock to be issued to Mylan shareholders in the Combination.

This document contains important information about the Separation, the Distribution, the Combination and the transactions comprising it. You should read it carefully.

 

Q:

What are the transactions described in this document?

 

A:

On July 29, 2019, Pfizer and Newco entered into a Separation and Distribution Agreement, and, on the same day, Pfizer, Newco and Mylan and certain of their affiliates entered into a Business Combination Agreement. These agreements provide for Pfizer to combine the Upjohn Business with Mylan in a Reverse Morris Trust transaction. The principal transactions to effect the Reverse Morris transaction include the following:

 

   

Separation. Pfizer will contribute the Upjohn Business to Newco, so that the Upjohn Business is separated from the remainder of Pfizer’s businesses (the “Separation”).

 

   

Distribution. Following the Separation, Pfizer will distribute all of the issued and outstanding shares of Newco common stock held by Pfizer by way of pro rata dividend (the “Distribution”). The number of shares of Newco common stock that will be distributed in the Distribution will be such that, after the Combination described below, Pfizer stockholders as of the record date of the Distribution will hold 57% of the fully diluted outstanding shares of Newco common stock following the Combination (as defined below). References in this document to the percentage ownership of fully diluted outstanding shares of Newco common stock by Pfizer stockholders and former Mylan shareholders upon completion of the transactions assumes that such percentages are determined excluding any overlaps in the pre-transactions securityholder bases.

 

   

Combination. Immediately following the Distribution, Newco and Mylan will engage in a strategic business combination transaction in which Mylan shareholders will receive one share of Newco

 

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common stock for each Mylan ordinary share held by such Mylan shareholder, subject to any applicable withholding taxes, including any Dutch dividend withholding tax (the “Combination”). The number of shares of Newco common stock that will be issued in the Combination will be such that, after the Combination, Mylan shareholders as of immediately before the Combination will hold 43% of the fully diluted outstanding shares of Newco common stock following the Combination.

Newco, which will be the parent entity of the combined Upjohn Business and Mylan business, will be renamed “Viatris,” effective as of the closing of the Combination. It is expected that there will be approximately 1.2 billion shares of Newco common stock outstanding immediately after the Combination (calculated based on the estimated maximum number of 526,700,740 Mylan ordinary shares expected to be exchanged for Newco common stock in connection with the Combination). Newco common stock will be listed on the NASDAQ under a ticker symbol to be determined.

 

Q:

What is a Reverse Morris Trust transaction?

 

A:

A Reverse Morris Trust transaction structure allows a parent company (in this case, Pfizer) to divest a subsidiary (in this case, Newco) in a tax-efficient manner. The first step of such a transaction is a distribution of the subsidiary’s stock to the parent company stockholders (in this case, Pfizer’s distribution of the stock of Newco to the Pfizer stockholders in the Distribution) in a transaction that is generally tax-free under Section 355 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). The distributed subsidiary then combines with a third party (in this case, Mylan through the Combination). Such a transaction can qualify as generally tax-free for U.S. federal income tax purposes for the parent company and its stockholders if the transaction structure meets all applicable requirements, including that the parent company stockholders own more than 50% of the stock of the combined entity immediately after the combination.

For information about the material tax consequences resulting from the Combination, see “Material Tax Consequences” beginning on page 142.

 

Q:

What will happen in the Separation?

 

A:

Pfizer and certain of Pfizer’s subsidiaries will engage in a series of transactions so that Pfizer’s Upjohn Business is held by Newco and its subsidiaries and is separated from the remainder of Pfizer’s businesses. We refer to these transactions as the “Separation.” In connection with the Separation and as partial consideration for the contribution of the Upjohn Business to Newco, Newco will make a cash payment of $12 billion to Pfizer, which this document refers to as the “Cash Distribution,” and will issue to Pfizer additional shares of Newco common stock. See “The Transactions” and “Separation and Distribution Agreement—Transfer of Assets and Assumption of Liabilities.”

 

Q:

What will happen in the Distribution?

 

A:

After the Separation, Pfizer will distribute to its stockholders all of the issued and outstanding shares of Newco common stock held by Pfizer by way of a pro rata dividend. This document refers to the distribution of the shares of Newco common stock as the “Distribution.”

This document assumes that Pfizer will effect the Distribution by way of a spin-off. In a spin-off, the board of directors of Pfizer (the “Pfizer Board”) will establish a record date and a distribution date, and each holder of Pfizer common stock as of the record date for the spin-off will receive a number of shares of Newco common stock equal to (a) the quotient of (i) the number of shares of Pfizer common stock held by the stockholder as of the record date divided by (ii) the total number of shares of Pfizer common stock outstanding on the record date multiplied by (b) the number of shares of Newco common stock (the “Distribution Shares”) equal to (i) the number of fully diluted Mylan ordinary shares (calculated as described in the Business Combination Agreement) multiplied by the quotient of 57% divided by 43% minus (ii) the number of shares of Newco common stock underlying certain awards under Newco’s stock plan that will be granted to employees of the Upjohn Business who held certain outstanding and unvested Pfizer equity awards immediately before the time at which the Distribution occurs.

 

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Pfizer has the option to effect the Distribution by way of a split-off instead of a spin-off. If Pfizer elects to effect the Distribution pursuant to a split-off, Pfizer would offer to holders of Pfizer common stock the right to exchange all or a portion of their Pfizer common stock for a number of Distribution Shares (which, in the aggregate, may not be all of the Distribution Shares) under terms to be determined by Pfizer in its discretion, including the number of shares of Newco common stock that will be offered for each validly tendered share of Pfizer common stock, the period during which the exchange offer will remain open and the procedures for the tender and exchange of shares. If some shares of Newco common stock offered in the exchange offer are not subscribed for, then all of the remaining shares of Newco common stock held by Pfizer will be distributed as a pro rata dividend to Pfizer stockholders whose shares of Pfizer common stock remain outstanding after the consummation of the exchange offer. If a split-off is ultimately selected by Pfizer, then Newco will file a registration statement on Form S-4 for the split-off, and Pfizer will file a Schedule TO for the split-off. See “The Transactions” and “Separation and Distribution Agreement—The Distribution.”

Pfizer may elect to effect the Distribution by way of a split-off instead of a spin-off if it determines that doing so would be in the best interests of Pfizer and its stockholders, based on market conditions prior to closing, including, but not limited to, the relative valuation and market price of shares of common stock of Pfizer and Mylan, the implied valuation of the Upjohn Business, the likelihood of demand from Pfizer stockholders for shares of Newco common stock to be issued in the Distribution, and the assessment by Pfizer and its financial advisors of the likelihood of sufficient tenders of shares of Pfizer common stock in a split-off. It is not expected that Pfizer’s decision to effect the Distribution through a split-off instead of a spin-off would have a material impact on the combined company or on Mylan’s shareholders.

 

Q:

What will happen in the Combination?

 

A:

Immediately following the Distribution, Newco and Mylan will engage in a strategic business combination transaction in which Mylan shareholders will receive Newco common stock. The Combination shall occur through the following steps:

 

   

First, Mylan will engage in a legal triangular merger under Dutch law (the “Mylan Merger”), in which Mylan will merge with and into Mylan II B.V. (“Mylan Newco Sub”), with Mylan Newco Sub surviving as a wholly owned subsidiary of Mylan I B.V. (“Mylan Newco”). In the Mylan Merger, each Mylan ordinary share would be replaced by one Mylan Newco ordinary share. The Mylan Newco ordinary shares will not be listed. The Mylan Newco ordinary shares will be in existence only until the dissolution and liquidation of Mylan Newco has been completed as described below. After the Mylan Newco Liquidation Distribution (as defined below) has been made, we do not expect there to be any further distributions in respect of the Mylan Newco ordinary shares, nor do we expect any Mylan Newco shareholder meeting to be held at which Mylan Newco shareholders could exercise voting rights.

 

   

Second, Mylan Newco will sell and transfer to Utah Acquisition Sub Inc., which is an indirect, wholly owned subsidiary of Newco (“Acquisition Sub”), all of the outstanding shares of Mylan Newco Sub in exchange for a note that is mandatorily exchangeable into a number of shares of Newco common stock (the “Exchangeable Note”) (such sale and transfer, the “Share Sale”).

 

   

Third, Mylan Newco will be dissolved and liquidated in accordance with Dutch law and each holder of Mylan Newco ordinary shares (i.e., former holders of Mylan ordinary shares) will, upon distribution of the Exchangeable Note, receive one share of Newco common stock for each Mylan Newco ordinary share held by such holder, subject to any applicable withholding taxes, including any Dutch dividend withholding tax (the “Mylan Newco Liquidation Distribution”) (such liquidation, the “Mylan Newco Liquidation”).

The Mylan Newco Liquidation Distribution may be subject to Dutch dividend withholding tax to the extent the Mylan Newco Liquidation Distribution, exceeds the average paid up capital recognized for Dutch dividend withholding tax purposes of the Mylan Newco ordinary shares, as of the closing. The average paid up capital recognized for Dutch dividend withholding tax purposes of the Mylan Newco ordinary shares

 

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shall at the Mylan Merger Effective Time, either amount to (a) the paid up capital recognized for Dutch dividend withholding taxes of the Mylan ordinary shares immediately prior to the Mylan Merger (i.e., approximately EUR 26 billion, updated for any relevant transactions between June 30, 2019 and the Mylan Merger) or, if lower, (b) the value (in EUR) of all issued and outstanding Mylan ordinary shares immediately prior to the Mylan Merger. The value of the Mylan Newco Liquidation Distribution in principle reflects the value (in EUR) of all issued and outstanding Mylan ordinary shares immediately prior to the Mylan Merger.

As a result, and assuming (i) the trading price of the Mylan ordinary shares at the time of the Mylan Newco Liquidation Distribution will not be significantly higher than the current trading price of the Mylan ordinary shares, (ii) the value of the EUR to the USD at the time of the Mylan Newco Liquidation Distribution will not be significantly lower than the current value of the EUR to the USD, (iii) no material negative changes will occur in the amount of paid up capital recognized for Dutch dividend withholding tax purposes of Mylan between June 30, 2019 and the time of the Mylan Newco Liquidation Distribution, and (iv) the Mylan Merger, the Share Sale, the Mylan Newco Liquidation and the Mylan Newco Liquidation Distribution (including the distribution of Newco common stock to Mylan Newco shareholders in connection with the automatic and mandatory exchange of the Exchangeable Note) will be effectuated as contemplated in the Business Combination Agreement, the Mylan Newco Liquidation Distribution shall be made free of withholding or deduction of Dutch dividend withholding tax.

If, contrary to Mylan’s expectations, Dutch dividend withholding tax is to be withheld in respect of the Mylan Newco Liquidation Distribution, Section 3.5(b) of the Business Combination Agreement provides that the Exchange Agent (as defined in the Business Combination Agreement) shall sell in one or more transactions, for the benefit of the holders of Mylan Newco ordinary shares, such number of shares of Newco common stock to which the holder of Mylan Newco ordinary shares, would otherwise be entitled as is necessary to obtain net cash proceeds to pay the Dutch dividend withholding tax due in respect of the Mylan Newco Liquidation Distribution to the Dutch tax authorities. This would result in the Mylan Newco shareholders (i.e., former Mylan shareholders) receiving fewer shares of Newco common stock than they would receive if no Dutch dividend withholding tax applies to the Mylan Newco Liquidation Distribution (see “Material Tax Consequences—Material Dutch Tax Consequences—Dutch Dividend Withholding Tax Consequences of the Combination to Holders of Mylan Ordinary Shares” beginning on page 151 of this document for a more detailed description of the Dutch dividend withholding tax consequences of the Combination).

If the Mylan Merger is not consummated within the period specified by Section 2:318(1) of the Dutch Civil Code (generally, six months after the announcement in a Dutch nationally distributed daily newspaper that the merger proposal with respect to the Mylan Merger has been deposited with the Dutch trade registry or disclosed for public inspection), then, unless otherwise mutually determined by Pfizer, Newco and Mylan, the Combination shall occur through the “Alternative Transaction Structure,” which entails the following steps:

 

   

First, Mylan will sell and transfer to Acquisition Sub all of Mylan’s assets and liabilities, in exchange for the Exchangeable Note (the “Asset Sale”).

 

   

Second, Mylan will be dissolved and liquidated in accordance with Dutch law and each holder of Mylan ordinary shares will receive, upon distribution of the Exchangeable Note, one share of Newco common stock for each Mylan ordinary share held by such holder, subject to any applicable withholding taxes, including any Dutch dividend withholding tax (such liquidation, the “Mylan Liquidation”).

The Mylan Liquidation Distribution (as defined below) may be subject to Dutch dividend withholding tax to the extent the Mylan Liquidation Distribution exceeds the average paid up capital recognized for Dutch dividend withholding tax purposes of the Mylan ordinary shares. Mylan has calculated the amount of paid up capital recognized for Dutch dividend withholding tax purposes of Mylan as of

 

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June 30, 2019 (the “Calculation”). Pursuant to the Calculation, the paid up capital recognized for Dutch dividend withholding tax purposes of Mylan as of June 30, 2019 amounts to approximately EUR 26 billion. On January 13, 2020 the Dutch tax authorities formally confirmed the Calculation. Therefore, assuming (i) the trading price of the Mylan ordinary shares will not be significantly higher than the current trading price of the Mylan ordinary shares, (ii) the value of the EUR to the USD will not be significantly lower than the current value of the EUR to the USD, each at the time of the Mylan Liquidation and (iii) no material negative changes will occur in the amount of paid up capital recognized for Dutch dividend withholding tax purposes of Mylan between June 30, 2019 and the time of the Mylan Liquidation Distribution, Mylan does not expect any Dutch dividend withholding tax to apply to the Mylan Liquidation Distribution. If, contrary to Mylan’s expectations, the Dutch dividend withholding tax is to be withheld in respect of the Mylan Liquidation Distribution, the Mylan shareholders will receive fewer shares of Newco common stock than they would receive if no Dutch dividend withholding tax applies to the Mylan Liquidation Distribution (see “Material Tax Consequences – Material Dutch Tax Consequences – Dutch Dividend Withholding Tax Consequences of the Combination to Holders of Mylan Ordinary Shares” beginning on page 151 of this document for a more detailed description of the Dutch dividend withholding tax consequences of the Combination).

The Asset Sale component of the Alternative Transaction Structure is likely to involve a transfer on sale for U.K. stamp duty purposes as further described under the risk factor entitled “The Combination could result in U.K. stamp duty becoming payable by Acquisition Sub.” As set forth in the Business Combination Agreement, Mylan and Pfizer have agreed to consider any U.K. stamp duty or stamp duty reserve tax implications of the Combination (including, if relevant, the Alternative Transaction Structure), and, unless otherwise agreed, for Mylan to apply for confirmation from HM Revenue and Customs that the Mylan Merger should not give rise to U.K. stamp duty or stamp duty reserve tax.

See “The Transactions” and “Business Combination Agreement—The Combination.”

 

Q:

Why did Mylan and Pfizer decide that Newco would be organized in Delaware as opposed to being organized in the Netherlands?

 

A:

It was determined that Newco will be organized in Delaware for the following primary reasons:

 

   

In the course of negotiations with respect to the transactions, representatives of Pfizer expressed to representatives of Mylan a desire to have Newco organized in the United States, including because domiciling Newco in the United States allows for more certainty with respect to the tax treatment of the transactions to Pfizer and its stockholders.

 

   

The Mylan Board’s understanding that the inefficiencies of being tax resident in the United States, relative to other jurisdictions, have been reduced as a result of recent U.S. tax reform legislation.

 

   

After agreeing that Newco would be organized in the United States, Pfizer and Mylan further agreed that organizing Newco in Delaware, which is well recognized for stable and balanced corporate laws and jurisprudence that are familiar to many U.S. investors, will provide Newco with an effective platform from which to operate and provide value for all Newco’s stockholders as well as its other stakeholders, including employees, creditors, customers, suppliers, relevant patient populations and communities in which Newco operates.

 

   

The Mylan Board’s belief that having Newco organized in Delaware and subject to a U.S.-style, stockholder centric governance model is consistent with views expressed to Mylan by a number of Mylan shareholders.

See the sections entitled “The Transactions—Background of the Combination” and “The Mylan Board’s Reasons for the Combination” for a discussion of the negotiations and decision to organize Newco in Delaware. See the section entitled “Comparison of the Rights of Mylan Shareholders and Newco Stockholders” for a comparison of the rights associated with Mylan ordinary shares against the rights as associated with Mylan ordinary shares.

 

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Q:

Will the Distribution and the Combination occur on the same day?

 

A:

Yes. The Combination is expected to occur immediately following the Distribution on the same day, New York City time.

 

Q:

Who will serve on the Newco Board following completion of the Combination?

 

A:

The Business Combination Agreement provides that, as of the closing of the Combination, the board of directors of Newco (the “Newco Board”) will consist of 13 members, consisting of:

 

   

the Executive Chairman of Newco, who will be Robert J. Coury (current Chairman of the Mylan Board);

 

   

the Chief Executive Officer of Newco, who will be Michael Goettler (current Global President of the Upjohn Business);

 

   

eight persons designated by Mylan before the closing date; and

 

   

three persons designated by Pfizer before the closing date (after consultation in good faith with Mylan). On December 18, 2019, Pfizer and Mylan announced that Ian Read and James Kilts (current director of Pfizer) will join the Newco Board upon completion of the Combination. Messrs. Read and Kilts were designated by Pfizer. Mr. Kilts will cease to be a member of the Pfizer Board immediately upon the closing of the Combination.

See “The Transactions” and “Business Combination Agreement—Post-Combination Governance and Management.”

 

Q:

Who will manage Newco after the Combination?

 

A:

The Business Combination Agreement provides that, as of the closing of the Combination,

 

   

Robert J. Coury will become the Executive Chairman of Newco;

 

   

Michael Goettler will become the Chief Executive Officer of Newco;

 

   

Rajiv Malik, Mylan’s President, will become the President of Newco; and

 

   

the Chief Financial Officer of Newco will be selected jointly by Mylan and Pfizer following a search initiated by Mylan.

See “The Transactions—Board of Directors and Executive Officers of Newco Following the Combination;—Operations Following the Combination; Liquidity and Capital Resources of Newco following the Combination.”

 

Q:

Will Newco incur indebtedness in connection with the Separation, the Distribution and the Combination?

 

A:

Yes. In connection with the transactions, Newco has obtained financing commitments from certain financial institutions that will permit Newco to incur borrowings in an aggregate principal amount of up to $12 billion. Newco may issue debt securities or incur other long-term debt financing in lieu of borrowing under the financing commitments. Newco expects to use the proceeds of such financings to make the Cash Distribution to Pfizer. See “Description of Financing.”

 

Q:

Is the completion of the Combination subject to any conditions?

 

A:

Yes. The respective obligations of each party to conduct the closing of the transactions contemplated by the Business Combination Agreement are subject to the fulfillment (or, to the extent permitted by applicable law, waiver) of certain conditions specified in the Business Combination Agreement. See “Business Combination Agreement—Conditions to the Combination.”

 

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Q:

How will the rights of Mylan shareholders change after the Combination?

 

A:

Mylan shareholders will receive shares of Newco common stock in connection with the Combination and will no longer be shareholders of Mylan following the Combination and the completion of the Mylan Newco Liquidation or the Mylan Liquidation, as applicable.

Shares of Newco common stock will represent an interest in a company that holds both the Upjohn Business and Mylan’s businesses. Upon completion of the Mylan Merger, Mylan ordinary shares will no longer be listed for trading on the NASDAQ, but Newco common stock will be listed on the NASDAQ under a ticker symbol to be determined. See “Comparison of the Rights of Mylan Shareholders and Newco Stockholders” and “The Transactions—Delisting and Deregistration of Mylan Ordinary Shares.”

 

Q:

What are the material U.S. federal income tax consequences to Mylan shareholders from the Combination?

 

A:

The receipt of the Newco common stock in respect of Mylan ordinary shares pursuant to the Combination (the “exchange”) will be a taxable transaction for U.S. federal income tax purposes for Mylan shareholders. Therefore, generally, a U.S. Holder (as defined below under “Material Tax Consequences—Material U.S. Federal Income Tax Consequences”) of Mylan ordinary shares will recognize capital gain or loss equal to the difference between (i) such U.S. Holder’s adjusted tax basis in its Mylan ordinary shares and (ii) the fair market value of the Newco common stock (and the amount of any cash in lieu of fractional Newco shares) received in exchange for Mylan ordinary shares pursuant to the Combination. A U.S. Holder’s adjusted tax basis in its Mylan ordinary shares generally will equal such U.S. Holder’s purchase price for such Mylan ordinary shares, as adjusted to take into account stock dividends, stock splits, or similar transactions.

Except in certain circumstances, a Non-U.S. Holder (as defined below under “Material Tax Consequences—Material U.S. Federal Income Tax Consequences”) will not be subject to U.S. federal income or withholding tax on the exchange of Mylan ordinary shares for Newco common stock (and cash in lieu of fractional shares, if any) in the Combination.

In certain circumstances, Section 304 of the Internal Revenue Code could cause a holder of Mylan ordinary shares whose percentage interest in the combined company after the Combination and related purchases or sales is greater than or equal to such holder’s percentage interest in Mylan immediately before the transaction to be treated as receiving a dividend up to the fair market value of the Newco common stock received in the Combination. Non-U.S. Holders may be subject to U.S. federal income and withholding tax on such dividend income. In addition, because of the uncertainty regarding the application of Section 304 of the Internal Revenue Code and the possibility of dividend treatment, withholding agents may withhold tax at a rate of 30% (or such lower rate as may be specified by an applicable income tax treaty) on the full fair market value of Newco common stock received by a Non-U.S. Holder in the Combination. Holders are urged to consult their tax advisors regarding the application of Section 304 of the Internal Revenue Code to them based on their particular circumstances, as well as any actions that may be taken to mitigate any potential adverse tax consequences.

The tax consequences to Mylan shareholders of the Combination may depend on a holder’s particular circumstances. Mylan shareholders should read the discussion below entitled “Material Tax Consequences—Material U.S. Federal Income Tax Consequences” beginning on page 142 of this document for a more detailed description of the U.S. federal income tax consequences of the Combination and should consult their own tax advisors for a full understanding of the tax consequences to them of the Combination.

 

Q:

What are the material Dutch tax consequences to Mylan shareholders from the Combination?

 

A:

The Mylan Newco Liquidation Distribution, and if the Alternative Transaction Structure is adopted, the Mylan Liquidation Distribution to be received by the Mylan shareholders in the Combination, is subject to Dutch dividend withholding tax to the extent the Mylan Newco Liquidation Distribution or the Mylan Liquidation Distribution, as applicable, exceeds the average paid up capital recognized for Dutch dividend withholding tax purposes of the Mylan Newco ordinary shares or the Mylan ordinary shares, as applicable.

 

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If, as of the closing, the Mylan Newco Liquidation Distribution or the Mylan Liquidation Distribution, as applicable, exceeds the average paid up capital recognized for Dutch dividend withholding tax purposes of the Mylan Newco ordinary shares or the Mylan ordinary shares, as applicable, 15% Dutch dividend withholding tax is due, in EUR, on the difference between (a) the value, in EUR, of the Mylan Newco Liquidation Distribution or the Mylan Liquidation Distribution, as applicable (i.e., the value, in EUR, of the Newco common stock to be received by the Mylan shareholders in the Combination) and (b) the average paid up capital, in EUR, recognized for Dutch dividend withholding tax purposes of Mylan Newco or Mylan, as applicable, in each case as of the Mylan Newco Liquidation Distribution or the Mylan Liquidation Distribution.

Mylan has calculated the amount of paid up capital recognized for Dutch dividend withholding tax purposes of Mylan as of June 30, 2019 (the “Calculation”). Pursuant to the Calculation, the paid up capital recognized for Dutch dividend withholding tax purposes of Mylan as of June 30, 2019 amounts to approximately EUR 26 billion. On January 13, 2020 the Dutch tax authorities formally confirmed the Calculation.

The average paid up capital recognized for Dutch dividend withholding tax purposes of the Mylan Newco ordinary shares shall at the Mylan Merger Effective Time, either amount to (a) the paid up capital recognized for Dutch dividend withholding taxes of the Mylan ordinary shares immediately prior to the Mylan Merger (i.e., approximately EUR 26 billion, updated for any relevant transactions between June 30, 2019 and the closing of the Combination) or, if lower, (b) the value (in EUR) of all issued and outstanding Mylan ordinary shares immediately prior to the Mylan Merger. The value of the Mylan Newco Liquidation Distribution in principle reflects the value (in EUR) of all issued and outstanding Mylan ordinary shares immediately prior to the Mylan Merger.

As a result, and assuming (i) the trading price of the Mylan ordinary shares at the time of the Mylan Newco Liquidation Distribution will not be significantly higher than the current trading price of the Mylan ordinary shares, (ii) the value of the EUR to the USD at the time of the Mylan Newco Liquidation Distribution will not be significantly lower than the current value of the EUR to the USD, (iii) no material negative changes will occur in the amount of paid up capital recognized for Dutch dividend withholding tax purposes of Mylan between June 30, 2019 and the time of the Mylan Newco Liquidation Distribution, and (iv) the Mylan Merger, the Share Sale, the Mylan Newco Liquidation and the Mylan Newco Liquidation Distribution (including the distribution of Newco common stock to Mylan Newco shareholders in connection with the automatic and mandatory exchange of the Exchangeable Note) will be effectuated as contemplated in the Business Combination Agreement, the Mylan Newco Liquidation Distribution shall be made free of withholding or deduction of Dutch dividend withholding tax.

If, contrary to Mylan’s expectations, Dutch dividend withholding tax is to be withheld in respect of the Mylan Newco Liquidation Distribution, Section 3.5(b) of the Business Combination Agreement provides that the Exchange Agent (as defined in the Business Combination Agreement) shall sell in one or more transactions, for the benefit of the holders of Mylan Newco ordinary shares, such number of shares of Newco common stock to which the holder of Mylan Newco ordinary shares, would otherwise be entitled as is necessary to obtain net cash proceeds to pay the Dutch dividend withholding tax due in respect of the Mylan Newco Liquidation Distribution to the Dutch tax authorities. This would result in the Mylan Newco shareholders (i.e., former Mylan shareholders) receiving fewer shares of Newco common stock than they would receive if no Dutch dividend withholding tax applies to the Mylan Newco Liquidation Distribution.

Assuming (i) the trading price of the Mylan ordinary shares will not be significantly higher than the current trading price of the Mylan ordinary shares, (ii) the value of the EUR to the USD will not be significantly lower than the current value of the EUR to the USD at the time of the Mylan Liquidation and (iii) no material negative changes will occur in the amount of paid up capital recognized for Dutch dividend withholding tax purposes of Mylan between June 30, 2019 and the time of the Mylan Liquidation Distribution Mylan does not expect the value, in EUR, of the Mylan Liquidation Distribution to exceed the paid up capital, in EUR, recognized for Dutch dividend withholding tax purposes of Mylan and thus does not expect any Dutch dividend withholding tax to apply in the Alternative Transaction Structure.

 

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If, contrary to Mylan’s expectations, Dutch dividend withholding tax is to be withheld in respect of the Mylan Liquidation Distribution, the Exchange Agent (as defined in the Business Combination Agreement) shall sell in one or more transactions for the benefit of the Mylan shareholders such number of shares of Newco common stock to which the Mylan shareholder would otherwise be entitled as is necessary to obtain net cash proceeds to pay the Dutch dividend withholding tax due in respect of the Mylan Liquidation Distribution to the DTA.

See “Material Tax Consequences—Material Dutch Tax Consequences—Dutch Dividend Withholding Tax Consequences of the Combination to Holders of Mylan Ordinary Shares” beginning on page 151 of this document for a more detailed description of the Dutch dividend withholding tax consequences of the Combination.

 

Q:

What will happen to outstanding Mylan equity awards in the Combination?

 

A:

Each Mylan equity award outstanding as of immediately prior to the Effective Time will be converted into an equity award with respect to a number of shares of Newco common stock. See “Business Combination Agreement—Treatment of Mylan Equity Awards” beginning on page 161 of this document for a more detailed description of the treatment of Mylan equity awards in the Combination.

 

Q:

What will happen to outstanding Pfizer equity awards in the Distribution?

 

A:

Pfizer equity awards held by Pfizer employees who move to Newco will generally be vested pro rata as of immediately prior to the Distribution and settle in accordance with the existing terms of such awards, and such employees will receive a grant of a replacement award from Newco based on the value of the portion of the Pfizer equity award that is forfeited, with such replacement award to generally be subject to the same terms and conditions as the corresponding forfeited Pfizer equity award. Pfizer equity awards held by current and former employees and non-employee directors of Pfizer, as well as Pfizer awards held by Newco employees that remain outstanding following the Distribution, will generally remain denominated in shares of Pfizer common stock, and Pfizer will adjust the terms of such awards as it determines to be appropriate to preserve the value of such awards in connection with the Distribution.

For a more complete discussion of the treatment of Pfizer equity awards, see “Additional Transaction Agreements—Employee Matters Agreement” beginning on page 192.

 

Q:

Does Mylan have to pay anything to Pfizer if the transactions contemplated by the Business Combination Agreement are not approved by the Mylan shareholders or if the Business Combination Agreement is otherwise terminated?

 

A:

Yes. If the Business Combination Agreement is terminated because Mylan shareholder approval is not obtained, then Mylan will reimburse Pfizer for up to $96 million of the aggregate out-of-pocket costs, fees and expenses incurred by Pfizer in connection with the Business Combination Agreement.

Mylan is required to pay Pfizer a termination fee of $322 million in the aggregate if the Business Combination Agreement is terminated under certain circumstances. For a discussion of the circumstances under which the termination fee is payable by Mylan or the requirement to reimburse expenses applies, see “The Transactions” and “Business Combination Agreement—Termination, Amendment and Waiver”. In addition, if the Business Combination Agreement is terminated, Mylan shall pay Pfizer 43% of the Financing Obligations (as defined in the Business Combination Agreement) and indemnify and hold harmless Pfizer, its subsidiaries and its and their representatives from and against 43% of certain losses actually suffered or incurred by them in connection with the Financing or the Permanent Financing (each as defined in “—Description of Financing”). For a discussion of financing-related payments, see “Business Combination Agreement—Financing.”

 

Q:

Does Pfizer have to pay anything to Mylan if the Business Combination Agreement is terminated?

 

A:

No. Pfizer will not have to pay Mylan anything if the Business Combination Agreement is terminated.

 

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Q:

Are there risks associated with the transactions?

 

A:

Yes. Pfizer, Newco and Mylan may not realize the expected benefits of the transactions because of the risks and uncertainties discussed in the section entitled “Risk Factors” beginning on page 51 of this document and the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 82 of this document. These risks include, among others, risks relating to the uncertainty that the transactions will close, the uncertainty that the combined company will achieve expected benefits, including synergies in amounts and on the schedules anticipated, and uncertainties relating to the performance of Pfizer and the combined company after the transactions.

 

Q:

Can Mylan shareholders or Pfizer stockholders demand appraisal of their shares in connection with the transactions?

 

A:

No. Neither Mylan shareholders nor Mylan Newco shareholders are entitled under Dutch law or otherwise to appraisal or dissenters’ rights related to the Mylan ordinary shares or Mylan Newco ordinary shares in connection with the Combination.

Pfizer stockholders are not entitled to appraisal rights in connection with the Separation, the Distribution or the Combination.

 

Q:

When will the transactions be completed?

 

A:

The transactions are currently anticipated to close in mid-2020, subject to approval by Mylan shareholders and customary closing conditions, including receipt of regulatory approvals.

 

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QUESTIONS AND ANSWERS ABOUT THE EXTRAORDINARY GENERAL

MEETING AND VOTING

The following questions and answers are intended to address questions that you, as a shareholder of Mylan, may have regarding the EGM with respect to the Combination. These questions and answers highlight only some of the information contained in this document. Mylan urges you to read carefully the entire document and the documents incorporated by reference into this document in addition to these questions and answers. See “Where You Can Find Additional Information” beginning on page ii of this document.

Unless the context expressly provides otherwise, these questions and answers and this document describe the rights of Mylan ordinary shareholders (as defined below) to attend and, if relevant, vote at the EGM, including the procedures for convening the EGM and for Mylan ordinary shareholders exercising voting and other rights at such meeting. Generally similar rights apply in respect of Mylan preferred shareholders, unless otherwise indicated.

 

Q:

What is this document and why am I receiving this document?

 

A:

This document is part of a solicitation of proxies by the Mylan Board for the EGM and is being provided to Mylan’s shareholders and beneficial owners of Mylan ordinary shares on or about                     , 2020. This document provides Mylan’s shareholders with information relating to their decisions to vote, grant a proxy to vote, attend and, if relevant, instruct their vote to be cast, at the EGM.

You will receive this document if you are a Mylan shareholder or beneficial owner of Mylan ordinary shares on March 30, 2020, the record date for the EGM (the “Record Date”). This document serves as the proxy statement through which the Mylan Board will solicit proxies to obtain the necessary shareholder approval with respect to each of the Proposals in connection with the Combination. Mylan is holding the EGM to obtain such approval. This document contains important information about the Combination and the EGM, and you should read it carefully and in its entirety. You may cast your vote in person at the EGM or by using one of the advance voting methods described in the Notice of Extraordinary General Meeting of Mylan Shareholders. For detailed information, see the questions below entitled, “How do I vote if my ownership of Mylan ordinary shares is reflected directly on the Register as of the Record Date?” or “How do I vote if I am a beneficial owner of Mylan ordinary shares and hold them in street name?”, as applicable.

 

Q:

When and where will the EGM be held?

 

A:

The EGM will be held on April 27, 2020 at                      Central European Time (CET) at                     .

Persons attending the EGM will not be permitted to use cameras, recording devices or other similar electronic devices during the meeting.

 

Q:

How can I attend the EGM?

 

A:

If you wish to attend the EGM in person, please so inform Mylan in writing by sending notice to the attention of Mylan’s Corporate Secretary at Building 4, Trident Place, Mosquito Way, Hatfield, Hertfordshire, AL10 9UL, England (the “Corporate Address”) or by e-mail to corporatesecretary@mylan.com, in each case prior to 5:00 p.m. Central European Time (CET) on April 24, 2020 (the “Cut-Off Time”).

Beneficial owners of Mylan ordinary shares that are held through a broker, bank, trust company or other nominee (“street name”) may not vote the underlying ordinary shares at the EGM unless they first obtain (where appropriate, through the relevant broker, bank, trust company or other nominee) a signed proxy card from the relevant shareholder who is registered in Mylan’s shareholder register (the “Register”) as the

 

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holder on the Record Date of the underlying ordinary shares. In addition, beneficial owners of Mylan ordinary shares must provide proof of ownership, such as a recent account statement or letter from a brokerage firm, bank nominee, or other institution proving ownership on the Record Date. Proper identification, such as a driver’s license or passport, must be presented at the meeting.

Failure to comply with such notification and identification requirements may result in not being admitted to the meeting.

 

Q:

What will be the effect of the Combination?

 

A:

It is expected that, following the consummation of the Combination, Mylan shareholders as of immediately prior to the Combination will own 43% of the outstanding shares of Newco common stock and Pfizer stockholders as of the record date of the Distribution will own 57% of the outstanding shares of Newco common stock, in each case on a fully diluted basis.

 

Q:

What will be the relationship among Mylan, Pfizer and Newco after the consummation of the Combination?

 

A:

Following consummation of the Combination, Newco will be a publicly traded entity that will hold both the Upjohn Business and Mylan’s businesses. Mylan will either be merged with and into Mylan Newco Sub or dissolved and liquidated, and in each case will cease to exist as a separate legal entity.

Pfizer and Newco will enter into certain additional agreements that will govern certain arrangements between them following the consummation of the transaction relating to, among other things, tax matters, employee matters, intellectual property rights, transition services and manufacturing and supply arrangements.

 

Q:

Who is entitled to vote at the EGM and how many votes do they have?

 

A:

Dutch law provides that the record date for the EGM must be 28 days prior to the date of the EGM; thus, the Record Date is March 30, 2020. Mylan ordinary shareholders who on the Record Date are registered in the “Register” may attend the EGM and, if relevant, vote in person or authorize a third-party to attend and, if relevant, vote at the meeting on their behalf through use of a proxy card.

Mylan ordinary shareholders who are not registered in the Register may request, if eligible for registration, to be registered in the Register no later than the Record Date by means of a request sent to Mylan in writing (to the attention of Mylan’s Corporate Secretary at Mylan’s Corporate Address) or by sending an e-mail to corporatesecretary@mylan.com.

If you are a beneficial owner of Mylan ordinary shares and hold your shares in street name, the relevant institution will send you instructions describing the procedure for instructing the institution how to vote the Mylan ordinary shares you beneficially own.

If you wish to vote the Mylan ordinary shares you beneficially own directly either in person at the EGM or by proxy, you first must obtain a signed “legal proxy” from the bank, broker, trust company or other nominee through which you beneficially own your Mylan ordinary shares.

Mylan preferred shareholders who on April 27, 2020 are registered in the Register may attend the EGM and, if relevant, vote in person or authorize a third-party to attend, and, if relevant, vote at the meeting on their behalf by proxy.

As of the close of business on February 4, 2020, the last practicable trading day for which the information is available as of the date of this document, there were 516,149,574 Mylan ordinary shares and no Mylan preferred shares outstanding and entitled to vote. Each Mylan share is entitled to one vote on each matter properly brought before the EGM. Shareholders do not have cumulative voting rights.

Unless the context otherwise requires, references to (a) “Mylan ordinary shareholders” refer to both (i) shareholders who on the Record Date are registered in the Register as holders of Mylan ordinary shares

 

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and (ii) others with meeting rights under Dutch law with respect to Mylan ordinary shares, who on the Record Date are registered as such in the Register, (b) “Mylan preferred shareholders”, if any, refer to both (i) shareholders who on April 27, 2020 are registered in the Register as holders of Mylan preferred shares and (ii) others with meeting rights under Dutch law with respect to Mylan preferred shares who, on the Record Date, are registered as such in the Register and (c) “Mylan shareholders” refer to Mylan ordinary shareholders and Mylan preferred shareholders.

 

Q:

What proposals will be considered at the EGM?

 

A:

The EGM is being held for Mylan shareholders to vote on the approval of the following matters relating to the Combination:

 

  1.

Approval of the Combination Proposal (voting item), consisting of:

 

   

Mylan Merger: Resolution to enter into and effectuate a legal triangular merger (juridische driehoeksfusie), whereby Mylan, as disappearing company, will merge with and into Mylan II B.V. (“Mylan Newco Sub”), as acquiring company, and whereby Mylan I B.V. (“Mylan Newco”) will allot shares in its capital to Mylan shareholders at the time of such merger in accordance with the merger proposal that will be deposited with the Dutch trade registry and disclosed for public inspection, prepared by the respective boards of directors of Mylan, Mylan Newco and Mylan Newco Sub (the “Mylan Merger”) (the “Mylan Merger Resolution”);

 

   

Approval of the Share Sale: Resolution to approve, under Section 2: 107a of the Dutch Civil Code, the sale and transfer by Mylan Newco, immediately following the time at which the Mylan Merger becomes effective (the “Mylan Merger Effective Time”), of all issued and outstanding shares in the capital of Mylan Newco Sub to Utah Acquisition Sub Inc. (“Acquisition Sub”) or its designated nominee (the “Share Sale”) (the “Share Sale Resolution”);

 

   

Approval of the Mylan Newco Liquidation: Resolution to, effective as of the time at which the Share Sale becomes effective, approve and effectuate (i) the dissolution of Mylan Newco, (ii) the appointment of Stichting Liquidator Mylan (the “Liquidator”) as liquidator (vereffenaar) of Mylan Newco and (iii) the appointment of an affiliate of Upjohn Inc. (the “Liquidation Custodian”) as custodian of the books and records of Mylan Newco in accordance with Section 2:24 of the Dutch Civil Code (the “Mylan Newco Liquidation Resolutions”);

 

   

Approval of the Alternative Transaction Structure: Resolution to, if the Mylan Merger is not consummated within the period specified by Section 2:318(1) of the Dutch Civil Code, (i) approve, under Section 2:107a of the Dutch Civil Code, the sale, transfer, assignment and delivery by Mylan to Acquisition Sub or its designated nominee of all of the right, title and interest of Mylan in, to and under all of its assets (the “Asset Sale”), and (ii) approve and effectuate, as soon as practicable following the Asset Sale, (x) the dissolution of Mylan (ontbinding) and its subsequent liquidation (vereffening) in accordance with Sections 2:19 and 2:23b of the Dutch Civil Code, (y) the appointment of the Liquidator as liquidator (vereffenaar) of Mylan and (z) the appointment of the Liquidation Custodian as custodian of the books and records of Mylan in accordance with Section 2:24 of the Dutch Civil Code (the “Alternative Transaction Resolutions”); and

 

   

Approval of the Discharge of Directors: Resolution to, effective upon the Mylan Merger Effective Time or the effective time of the Asset Sale (which shall be 6:00 p.m., New York City time, on the date of the Asset Sale), as applicable, provide full and final discharge to each member of the Mylan Board for their acts of management or supervision, as applicable, up to the date of the EGM; provided that no discharge shall be given to any director for acts as a result of fraud (bedrog), gross negligence (grove schuld) or willful misconduct (opzet) of such director (the “Discharge Resolution” and, collectively with the Mylan Merger Resolution, the Share Sale Resolution, the Mylan Newco Liquidation Resolutions and the Alternative Transaction Resolutions, the “Combination Proposal”);

 

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  2.

Adoption of the Advisory Compensation Proposal (advisory voting item): Non-binding, advisory resolution to adopt the compensation that will or may be paid or become payable to Mylan’s named executive officers in connection with, or following, the consummation of the Combination (the “Compensation Proposal”);

 

  3.

Adoption of the Advisory Proposal Regarding Procedures for Determining Board Composition (advisory voting item): Non-binding, advisory resolution to adopt certain features of Newco’s governance which will replace the corresponding features of Mylan’s governance, effective upon the closing of the Combination, relating to (i) the right of stockholders to nominate directors and make other stockholder proposals at stockholder meetings and (ii) director terms and stockholder removal of directors (the “Proposal Regarding Procedures for Determining Board Composition”); and

 

  4.

Adoption of the Advisory Stockholder Special Meetings Proposal (advisory voting item): Non-binding, advisory resolution to adopt certain features of Newcos governance which will replace the corresponding features of Mylans governance, effective upon the closing of the Combination, relating to the right of stockholders to call special meetings of stockholders (the “Stockholder Special Meetings Proposal” and, together with the advisory Proposal Regarding Procedures for Determining Board Composition, the “Governance Proposals” and, collectively with the Combination Proposal and the advisory Compensation Proposal, the “Proposals” and each, a “Proposal”).

 

Q:

What vote is required to approve the Proposals?

 

A:

Approval of the Combination Proposal requires the affirmative vote of an absolute majority of the valid votes cast at the EGM where at least 50% of Mylan’s issued share capital is represented or the affirmative vote of at least two-thirds of the valid votes cast at the EGM where more than one-third but less than 50% of Mylan’s issued share capital is represented.

Adoption of the advisory Compensation Proposal requires the affirmative vote of an absolute majority of the valid votes cast at the EGM where at least one-third of Mylan’s issued share capital is represented. Because the vote on the Compensation Proposal is advisory only, it will not be binding on the Mylan Board or Mylan. Accordingly, if the Combination Proposal is approved by the Mylan shareholders and the Combination is consummated, the compensation in respect of the advisory Compensation Proposal will be payable regardless of the outcome of such vote.

Adoption of each of the advisory Governance Proposals requires the affirmative vote of an absolute majority of the valid votes cast at the EGM where at least one-third of Mylan’s issued share capital is represented. Because the votes on the Governance Proposals are advisory only, they will not be binding on the Mylan Board or Mylan. Accordingly, if the Combination Proposal is approved by the Mylan shareholders and the Combination is consummated, the governance features of Newco described in the advisory Governance Proposals will be adopted regardless of the outcome of such votes.

Abstentions and failures to vote (as described below) are not considered to be votes cast for purposes of determining if a Proposal has been approved or adopted. If a quorum of the minimum number of issued share capital with respect to a Proposal as described above is not present or represented with respect to a Proposal at the EGM, such Proposal cannot be validly adopted at the EGM.

 

Q:

How many Mylan ordinary shares will Mylan’s directors and officers be entitled to vote at the EGM? Do you expect them to vote in favor of the Proposals?

 

A:

As of the close of business on February 4, 2020, the last practicable trading day for which information is available as of the date of this document, approximately 0.6% of the outstanding Mylan ordinary shares were held by Mylan directors and executive officers and their affiliates. Mylan expects that Mylan’s directors and executive officers will vote their shares in favor of each of the Proposals, although none of them has entered into any agreements obligating him or her to do so.

 

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Q:

Why is shareholder approval of the Combination required?

 

A:

Under Dutch law, certain actions can only be taken by Mylan or the Mylan Board with the approval of the general meeting of Mylan shareholders. Such resolutions include those relating to the Mylan Merger and the approval of the Alternative Transaction Structure. The approval of Mylan shareholders at a general meeting is therefore required to consummate the Combination.

 

Q:

What will happen if the Proposals are not approved?

 

A:

If the Combination Proposal is not approved, we will not be able to consummate the Combination.

The vote on the advisory Compensation Proposal is a vote separate and apart from the vote to approve the Combination Proposal and is not a condition to consummation of the Combination. Such vote is advisory only, meaning that it will not be binding on the Mylan Board or Mylan. Accordingly, if the Combination Proposal is approved by the Mylan shareholders and the Combination is consummated, the compensation in respect of the advisory Compensation Proposal will be payable regardless of the outcome of such vote.

The vote on each of the advisory Governance Proposals is also a vote separate and apart from the vote to approve the Combination Proposal and is not a condition to consummation of the Combination. Each such vote is advisory only, meaning that it will not be binding on the Mylan Board, Mylan or Newco. Accordingly, if the Combination Proposal is approved by the Mylan shareholders and the Combination is consummated, the governance features of Newco described in the advisory Governance Proposals will be adopted regardless of the outcome of such votes.

 

Q:

How does the Mylan Board recommend that I vote?

 

A:

The Mylan Board unanimously recommends that the Mylan shareholders vote “FOR” the approval and adoption of the Combination Proposal (consisting of the Mylan Merger Resolution, the Share Sale Resolution, the Mylan Newco Liquidation Resolutions, the Alternative Transaction Resolutions and the Discharge Resolution); “FOR” the adoption of the advisory Compensation Proposal; “FOR” the adoption of the advisory Proposal Regarding Procedures for Determining Board Composition; and “FOR” the adoption of the advisory Stockholder Special Meetings Proposal.

 

Q:

How do I vote if my ownership of Mylan ordinary shares is reflected directly on the Register as of the Record Date?

 

A:

Mylan shareholders whose ownership is reflected directly on the Register as of the Record Date may cast their votes at the EGM, by internet or telephone or by submitting a proxy card. See the Notice of Extraordinary General Meeting of Mylan Shareholders for additional information about how to vote.

If you plan to attend the EGM, ownership of your Mylan ordinary shares is reflected directly on the Register as of the Record Date, and you wish to vote in person, you will be given a ballot at the EGM. In addition, if you plan to attend the EGM, please be prepared to provide proper identification, such as a driver’s license or passport.

If you do not plan to attend the EGM in person and ownership of your Mylan ordinary shares is reflected directly on the Register as of the Record Date, you may cast your vote, after the Record Date but no later than the Cut-Off Time, by internet or telephone or by submitting a proxy card. Mylan requests that you mark, sign and date the accompanying proxy card and return it promptly in the enclosed postage-paid envelope, or submit your proxy for ordinary shares by telephone or internet.

If the ownership of your Mylan ordinary shares is reflected directly on the Register as of the Record Date and you vote by proxy, the individuals named on the enclosed proxy card will vote your Mylan ordinary shares in the manner you indicate. All ordinary shares represented by properly executed proxies received after the Record Date but no later than the Cut-Off Time will be voted at the meeting in the manner

 

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specified by the Mylan ordinary shareholder giving those proxies. If the proxy is returned without an indication as to how the Mylan ordinary shares represented are to be voted with regard to a Proposal (and without expressly indicating to abstain or to cast a “blank vote”), the Mylan ordinary shares represented by the proxy will be voted in accordance with the recommendation of the Mylan Board, as described in this document.

 

Q:

How do I vote if I am a beneficial owner of Mylan ordinary shares and hold them in street name?

 

A:

If you are a beneficial owner of Mylan ordinary shares and hold your shares in street name, the relevant institution will send you instructions describing the procedure for instructing the institution how to vote the Mylan ordinary shares you beneficially own. See the Notice of Extraordinary General Meeting of Mylan Shareholders for additional information about how to vote.

If you are a beneficial owner of Mylan ordinary shares and hold your shares in street name, plan to attend the EGM, and wish to vote in person, you will be given a ballot at the EGM. Please note, however, that you must bring to the EGM a legal proxy executed in your favor from the relevant shareholder who is registered in the Register as the holder on the Record Date of the underlying shares (through your broker, bank, trust company or other nominee) authorizing you to vote at the EGM. You must also provide proof of ownership, such as a recent account statement or letter from your brokerage firm, bank nominee or other institution proving ownership on the Record Date. In addition, if you plan to attend the EGM, please be prepared to provide proper identification, such as a driver’s license or passport.

If you are a beneficial owner of Mylan ordinary shares and hold your shares in street name, see “If my Mylan ordinary shares are held in street name by my broker, will my broker automatically vote my Mylan ordinary shares for me?” below for more information on giving instructions to your broker, bank, trust company or other nominee.

 

Q:

If my Mylan ordinary shares are held in street name by my broker, will my broker automatically vote my Mylan ordinary shares for me?

 

A:

No. If you are a beneficial owner of Mylan ordinary shares and hold your shares in street name, your broker, bank, trust company or other nominee cannot vote your shares on non-routine matters without instructions from you. Each of the Proposals is considered a non-routine matter. You should instruct your broker, bank, trust company or other nominee as to how to vote your Mylan ordinary shares, following the directions from your broker, bank, trust company or other nominee provided to you. Please check the voting form used by your broker, bank, trust company or other nominee. If you do not provide your broker, bank, trust company or other nominee with instructions and your broker, bank, trust company or other nominee submits an unvoted proxy with respect to a Proposal, your shares will not be counted for purposes of determining the presence of a quorum at the EGM and they will not be voted on with respect to that Proposal. As discussed above, beneficial owners of Mylan ordinary shares held through a broker, bank, trust company or other nominee may not vote the underlying ordinary shares at the EGM, unless they first obtain (where appropriate, through the relevant broker, bank, trust company or other nominee) a signed proxy card from the relevant shareholder who is registered in the Register as the holder on the Record Date of the underlying ordinary shares.

 

Q:

What will happen if I fail to vote, I abstain from voting or I return my proxy card without indicating how to vote?

 

A:

If you do not exercise your vote because you do not submit a properly executed proxy card to Mylan, and do not vote by telephone or internet in a timely fashion or by failing to attend the EGM to vote in person or fail to instruct your broker, bank, trust company or other nominee how to vote (a “failure to vote”), it will have no effect on the Proposals. If you mark your proxy or voting instructions expressly to abstain or to cast a “blank vote” for any Proposal, it will also have no effect on such proposal. However, please see the question

 

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  below “What constitutes a quorum at the EGM?” for information on the effects of failures to vote or abstentions with respect to the determination of a quorum. If a Mylan shareholder returns a properly executed proxy card in a timely fashion without indicating how to vote on one or more of the Proposals (and without indicating expressly to abstain or to cast a “blank vote”), the Mylan ordinary shares represented by such proxy will count for the purposes of determining the presence of a quorum with respect to such Proposal(s), will be voted in favor of each such Proposal in accordance with the recommendation of the Mylan Board and it will not be considered a failure to vote.

 

Q:

How will Mylan effectuate the Combination?

 

A:

Mylan, together with Pfizer and Newco, will effectuate the Combination through a series of steps, including either (a) the consummation of the Mylan Merger, followed by the entry by Acquisition Sub and Mylan Newco into a purchase and sale agreement, whereby Mylan Newco will sell and agree to transfer, immediately following the Mylan Merger Effective Time, all issued and outstanding shares in the capital of Mylan Newco Sub to Acquisition Sub, followed by the dissolution of Mylan Newco, or (b) if the Mylan Merger is not consummated within the period specified by Section 2:318(1) of the Dutch Civil Code, the Asset Sale followed by the Mylan Liquidation and the transactions contemplated thereby.

 

Q:

What constitutes a quorum at the EGM?

 

A:

For each of the Proposals, at least one-third of the issued Mylan ordinary shares must be represented at the EGM to constitute a quorum. Abstentions, “blank votes” and invalid votes will be counted for purposes of determining the presence of a quorum (although they are considered to be votes that were not cast). Proxies returned by a broker, bank, trust company or other nominee as “non-votes” because they have not received voting instructions from the beneficial owners of the relevant Mylan ordinary shares will not be treated as shares present for purposes of determining the presence of a quorum. Failures to vote by proxy will not be counted for purposes of determining the presence of a quorum.

 

Q:

May I change my vote or revoke my proxy or voting instructions after I have returned a proxy card or voted?

 

A:

Yes. You may change your vote of your Mylan ordinary shares as indicated on your proxy card or revoke your proxy at any time prior to the Cut-Off Time. You can do this by (a) voting again by telephone or internet or (b) submitting another properly executed proxy card, dated as of a later date (but prior to the Cut-Off Time), in writing (to be sent to Mylan’s Corporate Address to the attention of Mylan’s Corporate Secretary as indicated in the question “How may I communicate with Mylan’s directors?”). Alternatively, you may give notice of your attendance at the meeting (prior to the Cut-Off Time in the manner described above) and vote in person. If your shares are held through and/or in street name by your broker, bank, trust company or other nominee, you should contact your broker, bank, trust company or other nominee to change your vote or revoke your voting instructions.

 

Q:

What happens if I transfer my Mylan ordinary shares before the EGM?

 

A:

The Record Date for the EGM is earlier than the date of the EGM. If you transfer your Mylan ordinary shares after the Record Date, you will retain your right to attend and vote at the EGM.

 

Q:

Are holders of Mylan ordinary shares entitled to appraisal rights?

 

A:

No. Under the Dutch Civil Code, holders of Mylan ordinary shares do not have appraisal or dissenters’ rights with respect to the Combination.

 

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Q:

What do I need to do now?

 

A:

Carefully read and consider the information contained in and incorporated by reference into this document and vote your shares either in person or by telephone, the internet or the use of a proxy card, as described in these questions and answers and this document.

 

Q:

Are there any risks in connection with the Combination that I should consider?

 

A:

Yes. There are risks associated with the Combination. These risks are discussed in more detail in the section entitled “Risk Factors” beginning on page 51 of this document.

 

Q:

Who tabulates the votes?

 

A:

The inspector of election will, among other matters, determine the number of shares represented at the EGM to confirm the presence of a quorum, determine the validity of all proxies and ballots and certify the results of voting on the Proposals.

 

Q:

Where can I find the voting results of the EGM?

 

A:

Mylan expects to announce the preliminary voting results at the EGM. In addition, within four business days following certification of the final voting results, Mylan intends to report the final voting results in a Current Report on Form 8-K filed with the SEC.

 

Q:

How are proxies solicited and what is the cost?

 

A:

Mylan will bear all expenses incurred in connection with the solicitation of proxies including the costs associated with the filing, printing and publication of the document; however, pursuant to the Business Combination Agreement, if the Business Combination Agreement is terminated, Mylan and Pfizer will bear such costs equally and if the Combination is consummated, such costs will be borne by Newco. Mylan has retained Innisfree M&A Incorporated (“Innisfree”) to assist in its solicitation of proxies and has agreed to pay them a fee of approximately $40,000, plus certain fees and expenses, for these services. Mylan will provide funds to Innisfree for the payment of charges rendered by brokerage firms, bank nominees and other institutions for their costs in forwarding proxy materials to beneficial owners of Mylan ordinary shares. Our directors, officers and employees, some of whom may be considered participants in the solicitation, may also solicit proxies by mail, telephone or personal contact without additional remuneration.

 

Q:

What is householding?

 

A:

In accordance with notices previously sent to street name shareholders who share a single address, we are sending only one copy of the document and annual report to that address unless we have received contrary instructions from any shareholder at that address. This practice, known as “householding”, is designed to reduce printing and postage costs. However, if any shareholder residing at such an address wishes to receive a separate copy of this document, Mylan will promptly deliver, upon oral or written request, a separate copy of the document or annual report to any shareholder residing at an address to which only one copy was mailed. If you would like to request additional copies of this document or annual report (or in the future would like to receive separate copies or the document or annual report) or if you are receiving multiple copies of this document and would like to request that only a single copy be mailed in the future, you can request householding by contacting the Corporate Secretary as described under “How may I communicate with Mylan’s directors?” below.

 

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Q:

How may I communicate with Mylan’s directors?

 

A:

The Mylan Board has established a process for any interested parties to contact any individual director, the Mylan Board, the non-executive directors as a group or any other group or committee of directors, at:

Mylan N.V.

Attn: Corporate Secretary

Building 4, Trident Place

Mosquito Way, Hatfield,

Hertfordshire, AL10 9UL England

Phone: +44 (0) 1707-853-000

Communications regarding accounting, internal accounting controls or auditing matters may be reported to the Audit Committee using the above address. All communications received as set forth above shall be opened by the office of the Corporate Secretary for the purpose of determining whether the contents represent a message to Mylan’s directors. Materials that are not in the nature of advertising or promotions of a product or service or patently offensive shall be forwarded as appropriate to the Mylan Board or to each director who is a member of the group or committee to which the envelope is addressed.

 

Q:

Could matters other than those stated in the notice of the meeting be considered at the EGM?

 

A:

The Dutch Civil Code does not permit any business to be voted on at the EGM other than those listed as voting items in the notice of meeting unless the matter is unanimously approved by all votes cast and all issued shares are present or represented at the meeting.

 

Q:

Who can help answer my questions?

 

A:

If you have questions about the Combination or the Proposals to be voted on at the EGM, need assistance in completing your proxy card or if you desire additional copies of the document or additional proxy cards, you should contact:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor, New York, NY 10022

+1 (877) 750-9499 (toll free)

+1 (212) 750-5833 (banks and brokers)

 

Q:

Where can I find more information about Mylan?

 

A:

You can find more information about Mylan from various sources described under “Where You Can Find Additional Information” beginning on page ii of this document.

 

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SUMMARY

This summary, together with the sections titled “Questions and Answers About the Transactions” and “Questions and Answers About the Extraordinary General Meeting and Voting” immediately preceding this summary, provide a summary of the material terms of the Separation, the Distribution and the Combination. These sections highlight selected information contained in this document and may not include all the information that is important to you. You should read this entire document carefully, including the annexes, as well as those additional documents to which we refer you. See also “Where You Can Find Additional Information.”

The Companies (see “Information about Mylan” and “Information about the Upjohn Business” beginning on pages 197 and 198, respectively).

Mylan N.V.

Building 4, Trident Place, Mosquito Way

Hatfield, Hertfordshire, AL10 9UL, England

+44 (0) 1707-853-000

Mylan was originally incorporated as a private limited liability company in the Netherlands in 2014 and subsequently became a public limited liability company in the Netherlands on February 27, 2015, and is the successor to Mylan Inc., which has been in existence for more than 50 years. Mylan N.V., along with its subsidiaries, is a global pharmaceutical company committed to setting new standards in healthcare. Working together around the world to provide seven billion people access to the broadest range of high-quality, affordable medicine, Mylan innovates to satisfy unmet needs; makes reliability and service excellence a habit; does what’s right, not what’s easy; and impacts the future through passionate global leadership. Mylan offers a growing portfolio of more than 7,500 products, including prescription generic, branded generic, brand-name drugs and over-the-counter remedies. In addition, Mylan offers a wide range of antiretroviral therapies, upon which nearly 50% of HIV/AIDS patients in developing countries depend. Mylan markets its products in more than 165 countries and territories. Every member of Mylan’s approximately 35,000-strong global workforce is dedicated to delivering better health for a better world.

Mylan I B.V.

Krijgsman 20

1186 DM Amstelveen, The Netherlands

+44 (0) 1707-853-000

Mylan Newco is a wholly owned subsidiary of Mylan. Mylan Newco was incorporated under the laws of the Netherlands on July 25, 2019 for the purposes of effecting certain elements of the transactions in accordance with the Business Combination Agreement. Mylan Newco has not carried on any activities other than in connection with the Business Combination Agreement.

Mylan II B.V.

Krijgsman 20

1186 DM Amstelveen, The Netherlands

+44 (0) 1707-853-000



 

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Mylan Newco Sub is a wholly owned subsidiary of Mylan Newco. Mylan Newco Sub was incorporated under the laws of the Netherlands on July 25, 2019 for the purposes of effecting certain elements of the transactions in accordance with the Business Combination Agreement. Mylan Newco Sub has not carried on any activities other than in connection with the Business Combination Agreement.

Pfizer Inc.

235 East 42nd Street

New York, New York 10017

+1 (212) 733-3451

Pfizer is a research-based, global biopharmaceutical company. Pfizer applies science and its global resources to bring therapies to people that extend and significantly improve their lives through the discovery, development and manufacture of healthcare products, including innovative medicines and vaccines. Pfizer works across developed and emerging markets to advance wellness, prevention, treatments and cures that challenge the most feared diseases of our time. Pfizer collaborates with healthcare providers, governments and local communities to support and expand access to reliable, affordable healthcare around the world. Pfizer’s revenues are derived from the sale of its products and, to a much lesser extent, from alliance agreements, under which it co-promotes products discovered or developed by other companies or itself. The majority of Pfizer’s revenues come from the manufacture and sale of biopharmaceutical products. Pfizer was incorporated under the laws of the State of Delaware on June 2, 1942.

Upjohn Inc.

c/o Pfizer Inc.

235 East 42nd Street

New York, New York 10017

+1 (212) 733-3451

Newco is a recently formed corporation, organized in the State of Delaware on February 14, 2019, which is currently a wholly owned subsidiary of Pfizer and will hold, via its subsidiaries, the Upjohn Business at the time of the Distribution. Effective as of closing of the Combination, Newco will be named “Viatris” and will operate both Mylan and the Upjohn Business. In connection with the Separation, Pfizer will cause certain assets and liabilities to be conveyed to Newco and entities that are or will become subsidiaries of Newco pursuant to an internal restructuring in order to separate the Upjohn Business from Pfizer’s other businesses, and will then distribute all of the shares of Newco common stock pro rata to Pfizer stockholders entitled to shares of Newco common stock in the Distribution. Pfizer, Newco and Mylan will effect the Combination through a Reverse Morris Trust transaction structure. A Reverse Morris Trust transaction structure generally involves the spin-off or split-off of a subsidiary, usually by means of a distribution of, or an exchange offer for, common stock of such subsidiary, by the subsidiary’s parent company to its stockholders, and the immediately subsequent merger or other combination of the subsidiary with a third party. The first step of the Reverse Morris Trust transaction will be the distribution of all the shares of Newco common stock to Pfizer stockholders, and the second step will be the business combination transaction in which the Upjohn Business and Mylan will combine, with Newco becoming the parent of the combined company as a result of the business combination transaction. Pfizer and its stockholders are not expected to recognize any taxable income, gain or loss as a result of the Distribution for U.S. federal income tax purposes. The Combination is expected to be a taxable transaction to Mylan shareholders. For more information regarding the U.S. federal income tax consequences of the Combination, see “Material Tax Consequences—Material U.S. Federal Income Tax Consequences” beginning on page 142.



 

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The Upjohn Business currently operates as a business unit within Pfizer and through certain subsidiaries of Pfizer. The Upjohn Business is a global leader in the commercialization and manufacturing of pharmaceutical products, and has a portfolio of 20 globally recognized pharmaceutical brands as well as a U.S.-based generics platform, Greenstone.

Utah Acquisition Sub Inc.

c/o Pfizer Inc.

235 East 42nd Street

New York, New York 10017

+1 (212) 733-3451

Acquisition Sub is an indirectly wholly owned subsidiary of Newco. Acquisition Sub was organized in the State of Delaware on July 25, 2019 for the purposes of effecting certain elements of the Combination in accordance with the Business Combination Agreement. Acquisition Sub has not carried on any activities other than in connection with the Business Combination Agreement.

The Transactions (see “The Transactions” beginning on page 92).

On July 29, 2019, Pfizer and Newco entered into the Separation and Distribution Agreement, and, on the same day, Pfizer, Newco and Mylan and certain of their affiliates entered into the Business Combination Agreement. These agreements provide for Pfizer to combine its global, primarily off-patent branded and generic established medicines business (the “Upjohn Business”) with Mylan in a Reverse Morris Trust transaction. The principal transactions to effect the Reverse Morris transaction include the following:

 

   

Separation. Pfizer will contribute the Upjohn Business to Newco, so that the Upjohn Business is separated from the remainder of Pfizer’s businesses (the “Separation”).

 

   

Distribution. Following the Separation, Pfizer will distribute all of the issued and outstanding shares of Newco common stock held by Pfizer by way of pro rata dividend (the “Distribution”). The number of shares of Newco common stock that will be distributed in the Distribution will be such that, after the Combination (as defined below) described below, Pfizer stockholders as of the record date of the Distribution will hold 57% of the fully diluted outstanding shares of Newco common stock following the Combination.

 

   

Combination. Immediately following the Distribution, Newco and Mylan will engage in a strategic business combination transaction in which Mylan shareholders will receive one share of Newco common stock for each Mylan ordinary share held by such Mylan shareholder, subject to any applicable withholding taxes, including any Dutch dividend withholding tax (the “Combination”). The number of shares of Newco common stock that will be issued in the Combination will be such that, after the Combination, Mylan shareholders as of immediately before the Combination will hold 43% of the fully diluted outstanding shares of Newco common stock following the Combination.

Newco, which will be the parent entity of the combined Upjohn Business and Mylan business, will be renamed “Viatris” effective as of the closing of the Combination. It is expected that there will be approximately 1.2 billion shares of Newco common stock outstanding immediately after the Combination (calculated based on the estimated maximum number of 526,700,740 Mylan ordinary shares expected to be exchanged for Newco common stock in connection with the Combination). Newco common stock will be listed on the NASDAQ under a ticker symbol to be determined.

In connection with the transactions, Pfizer and Newco will enter into several other agreements to provide a framework for their relationship after the Distribution. These agreements provide for the allocation between Pfizer, on the one hand, and Newco, on the other hand, of certain assets, liabilities and obligations related to the



 

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Upjohn Business and will govern the relationship between Pfizer and Newco after the Distribution, including with respect to employee matters, intellectual property rights, transitional services, manufacturing and supply arrangements and tax matters.

For a more complete discussion of the agreements related to the transactions, see “Business Combination Agreement,” “Separation and Distribution Agreement” and “Additional Transaction Agreements.”

Overview (see “The Transactions” beginning on page 92).

Below is a description of the sequence of principal transactions relating to the Separation, the Distribution and the Combination:

 

Step 1 (Contribution):

Pfizer will engage in a series of transactions to contribute the Upjohn Business to Newco, so that the Upjohn Business is separated from Pfizer’s other businesses.

 

Step 2 (Cash Distribution):

Newco will make a cash payment to Pfizer equal to $12 billion, which this document refers to as the “Cash Distribution,” as partial consideration for the contribution of the Upjohn Business from Pfizer to Newco. Newco has obtained financing commitments from certain financial institutions that will permit Newco to incur borrowings in an aggregate principal amount of up to $12 billion. Newco may issue debt securities or incur other long-term debt financing in lieu of borrowing under the financing commitments. Newco expects to use the proceeds of such financings to make the Cash Distribution. The anticipated material terms of the financing, based on the current expectations of Newco and Mylan, are described in more detail under “Description of Financing.” After the Distribution, Pfizer will use the proceeds of the Cash Distribution to (a) repurchase Pfizer common stock, (b) make pro rata special cash distributions to its stockholders and/or (c) repay or repurchase debt (including principal, interest and associated premiums and fees) held by third-party lenders (the “Pfizer Distribution Payments”).

 

  As partial consideration for the contribution of the Upjohn Business to Newco, Newco will also issue to Pfizer additional shares of Newco common stock such that the number of shares of Newco common stock then outstanding and held by Pfizer will be equal to the Distribution Shares, which is (a) the number of fully diluted Mylan ordinary shares (calculated as described in the Business Combination Agreement) multiplied by the quotient of 57% divided by 43% minus (b) the number of shares of Newco common stock underlying certain awards under Newco’s stock plan that will be granted to employees of the Upjohn Business who held certain outstanding and unvested Pfizer equity awards immediately before the time at which the Distribution occurs (the “Distribution Shares”).

 

Step 3 (Distribution):

Pfizer will distribute all of the Distribution Shares to Pfizer stockholders in a spin-off or a split-off. In a spin-off, Pfizer will effect the Distribution by distributing on a pro rata basis all of the Distribution Shares to Pfizer stockholders entitled to shares of Newco



 

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common stock in the Distribution as of the record date of the Distribution. In a split-off, Pfizer would offer its stockholders the option to exchange all or a portion of their shares of Pfizer common stock for shares of Newco common stock in an exchange offer, resulting in a reduction in shares of Pfizer common stock outstanding. If the exchange offer is undertaken and consummated, the remaining Distribution Shares, if any, would be distributed on a pro rata basis to Pfizer stockholders whose shares of Pfizer common stock remain outstanding after the consummation of the exchange offer.

 

  This document assumes that the Distribution will occur through a spin-off. If a split-off is ultimately selected by Pfizer, Newco will file a registration statement on Form S-4 for the split-off, and Pfizer will file a Schedule TO for the split-off.

 

Step 4 (Combination):

Under the terms of the Business Combination Agreement, immediately following the Distribution, Newco and Mylan will effect the Combination through the following series of transactions:

 

   

First, Mylan will engage in a legal triangular merger under Dutch law (the “Mylan Merger”), in which Mylan will merge with and into Mylan II B.V. (“Mylan Newco Sub”), with Mylan Newco Sub surviving as a wholly owned subsidiary of Mylan I B.V. (“Mylan Newco”). In the Mylan Merger, each Mylan ordinary share would be replaced by one Mylan Newco ordinary share. The Mylan Newco ordinary shares will not be listed. The Mylan Newco ordinary shares will be in existence only until the dissolution and liquidation of Mylan Newco has been completed as described below. After the Mylan Newco Liquidation Distribution (as defined in this document) has been made, we do not expect there to be any further distributions in respect of the Mylan Newco ordinary shares, nor do we expect any Mylan Newco shareholder meeting to be held at which Mylan Newco shareholders could exercise voting rights.

 

   

Second, Mylan Newco will sell and transfer to Acquisition Sub, an indirect, wholly owned subsidiary of Newco, or its designated nominee, all of the outstanding shares of Mylan Newco Sub in exchange for a note that is mandatorily exchangeable into a number of shares of Newco common stock equal to the number of Mylan Newco ordinary shares outstanding immediately after the effective time of the Mylan Merger (such sale and transfer, the “Share Sale”).

 

   

Third, Mylan Newco will be dissolved and liquidated in accordance with Dutch law and each holder of Mylan Newco ordinary shares will, upon distribution of the Exchangeable Note, receive one share of Newco common stock for each Mylan Newco ordinary share held by such holder, subject to any applicable withholding taxes, including any Dutch dividend withholding tax (such liquidation, the “Mylan Newco Liquidation”).



 

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  If the Mylan Merger is not consummated within the period specified by Section 2:318(1) of the Dutch Civil Code (generally, six months after the announcement in a Dutch nationally distributed daily newspaper that the merger proposal with respect to the Mylan Merger has been deposited with the Dutch trade registry and disclosed for public inspection), then, unless otherwise mutually determined by Pfizer, Newco and Mylan, the Combination will occur through the following steps, which do not involve the Mylan Merger. This alternative transaction structure, which this document refers to as the “Alternative Transaction Structure,” consists of the following:

 

   

First, Mylan will sell and transfer to Acquisition Sub all of Mylan’s assets and liabilities, in exchange for a note that is mandatorily exchangeable into a number of shares of Newco common stock equal to the number of Mylan ordinary shares outstanding immediately after the effective time of the Asset Sale (as defined below) (the “Mylan Exchangeable Note”) (such sale and transfer, the “Asset Sale”); and

 

   

Second, Mylan will be dissolved and liquidated in accordance with Dutch law and each holder of Mylan ordinary shares will, upon distribution of the Exchangeable Note, receive one share of Newco common stock for each Mylan ordinary share held by such holder, subject to any applicable withholding taxes, including any Dutch dividend withholding tax (such liquidation, the “Mylan Liquidation”).

 

  Each step of the Combination is intended to be completed substantially concurrently, in the order indicated.

When the Distribution and Combination are completed, Pfizer stockholders as of the record date of the Distribution will own 57% of the outstanding shares of Newco common stock, and Mylan shareholders as of immediately before the Combination will own 43% of the outstanding shares of Newco common stock, in each case on a fully diluted basis.

Set forth below are diagrams that graphically illustrate, in simplified form, the existing corporate structure, the corporate structure immediately following the Separation and the Distribution but before the Combination (both in the scenario that the Alternative Transaction Structure is not adopted and in the scenario that the Alternative Transaction Structure is adopted), and the corporate structure immediately following the consummation of the Combination (both in the scenario that the Alternative Transaction Structure is not adopted and in the scenario that the Alternative Transaction Structure is adopted).



 

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Pre-Distribution Structure

 

 

LOGO



 

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If the Alternative Transaction Structure Is Not Adopted: Structure Following the Distribution and Mylan Merger but Before the Share Sale and Mylan Newco Liquidation Distribution

 

 

LOGO



 

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If the Alternative Transaction Structure Is Not Adopted: Structure Following the Share Sale and Mylan Newco Liquidation Distribution

 

 

LOGO

 

*

Excludes overlap of Pfizer stockholders and Mylan shareholders



 

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If the Alternative Transaction Structure Is Adopted: Structure Following the Distribution but Before the Combination

 

 

LOGO



 

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Structure Following the Combination if the Alternative Transaction Structure Is Adopted

 

 

LOGO

 

*

Excludes overlap of Pfizer stockholders and Mylan shareholders

Conditions to the Transactions (see “Business Combination Agreement—Conditions to the Combination” beginning on page 178 and “Separation and Distribution Agreement—Conditions to the Distribution” beginning on page 186).

As more fully described in this document, the Separation and the Distribution are generally subject to the same closing conditions as the Combination, and the Combination is subject to consummation of the Separation and the Distribution, among other closing conditions.

Conditions to the Combination

The Business Combination Agreement provides that the respective obligations of each party to conduct the closing of the transactions contemplated by the Business Combination Agreement are subject to the fulfillment (or, to the extent permitted by applicable law, waiver) of the following conditions on or before the closing date:

 

   

any waiting period applicable to the Combination under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder (the “HSR Act”) has



 

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expired or been earlier terminated and competition law merger control clearance in the Required Jurisdictions (as defined under “—Regulatory Approvals”) has been obtained;

 

   

the consummation of the Separation and the Distribution in accordance with the terms of the Separation and Distribution Agreement;

 

   

the effectiveness of the registration statement on Form 10 filed by Newco to effect the registration of shares of Newco common stock that will be received by holders of Pfizer common stock in connection with the Distribution, as such registration may be amended or supplemented from time to time before the time at which the Distribution occurs, and the registration statement filed with the SEC of which this document forms a part, and the absence of any stop order issued by the SEC or any pending proceeding before the SEC seeking a stop order with respect thereto;

 

   

the approval of the listing of the Newco common stock to be issued in the Distribution and the Combination on the NYSE or the NASDAQ;

 

   

the approval and adoption by Mylan shareholders of the Combination Proposal (consisting of the Mylan Merger Resolution, the Share Sale Resolution, the Mylan Newco Liquidation Resolutions, the Alternative Transaction Resolutions and the Discharge Resolution) in accordance with applicable law (the “Mylan Shareholder Approval”) has been obtained; and

 

   

the absence of any law, governmental order or other action taken by a court of competent jurisdiction or other governmental authority prohibiting, enjoining, restraining or otherwise making illegal the Separation, the Distribution, the Combination or the Mylan Newco Liquidation Distribution (or, if the Alternative Transaction Structure is adopted, the Mylan Liquidation Distribution).

Pfizer’s and Newco’s obligations to conduct the closing of the Combination are subject to the fulfillment (or waiver by Pfizer, to the extent permissible under applicable law) of the following additional conditions:

 

   

performance and compliance in all material respects by each of Mylan, Mylan Newco and Mylan Newco Sub (each, a “Mylan Party”) of all obligations and covenants, respectively, required to be performed or complied with, as applicable, by it under the Business Combination Agreement at or before the closing date;

 

   

the accuracy of the representations and warranties of the Mylan Parties contained in the Business Combination Agreement at and as of the date of the Business Combination Agreement and as of the closing date (except for any such representations and warranties made as of a particular date or period), generally subject to a material adverse effect standard or other materiality standard provided in the Business Combination Agreement;

 

   

receipt by Pfizer of a certificate of Mylan, executed on its behalf by a senior officer, certifying to the effect that the conditions referred to in the immediately preceding two bullets have been satisfied;

 

   

receipt by Pfizer of a private letter ruling by the U.S. Internal Revenue Service (the “IRS,” and such private letter ruling the “IRS Ruling”) and an opinion of its tax counsel, Davis Polk & Wardwell LLP (the “Tax Opinion”), each to the effect that the Distribution, together with certain related transactions, will qualify as a tax-free “reorganization” within the meaning of Section 368(a)(1)(D) of the Internal Revenue Code, the Distribution will qualify as a tax-free distribution within the meaning of Section 355 of the Internal Revenue Code and the Pfizer Distribution Payments will qualify as money distributed to Pfizer creditors or stockholders in connection with the reorganization for purposes of Section 361(b) of the Internal Revenue Code; and

 

   

consummation of the Cash Distribution in accordance with the terms of the Separation and Distribution Agreement.



 

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The Mylan Parties’ obligations to conduct the closing of the Combination are subject to the fulfillment (or waiver by Mylan, to the extent permissible under applicable law) of the following additional conditions:

 

   

performance and compliance in all material respects by Newco, Acquisition Sub and Pfizer of all obligations and covenants, respectively, required to be performed or complied with, as applicable, by it under the Business Combination Agreement at or before the closing date;

 

   

the accuracy of the representations and warranties of Pfizer contained in the Business Combination Agreement at and as of the date of the Business Combination Agreement and as of the closing date (except for any such representations and warranties made as of a particular date or period), generally subject to a material adverse effect standard or other materiality standard provided in the Business Combination Agreement; and

 

   

receipt by Mylan of a certificate of Pfizer, executed on its behalf by a senior officer, certifying to the effect that the conditions referred to in the immediately preceding two bullets have been satisfied.

Conditions to the Separation and Distribution

Pfizer’s obligation to complete the Distribution is subject to the satisfaction or waiver of all the conditions to the Combination, as set forth in the Business Combination Agreement, other than the condition that the Distribution has been consummated (see “Business Combination Agreement—Conditions to the Combination”). Further, without Mylan’s prior written consent, the Distribution will not occur unless each of Pfizer and Newco will have executed and delivered, and caused each of their applicable subsidiaries to execute and deliver, as applicable, the Transition Services Agreements, the Tax Matters Agreement, the Employee Matters Agreement, the Manufacturing and Supply Agreements, the IP Matters Agreement and the Trademark License Agreement (together with the Specified Purchase Agreement (as defined in “Additional Transaction Agreements—Specified Purchase Agreement”), if executed, the “Ancillary Agreements,” and together with the Business Combination Agreement and the Separation and Distribution Agreement, the “Transaction Documents”) to which each of Pfizer, Newco or any applicable subsidiary is a party, and cause to be implemented and become effective certain of Newco’s organizational documents.

The Combination; Consideration (see “The Transactions” beginning on page 92).

Under the terms of the Business Combination Agreement, immediately following the Distribution, and unless the Alternative Transaction Structure is adopted, Newco and Mylan will combine through the Mylan Merger, the Share Sale and the Mylan Newco Liquidation, or, if the Mylan Merger is not consummated within the period specified by Section 2:318(1) of the Dutch Civil Code (generally, six months after the announcement in a Dutch nationally distributed daily newspaper that the merger proposal with respect to the Mylan Merger has been deposited with the Dutch trade registry and disclosed for public inspection), then, unless otherwise mutually determined by Pfizer, Newco and Mylan, Newco and Mylan will be combined through the Alternative Transaction Structure consisting of the Asset Sale and the Mylan Liquidation.

In connection with the Mylan Newco Liquidation, or, if the Alternative Transaction Structure is adopted, the Mylan Liquidation, the Mylan shareholders will receive, as a liquidation distribution, a number of shares of Newco common stock equal to the number of Mylan Newco ordinary shares or Mylan ordinary shares, as applicable, held by such shareholder as of such time, reduced by any applicable withholding taxes, if any, including any Dutch dividend withholding tax. The exchange ratio of Newco common stock and Mylan Newco ordinary shares or Mylan ordinary shares, as applicable, equals one to one (the “Exchange Ratio”). The Business Combination Agreement provides that after the Distribution but before the Combination, the number of outstanding shares of Newco common stock will be equal to 57% of the fully diluted outstanding shares of Newco common stock following the Combination.



 

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When the Distribution and the Combination are completed, Pfizer stockholders as of the record date of the Distribution will own 57% of the outstanding Newco common stock, and Mylan shareholders as of immediately before the Combination will own 43% of the outstanding Newco common stock, in each case on a fully diluted basis.

See “The Transactions—Calculation of the Combination Consideration.”

Treatment of Mylan Equity Awards (see “Business Combination Agreement—Treatment of Mylan Equity Awards” beginning on page 161).

 

   

Mylan Options and Mylan SARs: At the Effective Time, each option to purchase Mylan ordinary shares (a “Mylan Option”) or stock appreciation right in respect of Mylan ordinary shares (a “Mylan SAR”) that is outstanding as of immediately prior to the Effective Time will be converted into the right to receive, as of immediately following the Share Sale Effective Time or the Asset Sale Effective Time, as applicable, an option to purchase shares of Newco common stock (a “Newco Option”) or a stock appreciation right in respect of shares of Newco common stock (a “Newco SAR”), as applicable, (a) with respect to a number of shares of Newco common stock equal to the number of Mylan ordinary shares subject to such Mylan Option or Mylan SAR, as applicable, multiplied by the Exchange Ratio and (b) with an exercise price per share or base price per share, as applicable, equal to the exercise price per share or base price per share of such Mylan Option or Mylan SAR, as applicable, divided by the Exchange Ratio.

 

   

Mylan RSU Awards: At the Effective Time, each time-vesting restricted stock unit award in respect of Mylan ordinary shares (a “Mylan RSU Award”) that is outstanding as of immediately prior to the Effective Time will be converted into the right to receive, as of immediately following the Share Sale Effective Time or the Asset Sale Effective Time, as applicable, a time-vesting restricted stock unit award in respect of shares of Newco common stock (a “Newco RSU Award”) in respect of a number of shares of Newco common stock equal to the number of Mylan ordinary shares subject to such Mylan RSU Award multiplied by the Exchange Ratio.

 

   

Mylan PRSU Awards: At the Effective Time, each performance-vesting restricted stock unit in respect of Mylan ordinary shares (each, a “Mylan PRSU Award”) that is outstanding as of immediately prior to the Effective Time will be converted into the right to receive, as of immediately following the Share Sale Effective Time or the Asset Sale Effective Time, as applicable, a Newco RSU Award in respect of a number of shares of Newco common stock equal to the number of Mylan ordinary shares subject to such Mylan PRSU Award as of immediately prior to the Effective Time multiplied by the Exchange Ratio. The number of Mylan ordinary shares subject to a Mylan PRSU Award with a performance period that is incomplete as of immediately prior to the Effective Time will be determined assuming performance goals are satisfied at the target level. After the Share Sale Effective Time or the Asset Sale Effective Time, as applicable, each such Newco RSU Award will be subject only to time-based vesting at the end of the originally scheduled performance period (or any later scheduled vesting date).

Each converted equity award described above will be subject to substantially the same terms and conditions as applied to the corresponding Mylan equity award immediately prior to the Effective Time, including with respect to the vesting and payment schedules of each such award (except, in the case of any converted Mylan PRSU Award, for any performance-based vesting conditions).

For a more complete discussion of the treatment of Mylan equity awards, see “Business Combination Agreement—Treatment of Mylan Equity Awards” beginning on page 161.

Treatment of Pfizer Equity Awards (see “Additional Transaction Agreements—Employee Matters Agreement” beginning on page 192).



 

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Pfizer equity awards held by Pfizer employees who move to Newco will generally be vested pro rata as of immediately prior to the Distribution and settle in accordance with the existing terms of such awards and such employees will receive a grant of a replacement award from Newco based on the value of the portion of the Pfizer equity award that is forfeited, with such replacement award to generally be subject to the same terms and conditions as the corresponding forfeited Pfizer equity award. Pfizer equity awards held by current and former employees and non-employee directors of Pfizer, as well as Pfizer awards held by Newco employees that remain outstanding following the Distribution, will generally remain denominated in shares of Pfizer common stock, and Pfizer will adjust the terms of such awards as it determines to be appropriate to preserve the value of such awards in connection with the Distribution.

For a more complete discussion of the treatment of Pfizer equity awards, see “Additional Transaction Agreements—Employee Matters Agreement” beginning on page 192.

Voting by Mylan Directors and Executive Officers (see “Information About the Mylan Extraordinary General Meeting” beginning on page 85).

As of the close of business on February 4, 2020, the last practicable trading day for which information is available as of the date of this document, approximately 2,842,707 Mylan ordinary shares, representing approximately 0.6% of the outstanding Mylan ordinary shares, were held by Mylan directors and executive officers and their affiliates. Mylan expects that Mylan’s directors and executive officers will vote their shares in favor of each of the Proposals, although none of them has entered into any agreements obligating him or her to do so.

Opinions of Mylan’s Financial Advisors (see “The Transactions—Opinions of Mylan’s Financial Advisors” beginning on page 109).

Opinion of Centerview Partners LLC

Mylan retained Centerview Partners LLC (“Centerview”) to act as financial advisor to the Mylan Board and the Mylan Strategic Review Committee in connection with the transactions. In connection with this engagement, the Mylan Board and the Mylan Strategic Review Committee requested that Centerview evaluate the fairness, from a financial point of view, to the holders of Mylan ordinary shares (other than Mylan ordinary shares held by Mylan, Pfizer or any of their respective affiliates, which are collectively referred to as “Excluded Shares” throughout this section, the section entitled “The Transactions—Background of the Combination” and the summary of Centerview’s opinion below under the caption “Opinions of Mylan’s Financial Advisors—Opinion of Centerview Partners LLC”) of the Exchange Ratio, which will result in a pro forma ownership of the fully diluted shares of Newco common stock being held 43% by former Mylan shareholders and 57% by Pfizer stockholders in accordance with the Business Combination Agreement. On July 26, 2019, Centerview rendered to the Mylan Board and the Mylan Strategic Review Committee its oral opinion, which was subsequently confirmed by delivery of a written opinion, dated July 26, 2019, that, as of such date and based upon and subject to the various assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, the Exchange Ratio, which will result in a pro forma ownership of the fully diluted shares of Newco common stock being held 43% by former Mylan shareholders and 57% by Pfizer stockholders in accordance with the Business Combination Agreement, was fair, from a financial point of view, to the holders of Mylan ordinary shares (other than Excluded Shares).

The full text of Centerview’s written opinion, dated July 26, 2019, which describes the various assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, is attached as Annex C and is incorporated by reference in this document. Centerview’s financial advisory services and opinion were provided for the information and assistance of the Mylan Board and the Mylan Strategic Review Committee (in their capacity as directors and not in any



 

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other capacity) in connection with and for purposes of their consideration of the transactions and Centerview’s opinion addressed only the fairness, from a financial point of view, as of the date thereof, to the holders of Mylan ordinary shares (other than Excluded Shares) of the Exchange Ratio, which will result in a pro forma ownership of the fully diluted shares of Newco common stock being held 43% by former Mylan shareholders and 57% by Pfizer stockholders in accordance with the Business Combination Agreement. Centerview’s opinion did not address any other term or aspect of the Business Combination Agreement or the transactions and does not constitute a recommendation to any Mylan shareholder or how any Mylan shareholder should vote or act with respect to the Combination or any other matter.

The full text of Centerview’s written opinion, dated July 26, 2019, should be read carefully in its entirety for a description of the various assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion.

For a summary of Centerview’s opinion and the methodology that Centerview used to render its opinion, see the section titled “Opinions of Mylan’s Financial Advisors—Opinion of Centerview Partners LLC.”

Opinion of PJT Partners LP

Mylan retained PJT Partners LP (“PJT Partners”) to act as financial advisor to the Mylan Board and the Mylan Strategic Review Committee in connection with the transactions and, at the request of the Mylan Board and the Mylan Strategic Review Committee, to render its opinion to the Mylan Board and the Mylan Strategic Review Committee as to the fairness, from a financial point of view, to the holders of Mylan ordinary shares (other than Mylan ordinary shares held by Mylan, Pfizer or any of their respective affiliates, which are collectively referred to as “Excluded Shares” throughout this section, the section entitled “The Transactions—Background of the Combination” and the summary of PJT Partners’ opinion below under the caption “Opinions of Mylan’s Financial Advisors—Opinion of PJT Partners LP”) of the Exchange Ratio, which will result in a pro forma ownership of the fully diluted shares of Newco common stock being held 43% by former Mylan shareholders and 57% by Pfizer stockholders, in accordance with the Business Combination Agreement. At a meeting of the Mylan Board and the Mylan Strategic Review Committee on July 26, 2019, PJT Partners rendered its oral opinion, which was subsequently confirmed in its written opinion dated July 26, 2019, to the Mylan Board and the Mylan Strategic Review Committee that, based upon and subject to the various assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken in connection with its opinion, as of the date thereof, that the Exchange Ratio, which will result in a pro forma ownership of the fully diluted shares of Newco common stock being held 43% by former Mylan shareholders and 57% by Pfizer stockholders, in accordance with the Business Combination Agreement, was fair, from a financial point of view, to the holders of Mylan ordinary shares (other than Excluded Shares).

The full text of PJT Partners’ written opinion delivered to the Mylan Board and the Mylan Strategic Review Committee, dated July 26, 2019, is attached as Annex D and incorporated by reference in this document. PJT Partners’ written opinion sets forth, among other things, the various assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by PJT Partners in rendering its opinion. You are encouraged to read the opinion carefully in its entirety. PJT Partners provided its opinion to the Mylan Board and the Mylan Strategic Review Committee, in their capacity as such, in connection with and for purposes of their consideration of the transactions and PJT Partners’ opinion addressed only the fairness, from a financial point of view, as of the date thereof, to the holders of Mylan ordinary shares (other than Excluded Shares) of the Exchange Ratio, which will result in a pro forma ownership of the fully diluted shares of Newco common stock being held 43% by former Mylan shareholders and 57% by Pfizer stockholders in accordance with the Business Combination Agreement. PJT Partners’ opinion does not constitute a recommendation as to any action the Mylan Board or the Mylan Strategic Review Committee should take with respect to the transactions or how any



 

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Mylan shareholder should vote or act with respect to the Combination or any other matter. The summary of the PJT Partners opinion contained in this document is qualified in its entirety by reference to the full text of PJT Partners’ written opinion.

For a summary of PJT Partners’ opinion and the methodology that PJT Partners used to render its opinion, see the section titled “Opinions of Mylan’s Financial Advisors—Opinion of PJT Partners LP.”

Board of Directors and Executive Officers of Newco Following the Combination (see “The Transactions—Board of Directors and Executive Officers of Newco Following the Combination; Operations Following the Combination; Liquidity and Capital Resources of Newco Following the Combination” beginning on page 136).

The Business Combination Agreement provides that, as of the closing of the Combination, the Newco Board will consist of 13 members, including the Executive Chairman of Newco, who will be Robert J. Coury (current Chairman of the Mylan Board); the Chief Executive Officer of Newco, who will be Michael Goettler (current Global President of the Upjohn Business); eight persons designated by Mylan before the closing date; and three persons designated by Pfizer before the closing date (after consultation in good faith with Mylan). On December 18, 2019, Pfizer and Mylan announced that Ian Read and James Kilts (current director of Pfizer) will join the Newco Board upon completion of the Combination. Messrs. Read and Kilts were designated by Pfizer. Mr. Kilts will cease to be a member of the Pfizer Board immediately upon the closing of the Combination. The Executive Chairman of Newco will be in the class of directors whose term expires at the 2023 annual meeting of Newco stockholders, and each of the three persons designated by Pfizer will serve in a different class of directors.

The Business Combination Agreement provides that, as of the closing of the Combination, Robert J. Coury will become the Executive Chairman of Newco, Michael Goettler will become the Chief Executive Officer of Newco and Rajiv Malik, Mylan’s President, will become the President of Newco. The Chief Financial Officer of Newco will be selected jointly by Mylan and Pfizer following a search initiated by Mylan.

Interests of Mylan Directors and Executive Officers in the Transactions (see “The Transactions—Interests of Mylan Directors and Executive Officers in the Transactions” beginning on page 124).

Certain of Mylan’s directors and executive officers may have interests in the transactions that may be different from, or in addition to, those of Mylan shareholders generally. The Mylan Board was aware of and considered these potential interests, among other matters, in evaluating, negotiating and approving the Business Combination Agreement and the transactions, as well as in recommending to Mylan shareholders that they vote to approve the Combination Proposal, adopt the advisory Compensation Proposal and adopt each of the advisory Governance Proposals. See the section entitled “The Transactions—Interests of Mylan Directors and Executive Officers in the Transactions” beginning on page 124 of this document for a more detailed description of these interests. These interests may include the following, among others:

 

   

the conversion of Mylan equity awards into Newco equity awards as described in the section entitled “Business Combination Agreement—Treatment of Mylan Equity Awards” beginning on page 161 of this document;

 

   

the potential accelerated vesting of outstanding equity awards in the event of a qualifying termination of employment within 24 months following the closing of the Combination (or, in the case of Mylan’s non-employee directors, the vesting of outstanding equity awards held by any non-employee director who does not join the Newco Board or whose service on the Mylan Board terminates prior to the closing of the Combination);

 

   

the right to severance payments and other benefits under the executive officers’ respective Transition and Succession Agreements with Mylan in the event of a qualifying termination of employment within 24 months following the closing of the Combination (or in the event of certain terminations in connection with or in anticipation of the transactions);



 

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in the case of certain Mylan directors and executive officers, potential service on the Newco Board or as an executive officer of Newco following the closing of the Combination and compensation in connection with such service, as applicable; and

 

   

continued indemnification and directors’ and officers’ liability insurance to be provided by Newco.

Interests of Newco Directors and Executive Officers in the Transactions (see “The Transactions—Interests of Newco Directors and Executive Officers in the Transactions” beginning on page 131).

Certain of Newco’s directors or executive officers may have interests in the transactions that may be different from, or in addition to, those of Pfizer’s stockholders generally. The Pfizer Board was aware of and considered these potential interests, among other matters, in evaluating, negotiating and approving the Business Combination Agreement and the transactions. See the section entitled “The Transactions—Interests of Newco Directors and Executive Officers in the Transactions” beginning on page 131 of this document for a more detailed description of these interests. These interests may include the following, among others:

 

   

the treatment of Pfizer equity awards as described in the section of this proxy statement/prospectus entitled “Additional Transaction Agreements—Employee Matters Agreement” beginning on page 192 of this document;

 

   

Ian C. Read, who served as Executive Chairman of Pfizer from January 2019 to December 31, 2019 and as Chairman of the Pfizer Board and Chief Executive Officer of Pfizer from December 2011 to December 2018, and James M. Kilts, currently a member of the Pfizer Board, will each become members of the Newco Board upon the closing of the Combination;

 

   

Mr. Read became entitled to certain payments pursuant to a consulting agreement with Pfizer;

 

   

Michael Goettler, currently the Global President of the Upjohn Business, will become a member of the Newco Board and Chief Executive Officer of Newco upon the closing of the Combination;

 

   

Mr. Goettler became entitled to certain payments pursuant to a retention letter and a deal completion letter with Pfizer; and

 

   

Messrs. Read, Kilts and Goettler and any other individuals who become directors or executive officers of Newco will be entitled to indemnification and directors’ and officers’ liability insurance to be provided by Newco.

Risk Factors (see “Risk Factors” beginning on page 51).

You should carefully consider the matters described in the section “Risk Factors,” as well as other information included in this document and the other documents to which they have been referred.

Regulatory Approvals (see “The Transactions—Regulatory Approvals Related to the Combination” beginning on page 139).

Under the HSR Act and related rules, the Combination may not be completed until the parties have filed Notification and Report forms with the U.S. Federal Trade Commission (the “FTC”) and the Antitrust Division of the Department of Justice (the “Antitrust Division”), and observed a specified statutory waiting period. Pfizer and Mylan filed Notification and Report forms with the FTC and the Antitrust Division on September 6, 2019. On October 7, 2019, Pfizer and Mylan each received a request for additional information from the FTC relating to the Combination. The effect of these requests, which were issued under the HSR Act, is to extend the waiting period imposed by the HSR Act until 30 days after Pfizer and Mylan have certified substantial compliance with the requests, unless the period is extended voluntarily by the parties or terminated earlier by the FTC. Pfizer and Mylan are also required to obtain antitrust clearance from the following antitrust authorities outside the United States as a condition precedent to the Combination (collectively, the “Required Jurisdictions”): the Australian



 

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Competition and Consumer Commission, the Brazilian Administrative Council of Economic Defense, the Canadian Competition Bureau, the State Administration for Market Regulation in China, the European Commission, the Competition Commission of India, the Japan Fair Trade Commission, the Mexican Federal Economic Competition Commission, the Philippine Competition Commission, the Federal Antimonopoly Service of Russia, the Competition Commission of South Africa and the Turkish Competition Authority, or to observe the applicable statutory waiting period in each of those jurisdictions. In addition, if the United Kingdom were to withdraw from the European Union before the issuance of antitrust clearance by the European Commission, the parties will also be required to obtain antitrust clearance from the UK Competition and Markets Authority if it asserts jurisdiction to review the transactions. Under the Business Combination Agreement, Pfizer and Mylan may add additional jurisdictions to the list of Required Jurisdictions by mutual written agreement before the closing of the Combination. On September 26, 2019, the Philippine Competition Commission informed the parties that the thresholds for a mandatory antitrust approval are not met, rendering the transactions not notifiable under applicable law. Accordingly, the parties withdrew the filing and the condition precedent to the Combination relating to receipt of antitrust clearance from the Philippine Competition Commission has been satisfied. On November 15, 2019, the Federal Antimonopoly Service of Russia granted clearance of the Combination. On January 16, 2020, the Chinese State Administration for Market Regulation granted clearance of the Combination. On January 21, 2020, the Brazilian Administrative Council of Economic Defense granted clearance of the Combination, effective as of February 7, 2020.

In addition to the Required Jurisdictions, Pfizer and Mylan are seeking antitrust clearance from the Competition Authority of Botswana, the Superintendence of Industry and Commerce in Colombia, the COMESA (Common Market for Eastern and Southern Africa) Competition Commission, the Namibian Competition Commission, the Serbian Commission for Protection of Competition, the General Authority for Competition of the Kingdom of Saudi Arabia, the Taiwanese Competition Commission, the Anti-Monopoly Committee of Ukraine and the New Zealand Commerce Commission. On September 27, 2019, the Serbian Commission for Protection of Competition granted an unconditional clearance of the Combination. On December 9, 2019, the Superintendence of Industry and Commerce in Colombia granted clearance of the Combination. On January 30, 2020, the Anti-Monopoly Committee of Ukraine granted clearance of the Combination.

Termination (see “Business Combination Agreement—Termination, Amendment and Waiver” beginning on page 179).

The Business Combination Agreement may be terminated at any time before the closing date:

 

   

by mutual written agreement of Pfizer and Mylan;

 

   

by either Pfizer or Mylan, subject to specified qualifications and exceptions, if:

 

   

any final and non-appealable legal restraint is in effect which permanently prohibits, enjoins, restrains or otherwise makes illegal the consummation of the Separation, the Distribution, the Combination or the Mylan Newco Liquidation Distribution (or, if the Alternative Transaction Structure is adopted, the Mylan Liquidation Distribution);

 

   

the closing of the Combination has not occurred on or before June 30, 2020, subject to (a) an automatic extension to September 30, 2020 if all of the conditions to closing, other than those pertaining to (i) the expiration of the waiting period under the HSR Act and other competition laws or (ii) any order or injunction prohibiting the Combination under antitrust laws (together, the “Antitrust Conditions”), have been satisfied or waived and (b) another automatic extension to December 30, 2020 if on September 30, 2020 one or both of the Antitrust Conditions have not been fulfilled but all other conditions to closing have been satisfied or waived (we refer to June 30, 2020, as so extended, as the “Outside Date”); or

 

   

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by Mylan, subject to specified qualifications and exceptions, in the event of a breach of any representation, warranty, covenant or agreement on the part of Pfizer or the Upjohn Entities (as defined below under “Business Combination Agreement—Conduct of Business Pending the Combination”), such that the closing conditions in the Business Combination Agreement regarding Pfizer’s or any Upjohn Entity’s, as applicable, representations, warranties, covenants or agreements would not be satisfied, and such breach is not cured within a specified time period or is incapable of being cured before the Outside Date;

 

   

by Pfizer, subject to specified qualifications and exceptions:

 

   

in the event of a breach of any representation, warranty, covenant or agreement on the part of the Mylan Parties, such that the closing conditions in the Business Combination Agreement regarding the Mylan Parties’ representations, warranties, covenants or agreements would not be satisfied, and such breach is not cured within a specified time period or is incapable of being cured before the Outside Date; or

 

   

before receipt of the Mylan Shareholder Approval, if the board of directors of Mylan (the “Mylan Board”) has effected a Mylan Change in Recommendation (as defined below).

The Separation and Distribution Agreement shall terminate immediately upon termination of the Business Combination Agreement, if the Business Combination Agreement is terminated in accordance with its terms before the time at which the Distribution occurs. After the time at which the Distribution occurs, the Separation and Distribution Agreement may not be terminated, except by an agreement in writing signed by a duly authorized officer of each of Pfizer and Newco.

Termination Fees (see “Business Combination Agreement—Termination, Amendment and Waiver—Termination Fee” beginning on page 180).

Mylan has agreed to pay to Pfizer, by way of compensation, $322 million (the “Termination Payment”), if the Business Combination Agreement is terminated as follows:

 

   

by Pfizer, before the receipt of the Mylan Shareholder Approval, if the Mylan Board has effected a Mylan Change in Recommendation;

 

   

by Pfizer, as a result of a willful breach by Mylan of its no solicitation obligations under the Business Combination Agreement and within 12 months after the date of such termination, a Competing Proposal (as defined under “Business Combination Agreement—No Solicitation by Mylan; Competing Proposal”) is consummated or Mylan enters into a definitive written agreement for a Competing Proposal (however, solely for purposes of this bullet point, all references to 15% in the definition of the term “Competing Proposal” are replaced with 50%); or

 

   

(a) by Mylan or Pfizer, if the Mylan Shareholder Approval has not been obtained upon a vote taken thereon at the Mylan Shareholders Meeting or (b) by Pfizer, as a result of a breach of Mylan of its obligation to hold the Mylan Shareholders Meeting to obtain the Mylan Shareholder Approval, and, in each case, before such termination, a Competing Proposal has been publicly announced or otherwise becomes publicly known (or, in the case of a willful breach by Mylan of its obligation to hold the Mylan Shareholders Meeting to obtain the Mylan Shareholder Approval, a Competing Proposal has been communicated to the Mylan Board), and such Competing Proposal has not been publicly withdrawn at least seven days before the Mylan Shareholders Meeting, and within 12 months after the date of such termination, any Competing Proposal is consummated or Mylan enters into a definitive written agreement for any Competing Proposal (however, solely for purposes of this bullet point, all references to 15% in the definition of the term “Competing Proposal” are replaced with 50%).

Pfizer’s Expenses (see “Business Combination Agreement—Termination, Amendment and Waiver—Pfizer’s Expenses” beginning on page 181).



 

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If the Business Combination Agreement is terminated by either Pfizer or Mylan because the Mylan Shareholder Approval has not been obtained upon a vote taken thereon at the Mylan Shareholders Meeting, then Mylan shall pay to Pfizer all reasonable out-of-pocket costs, fees and expenses incurred by Pfizer in connection with the Business Combination Agreement and the transactions contemplated thereby up to $96 million, but excluding all such costs, fees and expenses incurred by Pfizer before May 2, 2019. Such payment will be credited against any termination fee that is paid by Mylan to Pfizer.

Certain Adjustments (see “Separation and Distribution Agreement—Certain Adjustments” beginning on page 185).

The Separation and Distribution Agreement provides for specified adjustment payments to be made after the closing of the Distribution by Pfizer or Upjohn to the other party if and to the extent that at the closing of the Distribution the amount of Newco’s working capital as of immediately prior to the time at which the Distribution occurs is greater than or less than a specified target for such amount, as further described in the Separation and Distribution Agreement. In addition, the Separation and Distribution Agreement provides for Newco to pay to Pfizer an amount equal to Newco’s cash balance, up to a target amount, as of immediately prior to the time at which the Distribution occurs and, if applicable, cooperate with Pfizer to allow Pfizer to recover additional cash above such target amount, as further described in the Separation and Distribution Agreement.

Comparison of Shareholders’ Rights (see “Comparison of the Rights of Mylan Shareholders and Newco Stockholders” beginning on page 292).

Mylan shareholders will have different rights once they become Newco stockholders due to differences between Dutch law and Delaware law and differences between the governing documents of Mylan and Newco.

U.S. Federal Income Tax Consequences (see “Material Tax Consequences—Material U.S. Federal Income Tax Consequences” beginning on page 142).

The receipt of the Newco common stock in exchange for Mylan ordinary shares pursuant to the Combination will be a taxable transaction for U.S. federal income tax purposes to Mylan shareholders. Therefore, generally, a U.S. Holder (as defined below under “Material Tax Consequences—Material U.S. Federal Income Tax Consequences”) of Mylan ordinary shares will recognize capital gain or loss equal to the difference between (a) such U.S. Holder’s adjusted tax basis in its Mylan ordinary shares and (b) the fair market value of the Newco common stock (and the amount of any cash in lieu of fractional shares of Newco common stock) received in exchange for Mylan ordinary shares pursuant to the Combination. A U.S. Holder’s adjusted tax basis in its Mylan ordinary shares generally will equal such U.S. Holder’s purchase price for such Mylan ordinary shares, as adjusted to take into account stock dividends, stock splits, or similar transactions.

Except in certain circumstances, a Non-U.S. Holder (as defined below under “Material Tax Consequences—Material U.S. Federal Income Tax Consequences”) will not be subject to U.S. federal income or withholding tax on the exchange of Mylan ordinary shares for Newco common stock (and cash in lieu of fractional shares, if any) in the Combination.

In certain circumstances, Section 304 of the Internal Revenue Code could cause a holder of Mylan ordinary shares whose percentage interest in the combined company after the Combination and related purchases or sales is greater than or equal to such holder’s percentage interest in Mylan immediately before the transaction to be treated as receiving a dividend up to the fair market value of the Newco common stock received in the Combination. Non-U.S. Holders may be subject to U.S. federal income and withholding tax on such dividend income. In addition, because of the uncertainty regarding the application of Section 304 of the Internal Revenue Code and the possibility of dividend treatment, withholding agents may withhold tax at a rate of 30% (or such lower rate as may be specified by an applicable income tax treaty) on the full fair market value of Newco



 

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common stock received by a Non-U.S. Holder in the Combination. Holders of Mylan ordinary shares are urged to consult their tax advisors regarding the application of Section 304 of the Internal Revenue Code to them based on their particular circumstances, as well as any actions that may be taken to mitigate any potential adverse tax consequences.

The tax consequences to Mylan shareholders of the Combination may depend on a holder’s particular circumstances. Mylan shareholders should read the discussion below entitled “Material Tax Consequences—Material U.S. Federal Income Tax Consequences” beginning on page 142 of this document for a more detailed description of the U.S. federal income tax consequences of the Combination and should consult their own tax advisors for a full understanding of the tax consequences to them of the Combination.

Dutch Dividend Withholding Tax Consequences of the Combination to Holders of Mylan Ordinary Shares (see “Material Tax Consequences—Material Dutch Tax Consequences—Dutch Dividend Withholding Tax Consequences of the Combination to Holders of Mylan Ordinary Shares” beginning on page 151).

The Mylan Newco Liquidation Distribution, and if the Alternative Transaction Structure is adopted, the Mylan Liquidation Distribution to be received by the Mylan shareholders in the Combination, is subject to Dutch dividend withholding tax to the extent the Mylan Newco Liquidation Distribution or the Mylan Liquidation Distribution, as applicable (i.e., the value, in EUR, of the Newco common stock to be received by the Mylan shareholders in the Combination), exceeds the average paid up capital, in EUR, recognized for Dutch dividend withholding tax purposes of the Mylan Newco ordinary shares or the Mylan ordinary shares, as applicable, as of the closing.

Mylan has calculated the amount of paid up capital recognized for Dutch dividend withholding tax purposes of Mylan as of June 30, 2019 (the “Calculation”). Pursuant to the Calculation, Mylan’s paid up capital recognized for Dutch dividend withholding tax purposes amounts to approximately EUR 26 billion. On January 13, 2020, the Dutch Tax Authorities formally confirmed the Calculation. The average paid up capital recognized for Dutch dividend withholding tax purposes of the Mylan Newco ordinary shares shall at the Mylan Merger Effective Time, either amount to (a) the paid up capital recognized for Dutch dividend withholding taxes of the Mylan ordinary shares immediately prior to the Mylan Merger (i.e., approximately EUR 26 billion, updated for any relevant transactions between June 30, 2019 and the closing of the Combination) or, if lower, (b) the value (in EUR) of all issued and outstanding Mylan ordinary shares immediately prior to the Mylan Merger. The value of the Mylan Newco Liquidation Distribution in principle reflects the value (in EUR) of all issued and outstanding Mylan ordinary shares immediately prior to the Mylan Merger.

As a result, and assuming (i) the trading price of the Mylan ordinary shares at the time of the Mylan Newco Liquidation Distribution will not be significantly higher than the current trading price of the Mylan ordinary shares, (ii) the value of the EUR to the USD at the time of the Mylan Newco Liquidation Distribution will not be significantly lower than the current value of the EUR to the USD, (iii) no material negative changes will occur in the amount of paid up capital recognized for Dutch dividend withholding tax purposes of Mylan between June 30, 2019 and the time of the Mylan Newco Liquidation Distribution, and (iv) the Mylan Merger, the Share Sale, the Mylan Newco Liquidation and the Mylan Newco Liquidation Distribution (including the distribution of Newco common stock to Mylan Newco shareholders in connection with the automatic and mandatory exchange of the Exchangeable Note) will be effectuated as contemplated in the Business Combination Agreement, the Mylan Newco Liquidation Distribution shall be made free of withholding or deduction of Dutch dividend withholding tax.

If, contrary to Mylan’s expectations, Dutch dividend withholding tax is to be withheld in respect of the Mylan Newco Liquidation Distribution, Section 3.5(b) of the Business Combination Agreement provides that the Exchange Agent (as defined in the Business Combination Agreement) shall sell in one or more transactions, for the benefit of the holders of Mylan Newco ordinary shares, such number of shares of Newco common stock to



 

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which the holder of Mylan Newco ordinary shares, would otherwise be entitled as is necessary to obtain net cash proceeds to pay the Dutch dividend withholding tax due in respect of the Mylan Newco Liquidation Distribution to the Dutch tax authorities. This would result in the Mylan Newco shareholders (i.e., former Mylan shareholders) receiving fewer shares of Newco common stock than they would receive if no Dutch dividend withholding tax applies to the Mylan Newco Liquidation Distribution.

Assuming (i) the trading price of the Mylan ordinary shares will not be significantly higher than the current trading price of the Mylan ordinary shares, (ii) the value of the EUR to the USD will not be significantly lower than the current value of the EUR to the USD at the time of the Mylan Liquidation and (iii) no material negative changes will occur in the amount of paid up capital recognized for Dutch dividend withholding tax purposes of Mylan between June 30, 2019 and the time of the Mylan Liquidation Distribution Mylan does not expect the value, in EUR, of the Mylan Liquidation Distribution to exceed the paid up capital, in EUR, recognized for Dutch dividend withholding tax purposes of Mylan and thus does not expect any Dutch dividend withholding tax to apply in the Alternative Transaction Structure.

If, contrary to Mylan’s expectations, Dutch dividend withholding tax is to be withheld in respect of the Mylan Liquidation Distribution, the Exchange Agent (as defined in the Business Combination Agreement) shall sell in one or more transactions for the benefit of the Mylan shareholders such number of shares of Newco common stock to which the Mylan shareholder would otherwise be entitled as is necessary to obtain net cash proceeds to pay the Dutch dividend withholding tax due in respect of the Mylan Liquidation Distribution to the DTA.

See “Material Tax Consequences—Material Dutch Tax Consequences—Dutch Dividend Withholding Tax Consequences of the Combination to Holders of Mylan Ordinary Shares” beginning on page 151 of this document for a more detailed description of the Dutch dividend withholding tax consequences of the Combination.

No Appraisal Rights (see “Business Combination Agreement—No Appraisal Rights” beginning on page 161).

Neither Mylan shareholders nor Mylan Newco shareholders are entitled under Dutch law or otherwise to appraisal or dissenters’ rights related to the Mylan ordinary shares or Mylan Newco ordinary shares in connection with the Combination.

Pfizer stockholders are not entitled to appraisal rights in connection with the Separation, the Distribution or the Combination.



 

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SUMMARY HISTORICAL COMBINED FINANCIAL INFORMATION OF THE UPJOHN BUSINESS

The following table presents summary historical combined financial information of the Upjohn Business. The combined statements of income information and the combined statements of cash flows information for the years ended December 31, 2018, 2017 and 2016 set forth below are derived from the Upjohn Business’s audited combined financial statements included in this document. The combined statements of income information and the combined statements of cash flows information for the nine months ended September 29, 2019 and September 30, 2018 and the combined balance sheet information as of September 29, 2019 are derived from the Upjohn Business’s unaudited condensed combined financial statements included in this document. In the opinion of management, the unaudited condensed combined financial statements for the interim periods included in this document include all the normal and recurring adjustments that the Upjohn Business considers necessary for a fair presentation of the financial position and operating results for these periods. The combined financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”).

The combined financial statements of the Upjohn Business include expense allocations for direct and indirect commercial and corporate costs, including certain support functions, that are provided on a centralized basis within Pfizer. Such costs include, among others, (i) certain non-product commercial costs managed by Pfizer’s commercial organization; (ii) allocations for certain platform functions that are generally provided on a centralized basis within Pfizer, such as expenses for worldwide technology, global real estate operations, legal, finance, human resources, insurance, worldwide public affairs, compliance and worldwide procurement, among others; (iii) certain manufacturing and supply costs incurred by manufacturing sites that are shared with other Pfizer business units, Pfizer’s global external supply group and Pfizer’s global logistics and support group, and other overhead costs associated with the Upjohn Business’s manufacturing (which include manufacturing variances associated with production); (iv) certain compensation and benefits and other corporate costs, such as interest income and expense and gains and losses on investments; (v) research, development and medical expenses; and (vi) restructuring charges and other costs associated with cost reduction/productivity initiatives. Pfizer does not routinely allocate these costs to any of its business units. However, as part of a Pfizer reorganization beginning in 2019, the Upjohn Business was positioned as a standalone division within Pfizer with distinct and dedicated manufacturing, marketing and other commercial activities, research and development, medical, regulatory and limited enabling functions. As a result, many of the costs for certain support functions that, prior to 2019, were provided to the Upjohn Business on a centralized basis within Pfizer have been, beginning in 2019, incurred directly by the Upjohn Business. For such costs, the combined financial information for the nine months ended September 29, 2019 includes a combination of allocations to the Upjohn Business and limited directly incurred costs. Allocations are based on either a specific identification basis or, when specific identification is not practicable, proportional cost allocation methods (e.g., using third-party sales, headcount, Upjohn Business identified manufacturing costs, etc.), depending on the nature of the services and/or costs.

The summary historical combined financial information should be read in conjunction with the sections entitled “Selected Historical Combined Financial Information of the Upjohn Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Upjohn Business” and the Upjohn Business’s audited combined financial statements and accompanying notes and the Upjohn Business’s unaudited condensed combined financial statements and accompanying notes included in this document. The Upjohn Business’s historical combined financial information presented below may not be indicative of its future performance and does not necessarily reflect what the Upjohn Business’s financial position and results of operations would have been had it operated as an independent standalone company during the periods presented, including changes that will occur in its operations and capitalization as a result of the Separation, the Distribution and the Combination. See the section entitled “Unaudited Pro Forma Condensed Combined Financial Information of Mylan and the Upjohn Business” included in this document for a further description of the anticipated changes.



 

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Statement of income data:

 

     Nine Months Ended
(unaudited)
    Year Ended December 31,  
     September 29,
2019
     September 30,
2018
    2018      2017     2016  
(millions of dollars)                                 

Revenues(a)

   $             8,087      $             9,281     $ 12,431      $ 13,359     $ 13,765  

Costs and expenses(b)

     3,282        3,844       5,336        5,604       6,009  

Restructuring charges/(credits)

     27        (7     39        (80     248  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Income before provision/(benefit) for taxes on income

     4,778        5,444       7,056        7,835       7,508  

Provision/(benefit) for taxes on income(c)

     319        739       925        (2,366     1,920  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Net income before allocation to noncontrolling interests

     4,459        4,704       6,131        10,201       5,587  

Less: Net income attributable to noncontrolling interests

     1        2       3        3       —    
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Net income attributable to the Upjohn Business

   $ 4,458      $ 4,702     $ 6,128      $ 10,199     $ 5,588  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Balance sheet data:

 

     As of September 29, 2019
(unaudited)
 
(millions of dollars)       

Working capital

   $ 1,517  

Property, plant and equipment, less accumulated depreciation

     958  

Total assets

     16,924  

Long-term obligations(d)

     5,712  

Total liabilities

     9,068  

Total Upjohn Business equity

     7,856  

Other data:

 

     Nine Months Ended
(unaudited)
     Year Ended December 31,  
     September 29,
2019
     September 30,
2018
     2018      2017      2016  
(millions of dollars)                                   

Cash provided by operations

   $ 3,819      $ 3,970      $ 5,721      $ 7,397      $ 6,249  

Certain amounts may reflect rounding adjustments.

 

(a)

Pediatric exclusivity for Lyrica expired in the United States in June 2019 and multi-source generic competition began on July 19, 2019. As a result, the Upjohn Business experienced a significant decline in sales of Lyrica in the U.S. beginning in the third quarter of 2019.

(b)

Excludes restructuring charges/(credits).

(c) 

In the fourth quarter of 2017, the Upjohn Business recorded an estimate of certain tax effects of the legislation commonly referred to as the Tax Cuts and Jobs Act. For additional information see Note 7. Tax Matters accompanying the Upjohn Business’s audited combined financial statements and Note 5. Tax Matters accompanying the Upjohn Business’s unaudited condensed combined financial statements included in this document.

(d)

Defined as pension benefit obligations, net, postretirement benefit obligations, net, noncurrent deferred tax liabilities, other taxes payable and other noncurrent liabilities. The Upjohn Business did not have long-term debt for any of the periods presented.



 

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SUMMARY HISTORICAL CONSOLIDATED FINANCIAL

INFORMATION OF MYLAN

The following table presents the selected summary historical consolidated financial and operating data of Mylan as of and for each of the years in the five-year period ended December 31, 2018 and as of and for the nine months ended September 30, 2019 and 2018. The selected historical consolidated financial information as of and for the years ended December 31, 2018, 2017, 2016, 2015 and 2014 has been derived from Mylan’s audited consolidated financial statements. The unaudited selected historical financial information as of and for the nine months ended September 30, 2019 and 2018 has been derived from Mylan’s unaudited condensed consolidated financial statements which include, in the opinion of Mylan’s management, all normal and recurring adjustments that are necessary for the fair presentation of the results for such interim periods and dates. The historical consolidated financial statements of Mylan are prepared in accordance with U.S. GAAP. The information set forth below is only a summary that you should read together with the audited consolidated financial statements of Mylan and the related notes contained in Mylan’s Annual Report on Form 10-K, as amended, as of December 31, 2018 and 2017 and for the years ended December 31, 2018, 2017 and 2016, and the unaudited consolidated financial statements of Mylan and the related notes contained in Mylan’s Quarterly Report on Form 10-Q as of and for the nine months ended September 30, 2019, which are incorporated by reference into this document, and the audited consolidated financial statements of Mylan and the related notes as of December 31, 2016, 2015 and 2014 and for the years ended December 31, 2015 and 2014, and the unaudited consolidated financial statements of Mylan and the related notes as of and for the nine months ended September 30, 2018, which are not incorporated by reference into this document but which are available on Mylan’s website at www.mylan.com and on the SEC website at sec.gov. Mylan N.V. is considered the successor to Mylan Inc., and the information set forth below refers to Mylan Inc. for periods prior to February 27, 2015, and to Mylan N.V. on and after February 27, 2015.

The selected historical consolidated financial information may not be indicative of the future performance of Mylan. For all years presented, the consolidated balance sheet data has been adjusted for the retrospective application of the adoption of ASU 2015-03 and 2015-17, as described in footnotes 2 and 3 below. For more information, see “Where You Can Find Additional Information” beginning on page ii of this document.

 

    Nine Months Ended
September 30,
(unaudited)
    Year Ended December 31,  
(in millions, except per share amounts)   2019     2018     2018     2017     2016     2015     2014  

Statements of Operations:

             

Total revenues

  $ 8,308.7     $ 8,355.2     $ 11,433.9     $ 11,907.7     $ 11,076.9     $ 9,429.3     $ 7,719.6  

Cost of sales(1)

    5,498.5       5,369.2       7,432.3       7,124.6       6,379.9       5,213.2       4,191.6  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

    2,810.2       2,986.0       4,001.6       4,783.1       4,697.0       4,216.1       3,528.0  

Operating expenses:

             

Research and development

    488.1       555.7       704.5       783.3       826.8       671.9       581.8  

Selling, general and administrative

    1,909.2       1,808.1       2,441.0       2,575.7       2,498.5       2,180.7       1,625.7  

Litigation settlements and other contingencies, net

    (30.3     (50.6     (49.5     (13.1     672.5       (97.4     (32.1
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

    2,367.0       2,313.2       3,096.0       3,345.9       3,997.8       2,755.2       2,175.4  

Earnings from operations

    443.2       672.8       905.6       1,437.2       699.2       1,460.9       1,352.6  

Interest expense

    391.3       407.1       542.3       534.6       454.8       339.4       333.2  

Other expense, net

    32.7       44.3       64.9       (0.4     122.7       206.1       44.9  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings before income taxes

    19.2       221.4       298.4       903.0       121.7       915.4       974.5  

Income tax provision (benefit)

    22.9       (79.9     (54.1     207.0       (358.3     67.7       41.4  

Net loss attributable to the noncontrolling interest

    —         —         —         —         —         (0.1     (3.7
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) earnings attributable to Mylan N.V. ordinary shareholders

  $ (3.7   $ 301.3     $ 352.5     $ 696.0     $ 480.0     $ 847.6     $ 929.4  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


 

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    Nine Months Ended
September 30,
(unaudited)
    Year Ended December 31,  
(in millions, except per share amounts)   2019     2018     2018     2017     2016     2015     2014  

(Loss) earnings per ordinary share attributable to Mylan N.V. ordinary shareholders:

             

Basic

  $ (0.01   $ 0.59     $ 0.69     $ 1.30     $ 0.94     $ 1.80     $ 2.49  

Diluted

  $ (0.01   $ 0.58     $ 0.68     $ 1.30     $ 0.92     $ 1.70     $ 2.34  

Weighted average ordinary shares outstanding:

             

Basic

    515.5       514.4       514.5       534.5       513.0       472.2       373.7  

Diluted

    515.5       516.5       516.5       536.7       520.5       497.4       398.0  

Selected Balance Sheet data:

             

Total assets(2)(3)

  $ 31,053.5     $ 33,455.6     $ 32,734.9     $ 35,806.3     $ 34,726.2     $ 22,267.7     $ 15,820.5  

Working capital(2)(3)(4)

    2,000.1       1,359.7       1,779.9       828.0       2,481.8       2,350.5       1,137.2  

Short-term borrowings

    —         0.4       1.9       46.5       46.4       1.3       330.7  

Long-term debt, including current portion of long-term debt(2)

    13,015.0       14,427.0       13,816.4       14,614.5       15,426.2       7,294.3       8,104.1  

Total equity

    11,463.4       12,066.2       12,167.1       13,307.6       11,117.6       9,765.8       3,276.0  

 

(1)

Cost of sales includes the following amounts primarily related to the amortization of purchased intangibles from acquisitions: $1.21 billion, $1.19 billion, $1.61 billion, $1.44 billion, $1.32 billion, $854.2 million and $375.9 million for the nine months ended September 30, 2019 and September 30, 2018 and the years ended December 31, 2018, 2017, 2016, 2015 and 2014, respectively. In addition, cost of sales included the following amounts related to impairment charges to intangible assets: $71.8 million, $87.5 million, $224.0 million, $80.8 million, $68.3 million, $31.3 million and $27.7 million for the nine months ended September 30, 2019 and September 30, 2018 and the years ended December 31, 2018, 2017, 2016, 2015 and 2014, respectively.

(2)

Pursuant to the Company’s adoption of Accounting Standards Update 2015-03, Interest—Imputation of Interest, as of December 31, 2015, deferred financing fees related to term debt have been retrospectively reclassified from other assets to long-term debt or the current portion of long-term debt, depending on the debt instrument, on the Consolidated Balance Sheets for all periods presented. The Company retrospectively reclassified approximately $34.4 million for the year ended December 31, 2014.

(3)

Pursuant to the Company’s adoption of Accounting Standards Update 2015-17, Balance Sheet Classification of Deferred Taxes, as of December 31, 2015, deferred tax assets and liabilities that had been previously classified as current have been retrospectively reclassified to noncurrent on the Consolidated Balance Sheets for all periods presented. The reclassification resulted in a decrease in current assets of approximately $345.7 million for the year ended December 31, 2014. The reclassification resulted in a decrease in current liabilities of approximately $0.2 million for the year ended December 31, 2014.

(4)

Working capital is calculated as current assets minus current liabilities.



 

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SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following summary unaudited pro forma condensed combined financial information gives effect to the Combination and related transactions, including borrowings under the Bridge Facility, and the Distribution.

The summary unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2019 and for the year ended December 31, 2018 combine the historical unaudited condensed consolidated and the audited consolidated statements of operations of Mylan and the historical unaudited condensed combined and the historical audited combined statements of income for the Upjohn Business, respectively, giving effect to the Combination as if it had been consummated on January 1, 2018, the beginning of the earliest period presented. The unaudited pro forma condensed combined balance sheet combines the historical unaudited condensed consolidated balance sheet of Mylan as of September 30, 2019 and the historical unaudited condensed combined balance sheet of the Upjohn Business as of September 29, 2019, giving effect to the Combination as if it had been consummated on September 30, 2019. See the section entitled “Unaudited Pro Forma Condensed Combined Financial Information of Mylan and the Upjohn Business” included in this document for more information.

The summary unaudited pro forma condensed combined financial information was prepared in accordance with U.S. GAAP using the acquisition method of accounting in accordance with ASC 805, Business Combinations, with Mylan considered the accounting acquirer of the Upjohn Business. See “—Accounting Treatment” beginning on page 137 of this document for more information.

The Upjohn Business’s historical combined financial statements have been derived from the consolidated financial statements and accounting records of Pfizer and include allocations for direct costs and indirect costs attributable to the operations of the Upjohn Business. These historical combined financial statements do not purport to reflect what the results of operations, comprehensive income, financial position, equity or cash flows would have been had the Upjohn Business operated as an independent standalone company during the periods presented.

The summary unaudited pro forma condensed combined financial information is for informational purposes only. It does not purport to indicate the results that would have actually been attained had the Combination and the related transactions been completed on the assumed date or for the periods presented, or which may be realized in the future. To produce the unaudited pro forma condensed combined financial information, Mylan allocated the estimated purchase price using its best estimates of fair value. Also, as explained in more detail in the accompanying notes to the unaudited pro forma financial information, these estimates are based on the most recently available public information. To the extent there are significant changes to the Upjohn Business, the assumptions and estimates herein could change significantly. Furthermore, Newco could have reorganization and restructuring expenses as well as potential operating efficiencies as a result of combining Mylan and the Upjohn Business. The unaudited pro forma condensed combined financial information does not reflect these potential expenses nor any related efficiencies. The unaudited pro forma condensed combined financial information reflects only the pro forma adjustments that are factually supportable, directly attributable to the Combination and, with respect to the unaudited pro forma condensed combined statements of operations, expected to have a continuing impact on the combined results of Newco.

This information is only a summary and has been derived from and should be read in conjunction with the more detailed unaudited pro forma condensed combined financial information and the notes thereto, included in the section entitled “Unaudited Pro Forma Condensed Combined Financial Information of Mylan and the Upjohn Business”. In addition, the unaudited pro forma condensed combined financial information was based on, and should be read in conjunction with, the consolidated financial statements of Mylan and the related notes thereto, which are incorporated by reference into this document, and the Upjohn Business’s combined financial statements and accompanying notes included in this document.



 

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     As of September 30, 2019  
(millions of dollars)    (Pro Forma As Adjusted)  

Total assets

   $ 65,352  

Short-term borrowings

     12,000  

Long-term debt

     12,461  

Total liabilities

     39,442  

Total equity

     25,910  

 

     Nine months ended
September 30, 2019
     Year ended
December 31, 2018
 
(in millions, except per share amounts)    (Pro Forma As
Adjusted)
     (Pro Forma As
Adjusted)
 

Total revenues

   $ 16,397      $ 23,874  

Net earnings attributable to ordinary shareholders

   $ 3,517      $ 5,247  

Earnings per ordinary share applicable to ordinary shareholders

     

Basic

   $ 2.92      $ 4.36  

Diluted

   $ 2.92      $ 4.35  

Weighted average ordinary shares outstanding

     

Basic

     1,205.4        1,204.4  

Diluted

     1,206.3        1,206.4  


 

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SUMMARY HISTORICAL AND PRO FORMA PER SHARE DATA OF MYLAN

The following table sets forth selected historical share information of Mylan and unaudited pro forma per share information after giving effect to the Combination. Per share information for the Upjohn Business is not presented because the Upjohn Business did not have outstanding capital stock since its historical combined financial statements have been prepared on a carve-out basis. The historical consolidated financial statements of Mylan are prepared in accordance with U.S. GAAP. The information set forth below is only a summary that you should read together with the audited consolidated financial statements of Mylan and the related notes contained in Mylan’s Annual Report on Form 10-K for the year ended December 31, 2018, as amended, and the unaudited condensed consolidated financial statements of Mylan and the related notes contained in Mylan’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2019, each of which is incorporated by reference in this document. The pro forma data has been derived from the unaudited pro forma condensed consolidated and combined financial information of Mylan and the Upjohn Business included elsewhere in this document. See the section of this document entitled “Unaudited Pro Forma Condensed Combined Financial Information of Mylan and the Upjohn Business.”

This summary historical and pro forma per share data is being presented for informational purposes only and is not necessarily indicative of per share data that would have actually been attained had the Combination been completed on the dates indicated below, or the future per share data of Newco. You should not rely on the pro forma per share data presented as being indicative of the results that would have been achieved had Mylan and the Upjohn Business been combined at the date presented or of the actual future results or financial condition of Mylan or the Upjohn Business to be achieved following the consummation of the transactions.

 

     Nine Months Ended
September 30, 2019
     Year Ended
December 31, 2018
 
(in millions, except per share amounts)    Historical
(unaudited)
     Pro Forma      Historical      Pro Forma  

(Loss) earnings per share applicable to ordinary shareholders:

           

Basic

   $ (0.01    $ 2.92      $ 0.69      $ 4.36  
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted

   $ (0.01    $ 2.92      $ 0.68      $ 4.35  
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average shares outstanding:

           

Basic

     515.5        1,205.4        514.5        1,204.4  
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted

     515.5        1,206.3        516.5        1,206.4  
  

 

 

    

 

 

    

 

 

    

 

 

 

 



 

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HISTORICAL MARKET PRICE AND DIVIDEND INFORMATION

Mylan ordinary shares are listed on the NASDAQ under the symbol “MYL.” On July 26, 2019, the last trading day before the announcement of the signing of the Business Combination Agreement, the closing price of Mylan ordinary shares was $18.46 per share. On February 5, 2020, the last practicable trading day for which information is available as of the date of this document, the closing price of Mylan ordinary shares was $22.85 per share. For information on the current price per Mylan ordinary share, you are urged to consult publicly available sources.

Market price data for Newco common stock is not available because Newco is currently a wholly owned subsidiary of Pfizer, and shares of Newco common stock do not trade separately from shares of Pfizer common stock.

Mylan Dividend Policy

Mylan has historically not paid any dividends on Mylan ordinary shares. The timing, declaration, amount and payment of any future dividends to Mylan shareholders is within the discretion of the Mylan Board of Directors. Mylan does not anticipate paying dividends in the immediate future. The terms of the Business Combination Agreement generally restrict Mylan’s ability to declare and pay dividends to Mylan shareholders during the interim period commencing from the execution of the Business Combination Agreement until the closing of the Combination. There can be no assurance that Mylan will pay any dividend in the future.

Newco Dividend Policy

Newco is currently a wholly owned subsidiary of Pfizer. As of the date of this document, there is no established trading market for Newco common stock, and shares of Newco common stock do not trade separately from shares of Pfizer common stock. It is currently anticipated that Newco will initiate a dividend of approximately 25% of free cash flow beginning the first full quarter following the consummation of the transactions. However, there can be no assurance that Newco will pay or continue to pay a dividend, and the timing, declaration, amount and payment by Newco of any dividend or distribution will be within the discretion of the Newco Board.



 

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RISK FACTORS

The following sets forth material risks related to the transactions, the Upjohn Business, the combined company’s business and the Newco common stock. You should also carefully consider the information contained or incorporated by reference in this document, including the matters addressed in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” contained in this document and the risks of the Mylan business discussed in Part I, Item 1A—Risk Factors in Mylan’s Annual Report on Form 10-K for the year ended December 31, 2018, as amended, and in Part II, Item 1A—Risk Factors in Mylan’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019, each incorporated by reference in this document.    Risks relating to the Upjohn Business or Mylan’s businesses are also risks that relate to the combined company. The risks described below are not the only risks that these businesses face or that the combined company will face after the consummation of the transactions. Additional risks and uncertainties not currently known or that are currently expected to be immaterial may also materially and adversely affect the combined company’s business, financial condition and results of operations or the price of combined company common stock in the future. Past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods.

Risks Related to the Transactions

The transactions may not be completed on the terms or timeline currently contemplated, or at all.

The consummation of the transactions is subject to the satisfaction (or, if applicable, valid waiver) of various conditions, including (a) the expiration or termination of any applicable waiting period under the HSR Act and the receipt of regulatory approvals in certain other jurisdictions, (b) the consummation of the Separation and the Distribution in accordance with the terms of the Separation and Distribution Agreement, (c) the effectiveness of the registration statements filed with the SEC by the parties in connection with the transactions, (d) the Mylan Shareholder Approval, (e) the absence of any legal restraint (including legal actions or proceedings pursued by U.S. state authorities in the relevant states) preventing the consummation of the transactions, (f) in the case of Pfizer’s and Newco’s obligations to consummate the transactions, (i) the consummation of the Cash Distribution in accordance with the terms of the Separation and Distribution Agreement and (ii) the receipt by Pfizer of the IRS Ruling and the Tax Opinion, and (g) other customary closing conditions. See “Business Combination Agreement—Conditions to the Combination.” There is no guarantee that these conditions will be satisfied (or, if applicable, validly waived) in a timely manner or at all, in which case closing of the transactions may be delayed or may not occur and the benefits expected to result from the transactions may not be achieved.

If the transactions are not completed for any reason, the price of Mylan ordinary shares may decline to the extent that the market price of such shares reflects or previously reflected positive market assumptions that the transactions would be completed and the related benefits would be realized. In addition, Mylan and Pfizer have expended and will continue to expend significant management time and resources and have incurred and will continue to incur significant expenses due to legal, advisory, printing and financial services fees related to the transactions. Many of these expenses must be paid regardless of whether the transactions are consummated. If the transactions are not consummated because the Business Combination Agreement is terminated under certain circumstances, Mylan may be required to pay Pfizer a termination fee of $322 million. If the Mylan Shareholder Approval is not obtained upon a vote taken thereon at the Mylan Shareholders Meeting and the Business Combination Agreement is terminated by either Pfizer or Mylan, Mylan must reimburse Pfizer up to $96 million of Pfizer’s reasonable out-of-pocket costs, fees and expenses in connection with the transactions. See “Business Combination Agreement—Termination, Amendment and Waiver.” As a result of the conditions to closing of the transactions, some of which are dependent upon the actions of third parties, the parties cannot provide any assurance that the transactions will be consummated in a timely manner or at all.

The combined company may not realize the anticipated benefits from the transactions.

The combined company is expected to realize cost synergies, growth opportunities, and other financial and operating benefits as a result of the transactions. The combined company’s success in realizing these benefits,

 

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and the timing of their realization, depends on the successful integration of the Upjohn Business with the Mylan business. The combination of two independent businesses is a complex, costly and time-consuming process. Even if Mylan and the Upjohn Business successfully integrate, Mylan and the Upjohn Business cannot predict with certainty if or when these synergies, growth opportunities and benefits will occur, or the extent to which they actually will be achieved. For example, the benefits from the transactions may be offset by costs incurred in integrating the companies or for required capital expenditures related to the combined businesses. In addition, the quantification of synergies expected to result from the transactions is based on significant estimates and assumptions that are subjective in nature and inherently uncertain. Realization of any benefits and synergies could be affected by a number of factors beyond Mylan’s, the Upjohn Business’s or the combined company’s control, including, without limitation, general economic conditions, increased operating costs, regulatory developments and the other risks described in these risk factors. The amount of synergies actually realized in the transactions, if any, and the time periods in which any such synergies are realized, could differ materially from the expected synergies discussed in this document, regardless of whether the two business operations are combined successfully. If the integration is unsuccessful or if the combined company is unable to realize the anticipated synergies and other benefits of the transactions, there could be a material adverse effect on the combined company’s share price, business, financial condition and results of operations.

The terms of the transactions may discourage other companies from making alternative business proposals and the transactions may make future business transactions involving the combined company more difficult.

The Business Combination Agreement generally prohibits Mylan from soliciting any alternative transaction proposal during the pendency of the transactions, although in certain circumstances Mylan may make a Mylan Change in Recommendation in response to an unsolicited alternative transaction proposal that the Mylan Board determines is more favorable to Mylan and its shareholders and other stakeholders than the transactions. See “Business Combination Agreement—No Solicitation by Mylan; Competing Proposal.” The Business Combination Agreement provides that Mylan may be required to pay Pfizer a termination fee of $322 million if the Business Combination Agreement is terminated in certain circumstances, which payment might deter third parties from proposing alternative business combination proposals. The “no solicitation” provisions in the Business Combination Agreement prohibit Pfizer from soliciting any competing proposal involving the Upjohn Business as set forth in the Business Combination Agreement. See “Business Combination Agreement—No Solicitation by Pfizer; Competing Upjohn Proposal.”

In addition, certain provisions of the Tax Matters Agreement, which are intended to preserve the intended tax treatment of the Distribution and certain related transactions, may discourage, delay or prevent acquisition proposals and otherwise limit the combined company’s ability to pursue certain strategic transactions or engage in other transactions, including mergers or consolidations for a period of time following the closing of the transactions. Under the Tax Matters Agreement, the combined company will be restricted from taking certain actions for a period of time following the closing of the transactions because such actions could adversely affect the intended tax treatment of the Distribution and certain related transactions, and such restrictions could be significant. See “Additional Transaction Agreements—Tax Matters Agreement.”

Because the combined company will be a larger company than either the Upjohn Business or Mylan is currently, an acquisition of the combined company may be more expensive or more difficult than an acquisition of either the Upjohn Business or Mylan would be currently.

Costs and expenses related to the transactions could exceed amounts currently estimated and could have a material adverse effect on the business, financial condition and results of operation of the parties.

Pfizer, Mylan and Newco expect to incur a number of costs in relation to the transactions, including integration and post-closing costs, which could exceed the amounts currently estimated. There may also be further additional and unforeseen expenses incurred in connection with the transactions either due to delays or

 

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otherwise. There can be no guarantee that any benefits of the transactions that are realized will offset such costs, which could have a material adverse effect on the business, financial condition and results of operation of the companies.

Current Mylan shareholders’ percentage ownership interest in the combined company will be substantially lower than their current percentage ownership interest in Mylan.

After the consummation of the Combination, the Mylan ordinary shares outstanding immediately before the consummation of the Combination will represent, in the aggregate, 43% of the outstanding shares of Newco common stock on a fully diluted basis immediately following the closing of the Combination. See “Business Combination Agreement.” Consequently, Mylan’s pre-Combination shareholders, as a group, may be able to exercise less influence over the management and policies of the combined company following the consummation of the Combination than they were able to exercise with respect to Mylan immediately before the consummation of the Combination. Notwithstanding the decreased percentage ownership interest current Mylan shareholders will have in Newco relative to Mylan, the Business Combination Agreement provides that, as of the closing of the Combination, the Newco Board will consist of 13 members, including the Executive Chairman of Newco, who will be Robert J. Coury (current Chairman of the Mylan Board); the Chief Executive Officer of Newco, who will be Michael Goettler (current Global President of the Upjohn Business); eight persons designated by Mylan prior to the closing date; and three persons designated by Pfizer prior to the closing date (after consultation in good faith with Mylan). On December 18, 2019, Pfizer and Mylan announced that Ian Read and James Kilts (current director of Pfizer) will join the Newco Board upon completion of the Combination. Messrs. Read and Kilts were designated by Pfizer. Mr. Kilts will cease to be a member of the Pfizer Board immediately upon the closing of the Combination.

The calculation of the number of shares of Newco to be issued to Pfizer stockholders and Mylan shareholders in the transactions will not be adjusted if there is a change in the value of the Upjohn Business or Mylan before the Combination is completed.

The number of shares of Newco common stock to be issued to the Pfizer stockholders or the Mylan shareholders in the transactions will not be adjusted if there is a change in the value of the Upjohn Business or the value of Mylan before the closing of the transactions. Pfizer stockholders and Mylan shareholders will receive a number of shares of Newco to achieve a fixed percentage of the outstanding common stock of Newco in the aggregate pursuant to the Combination, rather than a number of shares with a particular fixed market value. As a result, the actual value of the Newco common stock to be received by Pfizer stockholders and Mylan shareholders in transactions will depend on the value of such shares at and after the closing of the Combination, which may be lower than the market value of Mylan’s ordinary shares.

Neither Pfizer stockholders nor Mylan shareholders will be entitled to appraisal rights in connection with the transactions.

Appraisal rights are statutory rights that, if applicable under law, enable stockholders to dissent from an extraordinary transaction, such as a merger, and to demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to stockholders in connection with the extraordinary transaction. Neither Pfizer stockholders nor Mylan shareholders are entitled to appraisal rights in connection with the Combination.

Certain of Mylan’s directors and executive officers may have interests in the transactions that may differ from the interests of holders of Mylan ordinary shares.

Holders of Mylan ordinary shares should be aware that certain of Mylan’s directors and executive officers may have interests in the transactions and have arrangements that are different from, or in addition to, those of holders of Mylan ordinary shares generally. These interests and arrangements may create potential conflicts of interest. The Mylan Board was aware of these respective interests and considered these interests, among other

 

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matters, when making its decision to approve the transactions and in recommending that holders of Mylan ordinary shares vote to approve the Combination. For a more complete description of these interests, please see “The Transactions—Interests of Mylan Directors and Executive Officers in the Transactions.”

Certain of Newco’s directors and executive officers may have interests in the transactions that may differ from the interests of Pfizer’s stockholders.

Pfizer’s stockholders should be aware that certain of Newco’s directors and executive officers may have interests in the transactions and have arrangements that are different from, or in addition to, those of Pfizer’s stockholders generally. These interests and arrangements may create potential conflicts of interest. The Pfizer Board was aware of these respective interests and considered these interests, among other matters, when making its decision to approve the transactions. For a more complete description of these interests, please see “The Transactions—Interests of Newco Directors and Executive Officers in the Transactions.”

Mylan, the Upjohn Business and the combined company may have difficulty attracting, motivating and retaining key personnel and other employees in light of the transactions.

The combined company’s success after the transaction will depend in part on its ability to attract and retain key personnel and other employees. Prior to and following the transactions, employees of Mylan, the Upjohn Business and the combined company may experience uncertainty about their future roles at the combined company following the consummation of the transactions, which may impact the ability of Mylan, the Upjohn Business and the combined company to retain key personnel and other employees. Competition for qualified personnel in the pharmaceutical industry is intense. Mylan, the Upjohn Business and the combined company may lose key personnel or may be unable to attract, retain and motivate qualified individuals, or the associated costs may increase. If employees of Mylan or the Upjohn Business depart because of issues relating to the uncertainty and difficulty of integration or a desire not to become employees of the combined company after the transactions, the combined company’s ability to realize the anticipated benefits of the transactions could be reduced, and it may have a material adverse impact on the business and operations of the combined company.

The integration of the Upjohn Business with Mylan following the transactions may present significant challenges.

The combination of two independent businesses is a complex, costly and time-consuming process and there is a significant degree of difficulty inherent in the process of integrating the Upjohn Business and Mylan. These difficulties include:

 

   

the integration of the Upjohn Business’s and Mylan’s current businesses while carrying on the ongoing operations of all businesses;

 

   

diversion of management’s attention to integration matters;

 

   

the challenge of integrating the employees and business cultures of the Upjohn Business and Mylan;

 

   

retaining existing customers and suppliers, or obtaining new customers and suppliers;

 

   

risks associated with managing the larger and more complex combined company;

 

   

the challenge and cost of integrating manufacturing, logistics, information technology, communications and other systems of the Upjohn Business and Mylan; and

 

   

the potential difficulty in attracting and retaining key personnel and other employees of Mylan and the Upjohn Business.

The process of integrating operations could cause an interruption of, or loss of momentum in, the activities of one or more of the combined company’s businesses. Members of senior management of Mylan, the Upjohn Business or the combined company may be required to devote considerable amounts of time to this integration

 

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process prior to and after the closing of the transactions, which will decrease the time they will have to manage the business of Mylan, the Upjohn Business or the combined company, service existing businesses, and develop new products or strategies. There is no assurance that Mylan, the Upjohn Business or the combined company will be able to manage this integration in the manner or on the timeline currently anticipated. If senior management of Mylan, the Upjohn Business or the combined company is not able to timely and effectively manage the integration process, or if any significant business activities are interrupted as a result of the integration process, the business of Mylan, the Upjohn Business or the combined company could suffer.

If there is a delay or inability to achieve anticipated integration goals, or if senior management of Mylan, the Upjohn Business or the combined company is not able to timely and effectively manage the integration process, or if any significant business activities are interrupted as a result of the integration process, there could be a material adverse effect on the combined company’s share price, business, financial condition and results of operations after the transactions.

The historical combined financial information of the Upjohn Business may not be representative of its results if it had been operated independently of Pfizer and as a result, may not be a reliable indicator of the results that the Upjohn Business or the combined company will achieve in the future.

The Upjohn Business is currently operated through various subsidiaries of Pfizer. Consequently, the financial information of the Upjohn Business included in this document has been derived from the consolidated financial statements and accounting records of Pfizer and reflects assumptions and allocations made by Pfizer. The financial position, results of operations and cash flows of the Upjohn Business presented herein may be different from those that would have resulted if the Upjohn Business had historically been operated as a standalone company or by a company other than Pfizer. For example, in preparing the financial statements of the Upjohn Business, Pfizer made an allocation of Pfizer costs and expenses that are attributable to the Upjohn Business. However, these costs and expenses reflect the costs and expenses attributable to the Upjohn Business as part of a larger organization and do not necessarily reflect costs and expenses that would be incurred by the Upjohn Business had it been operated independently, and may not reflect costs and expenses that would have been incurred by the combined company. As a result, the historical financial information of the Upjohn Business may not be a reliable indicator of the results that the Upjohn Business or the combined company will achieve in the future.

The unaudited pro forma condensed combined financial information of Mylan and the Upjohn Business is not intended to reflect what actual financial condition and results of operations would have been had Mylan and the Upjohn Business been a combined company for the periods presented, and therefore these results may not be indicative of Newco’s future operating performance.

The historical financial statements contained or incorporated by reference in this document consist of the separate financial statements of the Upjohn Business and Mylan, respectively. The unaudited pro forma condensed combined financial information presented in this document is for illustrative purposes only and is not intended to, and does not purport to, represent what the combined company’s actual results or financial condition would have been if the transactions had occurred on the relevant date. In addition, such unaudited pro forma condensed combined financial information is based in part on certain assumptions regarding the transactions that Pfizer, the Upjohn Business and Mylan believe are reasonable and comply with accounting standards under the SEC rules and regulations. These assumptions, however, are only preliminary and will be updated only after the consummation of the transactions.

The unaudited pro forma condensed combined financial information does not reflect the costs of any integration activities or transaction-related costs or incremental capital spend that Pfizer management and Mylan management believes are necessary to realize the anticipated synergies from the transactions. Accordingly, the pro forma financial information included in this document does not reflect what the combined company’s results of operations or operating condition would have been had Mylan and the Upjohn Business been a consolidated entity during all periods presented, or what the combined company’s financial condition and results of operations will be in the future.

 

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Newco will be subject to potentially significant restrictions that could limit its ability to undertake certain corporate actions (such as stock issuances or the undertaking of a merger or consolidation) that otherwise could be advantageous.

The Tax Matters Agreement generally prohibits Newco and its affiliates from taking certain actions that could cause the Distribution and certain related transactions to fail to qualify as tax-free transactions to Pfizer and its stockholders. Furthermore, unless an exception applies, for a two-year period following the date of the Distribution, none of Newco nor any of its subsidiaries may:

 

   

engage in transactions in which Newco’s stock is acquired;

 

   

engage in certain mergers or consolidations;

 

   

discontinue the active conduct of the Upjohn Business;

 

   

sell certain assets;

 

   

redeem or repurchase any of Newco’s stock; or

 

   

amend the amended and restated certificate of incorporation of Newco (the “Newco Charter”) or take any other action affecting the relative voting rights of any of its stock or stock rights.

If Newco intends to take certain restricted actions, it must notify Pfizer of the proposal to take such action and either (a) obtain a ruling from the IRS or an unqualified opinion acceptable to Pfizer to the effect that such action will not affect the tax-free status of the Distribution and certain related transactions or (b) receive from Pfizer a waiver of such requirement. However, none of the receipt of an IRS ruling, an unqualified tax opinion or a waiver by Pfizer will relieve Newco of any responsibility to indemnify Pfizer for tax-related losses resulting from such actions.

As a result of these restrictions and indemnification obligations under the Tax Matters Agreement, the combined company may be limited in its ability to pursue strategic transactions, equity or convertible debt financings or other transactions that may otherwise be in the combined company’s best interests. See “Additional Transaction Agreements—Tax Matters Agreement” for a detailed description of these restrictions.

Additionally, both Pfizer (with respect to the Upjohn Business) and Mylan have agreed in the Business Combination Agreement to refrain from taking certain actions with respect to their business and financial affairs during the pendency of the Combination, which restrictions could be in place for an extended period of time if completion of the Combination is delayed and could adversely impact their ability to execute certain of their respective business strategies and its financial condition, results of operations or cash flows. See the section entitled “Business Combination Agreement—Conduct of Business Pending the Combination” for a description of the restrictive covenants to which Pfizer (with respect to the Upjohn Business) and Mylan are subject.

The Distribution could result in significant U.S. tax liabilities, and Newco may be obligated to indemnify Pfizer for any such tax liability imposed on Pfizer.

The completion of the Distribution, Combination and certain related transactions is conditioned upon the receipt by Pfizer of a private letter ruling from the IRS and an opinion of its tax counsel, each to the effect that, for U.S. federal income tax purposes, the Distribution, together with certain related transactions, will qualify as a tax-free “reorganization” within the meaning of Section 368(a)(1)(D) of the Internal Revenue Code, the Distribution will qualify as a tax-free distribution within the meaning of Section 355 of the Internal Revenue Code and the Pfizer Distribution Payments will qualify as money distributed to Pfizer creditors or stockholders in connection with the reorganization for purposes of Section 361(b) of the Internal Revenue Code.

Although the IRS Ruling, if received, will generally be binding on the IRS, the continuing validity of the IRS Ruling will be subject to the accuracy of the factual representations made in the ruling request. Pfizer

 

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expects to obtain the opinion of counsel described above. In rendering the Tax Opinion, Pfizer’s tax counsel will rely on (i) customary representations and covenants made by Pfizer, Newco and Mylan, and (ii) specified assumptions, including an assumption regarding the completion of the Distribution, Combination and certain related transactions in the manner contemplated by the transaction agreements. In addition, Pfizer tax counsel’s ability to provide the Tax Opinion will depend on the absence of changes in existing facts or law between the date of this registration statement and the closing date of the Combination. If any of those representations, covenants or assumptions is inaccurate, tax counsel may not be able to provide the Tax Opinion and the tax consequences of the Distribution and Combination could differ from those described below. An opinion of tax counsel neither binds the IRS nor precludes the IRS or the courts from adopting a contrary position. Accordingly, notwithstanding the IRS Ruling and Tax Opinion, there can be no assurance that the IRS will not assert a position contrary to one or more of the conclusions set forth herein and if the IRS prevails in such challenge, the U.S. federal income tax consequences of the Distribution, together with certain related transactions, to Pfizer, Newco and the holders of Pfizer common stock could be materially different from, and worse than, the U.S. federal income tax consequences described below.

If the Distribution were determined not to qualify for tax-free treatment under Section 355 of the Internal Revenue Code, Pfizer would generally be subject to tax as if it sold the Newco common stock in a transaction taxable to Pfizer, which could result in a material tax liability. In addition, each Pfizer stockholder who receives Newco common stock in the Distribution would generally be treated as receiving a taxable distribution in an amount equal to the fair market value of the Newco common stock received by the stockholder in the Distribution. See “Material Tax Consequences—Material U.S. Federal Income Tax Consequences.”

Even if the Distribution were otherwise to qualify as a tax-free transaction under Sections 368(a)(1)(D) and 355 of the Internal Revenue Code, the Distribution would be taxable to Pfizer (but not to Pfizer’s stockholders) pursuant to Section 355(e) of the Internal Revenue Code if there were a 50 percent or greater change in ownership of either Pfizer or Newco, directly or indirectly, as part of a plan or series of related transactions that included the Distribution. For this purpose, any acquisitions of Pfizer or Newco common stock within the period beginning two years before the Distribution and ending two years after the Distribution are presumed to be part of such a plan, although Pfizer may be able to rebut that presumption. For purposes of this test, the Combination will be treated as part of a plan, but the Combination standing alone will not cause the Distribution to be taxable to Pfizer under Section 355(e) of the Internal Revenue Code because holders immediately before the Distribution of Pfizer common stock will directly own more than 50 percent of Newco common stock following the Combination. Nevertheless, if the IRS were to determine that other acquisitions of Pfizer common stock or Newco common stock, either before or after the Distribution, were part of a plan or series of related transactions that included the Distribution, such determination could result in the recognition of a material amount of taxable gain for U.S. federal income tax purposes by Pfizer under Section 355(e) of the Internal Revenue Code.

Under the Tax Matters Agreement, Newco will be required to indemnify Pfizer against any taxes resulting from the Distribution or certain aspects of the Separation that arise as a result of Newco’s breach of certain representations or covenants in the Tax Matters Agreement or certain other acts or omissions by Newco or Mylan, including certain actions that could result in Section 355(e) of the Internal Revenue Code applying to the Distribution. If Pfizer were to recognize taxable gain on the Distribution or the Separation other than as a result of a breach of a representation or covenant, or certain other actions or omissions, by Newco, Pfizer would not be entitled to indemnification from Newco under the Tax Matters Agreement and the resulting tax liability to Pfizer could have a material adverse effect on Pfizer. If Newco was required to indemnify Pfizer for taxes resulting from the Distribution or certain aspects of the Separation, that indemnification obligation could be substantial and could have a material adverse effect on the combined company, including with respect to its business, financial condition and results of operations. For a detailed description of the Tax Matters Agreement, see “Additional Transaction Agreements—Tax Matters Agreement.”

 

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The Combination is expected to result in an ownership change for Mylan under Section 382 of the Internal Revenue Code, limiting Mylan’s ability to utilize its foreign tax and other U.S. credits to offset the future taxable income of the combined company.

Mylan’s ability to utilize foreign tax and other U.S. credits to offset future income could be limited if Mylan undergoes an “ownership change” within the meaning of Section 382 of the Internal Revenue Code. In general, an ownership change will occur if there is a cumulative increase in ownership of Mylan stock by five percent shareholders (as defined in the Internal Revenue Code) that exceeds 50 percentage points over the lowest percentage of stock owned by such shareholders at any time over a rolling three-year period. If an ownership change does occur, Section 382 of the Internal Revenue Code establishes an annual limitation on the amount of certain deferred tax assets that may be used to offset taxable income in future years. A number of complex rules apply in calculating this limitation. An ownership change for Mylan is expected to occur in the Combination. Accordingly, all or a portion of Mylan’s deferred tax assets attributable to foreign tax and other U.S. credits may become subject to this limitation and as a result thereof, the combined company’s U.S. federal income tax liability could increase and its share price, business, financial condition, and results of operations and cash flows could be adversely impacted.

The Combination could result in U.K. stamp duty becoming payable by Acquisition Sub.

It is not expected that the Mylan Merger will be treated as involving a transfer on sale of U.K. shares for U.K. stamp duty purposes (and Mylan intends to apply for confirmation of this from HM Revenue & Customs). The Asset Sale is likely to involve a transfer on sale for U.K. stamp duty purposes and accordingly, if the Combination were to be effected by way of the Asset Sale, U.K. stamp duty may arise at a rate of 0.5% on the relevant consideration (including the assumption of debt) attributable to the transfer of shares in any U.K. incorporated companies comprised in the Asset Sale.

Shareholder litigation or creditor opposition could prevent or delay the closing of the transactions or otherwise negatively impact the business and operations of Newco.

The parties may incur costs in connection with the defense or settlement of any shareholder lawsuits, or creditor opposition under Dutch law, filed in connection with the transactions. Such litigation could have an adverse effect on the business, financial condition and results of operations of Pfizer, Mylan or Newco and could prevent or delay the consummation of the transactions.

The announcement and pendency of the Combination could adversely affect the business, financial results and operations of Mylan and/or the Upjohn Business.

The announcement and pendency of the proposed Combination could cause disruptions in and create uncertainty surrounding the business of Mylan or the Upjohn Business, including affecting relationships with existing and future customers, suppliers and employees, which could have an adverse effect on the business, financial results and operations of Mylan or the Upjohn Business or the combined company, regardless of whether the proposed Combination is completed. In particular, Mylan or the Upjohn Business or the combined company could potentially lose customers or suppliers, and new customer or supplier contracts could be delayed or decreased. In addition, Mylan and the Upjohn Business have diverted, and will continue to divert, significant management resources towards the completion of the Combination, which could adversely affect the business, financial condition and future results of operations of Mylan, the Upjohn Business or the combined company.

Risks Related to the Upjohn Business

The Upjohn Business faces intense competition, and most of its products no longer have market exclusivity in its major markets. This competition could result in a decline in the Upjohn Business’s revenues and results of operations.

With the exception of Lyrica and Effexor in Japan, all of the Upjohn Business’s key branded pharmaceutical products have lost exclusivity in major markets, and many of its products have not had exclusivity for a number

 

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of years. Therefore, most of the Upjohn Business’s branded products, as well as its generic products, face competition from generic alternatives. The compound patent for Celebrex in Japan recently expired in November 2019, and generics may enter the market as early as June 2020. In June 2019, Lyrica’s pediatric exclusivity in the United States expired, and multi-source generic competition commenced in the United States on July 19, 2019. This competition will have a negative impact on its sales and results of operations. The Upjohn Business may not be successful in managing competition from non-branded generics or other alternatives, or in generally managing revenues after loss of exclusivity, and its business, financial condition, and results of operations may be materially adversely affected.

The Upjohn Business’s ability to sustain its sales and profitability on any given product over time is affected by the number of companies selling generic alternatives of the product and the time by which those generic alternatives receive regulatory approval. The regulatory environment in many countries has facilitated increases in the number of generic competitors and eased the process for receiving regulatory approvals to introduce generic products. For example, the regulatory approval processes for generic products in the United States and European Union exempt such generic products from costly and time-consuming clinical trials to demonstrate their safety and efficacy and rely instead on the safety and efficacy of the corresponding innovator products. As a result, manufacturers of generic products can invest far less in research and development to bring a generic alternative to the market. In addition, with the passage of the Generic Drug User Fee Act and increased funding of the Office of Generic Drugs of the U.S. Food and Drug Administration (the “FDA”), the FDA has increased the number of generic products that it has approved, and the average time to obtain such approval has decreased. Legislation enacted in most U.S. states and certain other countries allows or, in some instances, mandates that a pharmacist dispense an available generic equivalent when filling a prescription for a branded product, in the absence of specific instructions from the prescribing physician. These laws have also encouraged the introduction of generic products.

Generic competitors are also becoming more aggressive in terms of pricing in many of the regions in which the Upjohn Business operates. In China, for example, the Upjohn Business faces strong competition from certain generic manufacturers, which may result in price cuts and volume loss on some of the Upjohn Business’s products. The Upjohn Business also faces competition in the United States, the European Union and other mature markets that have a robust generics market and favorable regulatory conditions for generics.

All of the Upjohn Business’s products also face potential competition from products that may be developed in the future that could render its products uncompetitive or obsolete. For example, companies may develop medicines that treat the same indications targeted by the Upjohn Business’s products, and these medicines could be more effective than the Upjohn Business’s or patients and physicians could prefer these medicines over the Upjohn Business’s. The introduction of these new competing products could also have a negative impact on the sales of the Upjohn Business’s products and its results of operations.

Other factors in the pharmaceutical industry that could affect the competition that the Upjohn Business faces include:

 

   

the strength of the Upjohn Business’s competitors, including their reputation, financial resources and product offerings;

 

   

the markets in which the Upjohn Business competes or intends to enter, including the competitors in a market, dynamics of a market, and the regulatory environment (and any potential changes in those markets);

 

   

vertical integration of pharmacies and large purchasing organizations;

 

   

any consolidation among distribution outlets through mergers and acquisitions and the formation of buying groups;

 

   

the willingness of the Upjohn Business’s customers, including wholesale and retail customers, to switch among products of different pharmaceutical manufacturers; and

 

   

pricing pressures by competitors and customers or changes in governmental policies with respect to pharmaceutical pricing.

 

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The historical results of operations of the Upjohn Business include sales of certain products that had market exclusivity during the periods represented, and some of those products have since lost or will lose market exclusivity. The Upjohn Business expects that the revenue from the sales of these products will decline after loss of exclusivity (“LOE”) and, therefore, the historical results of operations of the Upjohn Business may not be indicative of future results of operations.

In 2018, revenue from Lyrica sales in the United States was approximately $3.6 billion, representing 29% of the Upjohn Business’s worldwide revenues. In June 2019, Lyrica’s pediatric exclusivity in the United States expired, and multi-source generic competition commenced in the United States on July 19, 2019. Furthermore, over the next several years, several of the Upjohn Business’s products may lose market exclusivity upon entry of generics in certain markets, including Celebrex in Japan as early as June 2020 and Lyrica in Japan in or before December 2022, following patent expirations in November 2019 and April 2022, respectively. In 2018, revenue from Celebrex sales in Japan was $248 million, and revenue from Lyrica sales in Japan was $718 million, representing 2% and 6% of the Upjohn Business’s worldwide revenues, respectively.

Prices of drugs often decline after they lose market exclusivity, especially once generic pharmaceutical companies (including low-cost generic producers based in China and India) receive approvals and enter the market for a given product, which intensifies competition. Consistent with sales trends following loss of exclusivity, revenue from Lyrica sales in the United States decreased significantly after the second quarter of 2019, and the Upjohn Business expects revenue from Celebrex and Lyrica sales in Japan to decrease significantly upon patent expiration. However, the Lyrica pain use patent in Japan is currently the subject of an invalidity proceeding before the Japanese Patent Office (the “JPO”) and, if the action is determined adversely to the Upjohn Business, it could result in revenue from Lyrica sales in Japan experiencing a significant decrease earlier than December 2022. The Upjohn Business may not be successful in managing post-LOE revenues or competition from non-branded generics or other alternatives, and its business, financial condition and results of operations may be materially adversely affected. This could also cause the Upjohn Business’s overall net revenue and profits to decrease and have a material adverse impact on the Upjohn Business’s business, financial condition and results of operations. In addition, such competition, other competition across multiple products or other declines in the Upjohn Business brands could result in a material impairment of the Upjohn Business’s long-lived assets or the acceleration of amortization or depreciation on the Upjohn Business’s long-lived assets, which may have a material adverse impact on the Upjohn Business, its financial condition and its results of operations.

A substantial portion of the Upjohn Business’s revenues is derived from a limited number of its branded products, and, therefore, any adverse event with respect to those products could have a negative impact on the Upjohn Business’s results of operations.

The Upjohn Business derives a substantial portion of its revenue from the sales of a limited number of its branded products. For the nine months ended September 29, 2019 and the year ended December 31, 2018, the Upjohn Business derived 74.9% and 75.3%, respectively, of its revenue from the sale of Lyrica, Lipitor, Norvasc, Celebrex and Viagra, its top 5 products by revenue. The Upjohn Business’s dependence on the sales of a limited number of products exposes the Upjohn Business to the risk that, if there is an adverse event with respect to any of those products, such as a manufacturing delay, a competitor product that decreases demand for the product, increased pricing pressures, manufacturing defects or quality concerns, safety concerns, counterfeiting issues or any other impacts to the positive brand reputation of the products, the Upjohn Business’s results of operations could be negatively affected.

The Upjohn Business’s success depends on its ability to attract, retain and motivate qualified personnel.

The Upjohn Business’s ability to compete in the pharmaceutical industry depends upon its ability to attract and retain highly qualified personnel. The Upjohn Business may not be able to identify qualified candidates to join its team, and it may not be successful in motivating and retaining those employees. The Upjohn Business’s industry has experienced a high rate of turnover of such personnel in recent years, particularly in China. If the Upjohn Business loses one or more of its key employees, its ability to implement its business strategy

 

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successfully could be materially adversely affected. Furthermore, replacing key employees may be difficult and may take an extended period of time because of the limited number of individuals in the Upjohn Business’s industry with the breadth of skills and experience required to commercialize pharmaceutical products successfully. Competition to hire from this limited pool is intense, and the Upjohn Business may be unable to hire, train, retain or motivate these additional key employees on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. The Upjohn Business also experiences competition for the hiring of scientific and clinical personnel from universities and research institutions.

In addition, certain aspects of the Upjohn Business depend on the efforts, skills, reputations and business relationships of certain key personnel who are not obligated to remain employed with the Upjohn Business. The loss of these personnel, particularly to competitors, could jeopardize the Upjohn Business’s relationships with customers and materially and adversely affect its business, financial condition, results of operations and cash flows.

The Upjohn Business faces increased pricing pressures in key markets, including developed markets and emerging markets. Any decrease in the price, or reduction in the sales volume, of Upjohn products could have a negative effect on its results of operations.

The pharmaceutical industry has in recent years been the subject of significant publicity regarding the pricing of pharmaceutical products in the United States and elsewhere, including publicity and pressure resulting from prices charged by competitors and peer companies for new products as well as price increases by competitors and peer companies on older products that the public has deemed excessive. Any downward pricing pressure on the Upjohn Business’s products arising from social or political pressure to lower the cost of pharmaceutical products could have a material adverse impact on the Upjohn Business and its business, financial condition and results of operations.

There has also been increasing U.S. federal and state legislative and enforcement interest with respect to drug pricing, as well as from multinational organizations such as the United Nations, the World Health Organization and the Organisation for Economic Co-operation and Development. For instance, the U.S. Department of Justice issued subpoenas to pharmaceutical companies seeking information about the sales, marketing and pricing of certain generic drugs. In addition to the effects of any investigations or claims brought against the Upjohn Business, its business, financial condition and results of operations could also be adversely affected if any such inquiries, of the Upjohn Business or of other pharmaceutical companies or the industry more generally, were to result in legislative or regulatory measures that limit the Upjohn Business’s ability to effectively price its products. Efforts by government officials or legislators to implement measures to regulate prices or payment for pharmaceutical products, including legislation on drug importation, could adversely affect the Upjohn Business if implemented. There continues to be considerable public and government scrutiny of pharmaceutical pricing and measures to address the perceived high cost of pharmaceuticals are being considered by Congress, the Presidential Administration and select states. In addition to new state transparency laws and the introduction of several Federal pricing bills, we have also seen the Presidential Administration introduce proposals related to prescription drug importation and the implementation of an “International Pricing Index” model for Medicare Part B. We expect to see continued focus in regulating pricing resulting in additional legislation and regulation that could adversely impact revenue.

Outside the United States, governments may use a variety of cost-containment measures applicable to the Upjohn Business’s pharmaceutical products, including price cuts, mandatory rebates, health technology assessments, forced localization as a condition of market access, “international reference pricing” (i.e., the practice of a country linking its regulated medicine prices to those of other countries), quality consistency evaluation processes and volume-based procurement. This international patchwork of price regulation and differing economic conditions and incomplete value assessments across countries has led to varying access to quality medicines in many markets and some third-party trade in the Upjohn Business products between

 

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countries and may have an adverse impact on the pricing of Upjohn products and as a result, the Upjohn Business and its business, financial condition and results of operations.

In addition, “tender systems” for pharmaceuticals, in particular generic pharmaceuticals, have been implemented in a number of significant markets in which the Upjohn Business operates in an effort to lower prices. Under such tender systems, pharmaceutical companies submit bids to be selected by the payer or the delegated governmental agency. As a result, this tendering process tends to establish lower prices for generic pharmaceutical products and increases pricing pressures on post-LOE medicines. These measures impact marketing practices and reimbursement of drugs and may further increase pressure on reimbursement margins. Certain other countries and/or payers may consider the implementation of a tender system. Failing to win tenders or the Upjohn Business’s withdrawal from participating in tenders, or the implementation of similar systems in other markets leading to further price declines, could have a material adverse effect on the Upjohn Business and its business, financial condition and results of operations.

The Upjohn Business faces downward pricing pressure from government initiatives in China. Any decrease in the price, or reduction in the sales volume, of Upjohn products could have a negative effect on the Upjohn Business’s results of operations.

In China, pricing pressures have increased in recent years, and the Chinese government has also increased its focus on patient access and reimbursement for pharmaceutical medicines.

In China, medicines that are approved for use by the National Medical Products Administration are subject to a number of regulations and market practices which can impact patient access, including availability in hospitals, pricing and reimbursement. For example, products must participate in provincial level bidding procedures, historically without any volume guarantees, where prices are established and selected products can then be sold in local public hospitals. From the pool of products, each hospital can select which products to carry and, in some cases, additional price negotiations occur. There is also a national reimbursement drug list, updated periodically, that governs which products will be covered by public health insurance, and from August of 2019, local governments have no flexibility to make adjustments or set coverage conditions. In China, the Upjohn Business has largely been engaging in provincial bidding and negotiating with hospitals to sell its products.

In 2013, China began to implement a quality consistency evaluation process (“QCE”) for post-LOE products to improve the quality of domestically manufactured generic drugs, primarily by requiring such drugs to pass a test to assess their bioequivalence to a qualified reference drug (typically the originator drug). At the end of the first quarter of 2019, there were 99 distinct molecules in total that had passed QCE, with an additional 157 undergoing QCE registration.

In addition, volume-based tendering has been implemented in certain cities in China to significantly decrease prices for non-patented drug products. A pilot project for centralized procurement of 25 molecules that have passed QCE, including atorvastatin calcium tablets (Lipitor) and amlodipine besylate tablets (Norvasc), was launched in March 2019, covering 11 major Chinese cities (Beijing, Tianjin, Shanghai, Chongqing, Shenyang, Dalian, Xiamen, Guangzhou, Shenzhen, Chengdu and Xian). In that pilot procurement project, the successful bidder on a particular drug collected a guaranteed portion of the purchase amount from all 11 cities. Atorvastatin, the generic molecule of Lipitor, and amlodipine, the generic molecule of Norvasc, were among the products included in the tender process. The Upjohn Business and most originator brands were not successful in the first bidding process which was finalized in December 2018 and implemented in March 2019, and those contracts mostly went to local Chinese generic companies. The first bidding process resulted in significant price cuts for the molecules included. The first bidding process resulted in significant price cuts with some bidders reducing the price of their products by as much as 96 percent, as companies attempted to secure volumes on the Chinese pharmaceutical market. The drugs that lost the bidding were also requested to reduce their selling price up to 30 percent based on the price difference with the successful bidder.

 

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In July 2019, China’s government announced a plan for a nationwide expansion of the volume-based procurement project (excluding cities that are covered by the pilot project described above), which has been officially rolled out since September 2019. Under the rules of the new tender system, up to 70 percent of sales volume may be guaranteed to the lowest three bidders, which is an increase from the 50 percent of volume that was guaranteed in the pilot phase of the project. The Upjohn Business and most originator brands were not successful in the first bidding process for this expanded project, which was finalized on September 24, 2019 and was implemented in December 2019, and those contracts mostly went to local Chinese generic companies. In late 2019, China announced another round of expansion of its national volume-based procurement program. In this wave, China may allocate up to 80 percent of the volume to as many as six winners of the bidding process.

The Upjohn Business expects pricing pressures on Lipitor, Norvasc, and any other of its products to increase as a result of the above-mentioned pilot project and the national volume-based procurement project, and the Upjohn Business may be unable to successfully win contracts through these centralized procurement projects in the future. The Upjohn Business has failed, and may continue to fail, to win bids due to various factors, including uncompetitive bidding price. If the Upjohn Business’s bids fail to win in these centralized procurement projects or if prices are significantly cut, the market share, revenue and profitability of the products concerned could be adversely affected. In addition, the procurement projects or other similar programs could expand in the future to include additional molecules, including those that the Upjohn Business sells. Any of these developments could have a material adverse effect on the Upjohn Business, its financial position and its results of operations.

Furthermore, the Chinese government has discussed moving toward efforts to unify the reimbursement price between QCE-approved generic medicines and the applicable original medicines. The government currently plans to implement this universal reimbursement price initiative within the next two to three years. If this policy is implemented, the new reimbursement level will likely be lower than the current reimbursement level for the Upjohn Business’s products, placing additional pressures on price and/or patient copay. There remains uncertainty as to whether, when and how this policy may be officially implemented. The Chinese government could also enact other policies that may increase pricing pressures or have the effect of reducing the volume of sales available to the Upjohn Business’s products. This potential policy, and any other policies like it that could increase pricing and copay pressures on the Upjohn Business’s drug products in China, could have a material adverse effect on the Upjohn Business and its business, financial condition and results of operations.

If the Upjohn Business fails to maintain a positive reputation or is unable to conduct effective marketing, many aspects of the Upjohn Business and its prospects could be adversely affected.

The Upjohn Business believes that market awareness and recognition of its brands have contributed significantly to the success of its business. The Upjohn Business also believes that maintaining and enhancing these brands, especially market perceptions of the safety and quality of its products, is critical to maintaining its competitive advantage, particularly given that most of its branded products have lost exclusivity in major markets. The reputation of the Upjohn Business’s brands is particularly critical in Greater China and promotion-sensitive emerging market countries, which are critical to its growth strategies, where the Upjohn Business currently benefits from consumer preference for branded products over non-branded generics. If any of the Upjohn Business’s products or similar products that other companies distribute are subject to market withdrawal or recall or are proven to be, or are claimed to be, harmful to patients, then this could have a material adverse effect on the Upjohn Business, its business, financial condition and results of operations. Also, because the Upjohn Business is dependent on market perceptions, negative publicity associated with product quality, illness or other adverse effects resulting from, or perceived to be resulting from, the Upjohn Business’s products could have a material adverse impact on its business, financial condition and results of operations.

The Upjohn Business’s sales and marketing efforts are anchored by promoting its products to physicians, pharmacists, clinics and hospitals. Therefore, the Upjohn Business’s sales and marketing force, whether in-house sales representatives or third-party commercial partners, must possess a relatively high level of technical knowledge, up-to-date understanding of industry trends and expertise in the relevant therapeutic areas and products, as well as promotion and communication skills. In addition, the Upjohn Business has a network of third-party commercial partners that it uses to sell its products, including Pfizer. The Upjohn Business may also expand its network of third-party commercial partners to increase its marketing efforts. It may be difficult to

 

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effectively manage the Upjohn Business’s brand reputation as the Upjohn Business has relatively limited control over these third-party commercial partners. If the Upjohn Business is unable to effectively train its in-house sales representatives and third-party commercial partners or monitor and evaluate their marketing performances, the Upjohn Business’s sales and marketing may be less successful than desired.

While the Upjohn Business will continue to promote its brands to remain competitive, the Upjohn Business may not be successful in doing so. If the Upjohn Business is unable to increase or maintain the effectiveness and efficiency of its sales and marketing activities, including investments in digital marketing initiatives and other emerging sales channels, in particular in Greater China and emerging markets, or if the Upjohn Business incurs excessive marketing and promotion expenses to do so, the Upjohn Business and its business, financial condition and results of operations may be materially and adversely affected.

A significant portion of the Upjohn Business’s operations is conducted in jurisdictions outside of the United States and is subject to the economic, political, legal and business environments of the countries in which the Upjohn Business operates.

A significant portion of the Upjohn Business’s operations is conducted in jurisdictions outside of the United States. The Upjohn Business’s international operations could be limited or disrupted by any of the following:

 

   

volatility in the international financial markets;

 

   

compliance with governmental controls;

 

   

difficulties enforcing contractual and intellectual property rights;

 

   

compliance with a wide variety of laws and regulations, such as the U.S. Foreign Corrupt Practices Act (the “FCPA”) and similar non-U.S. laws and regulations, including anti-corruption laws in China;

 

   

compliance with foreign labor laws;

 

   

increased use of generic medicines in the Upjohn Business’s markets;

 

   

burdens to comply with multiple and potentially conflicting foreign laws and regulations, including those relating to environmental, health and safety requirements;

 

   

changes in laws, regulations, government controls or enforcement practices with respect to the Upjohn Business and the businesses of the Upjohn Business’s customers;

 

   

the impact of public health epidemics, such as the coronavirus outbreak emanating from China;

 

   

political and social instability, including crime, civil disturbance, terrorist activities and armed conflicts;

 

   

trade restrictions and restrictions on direct investments by foreign entities, including restrictions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury (the “Treasury Department”);

 

   

changes in tax laws and tariffs, including changes in tariffs resulting from the escalation of trade tensions between China and the United States;

 

   

the consequences of the U.K.’s exit from the E.U. and the terms of the future trading relationship between the U.K. government and the E.U., which could have implications on the commercial and general business operations of the Upjohn Business in the U.K. and the E.U., including the supply of products;

 

   

costs and difficulties in staffing, managing and monitoring international operations; and

 

   

longer payment cycles and increased exposure to counterparty risk.

Furthermore, the multinational nature of the Upjohn Business subjects it to potential risks that various taxing authorities may challenge the pricing of its cross-border arrangements and subject it to additional tax, adversely impacting its effective tax rate and the Upjohn Business’s tax liability.

 

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In addition, international transactions may involve increased financial and legal risks due to differing legal systems, requirements and customs. These requirements may prohibit the import or export of certain products and technologies or may require the Upjohn Business to obtain a license before importing or exporting certain products or technologies. A failure to comply with applicable laws, regulations or requirements could result in civil or criminal legal proceedings, monetary or non-monetary penalties, or both, disruptions to the Upjohn Business, limitations on its ability to import and export products and services and damage to its reputation. In addition, variations in the pricing of the Upjohn Business’s products between jurisdictions may result in the unauthorized importation of the Upjohn Business’s products between jurisdictions. While the impact of these factors is difficult to predict, any of them could materially adversely affect the Upjohn Business’s financial condition and results of operations. Changes in any of these laws, regulations or requirements, or the political environment in a particular country, may affect the Upjohn Business’s ability to engage in business transactions in certain markets, including investment, procurement and repatriation of earnings.

The Upjohn Business is subject to the FCPA, the U.K. Bribery Act, Chinese anti-corruption laws and similar worldwide anti-corruption laws, which impose restrictions on certain conduct and may carry substantial fines and penalties.

The Upjohn Business is subject to the FCPA, the U.K. Bribery Act, Chinese anti-corruption laws and similar anti-corruption laws in other jurisdictions. These laws generally prohibit companies and their intermediaries from engaging in bribery or making other prohibited payments to government officials for the purpose of obtaining or retaining business, and some have record keeping requirements. The failure to comply with these laws could result in substantial criminal and/or monetary penalties. The Upjohn Business operates in jurisdictions that have experienced corruption, bribery, payoffs and other similar practices from time to time and, in certain circumstances, such practices may be local custom. The Upjohn Business has implemented internal control policies and procedures that mandate compliance with these anti-corruption laws. However, the Upjohn Business cannot be certain that these policies and procedures will protect it against liability. There can be no assurance that the Upjohn Business’s employees or other agents will not engage in conduct that might expose the Upjohn Business to liability under anti-corruption laws. If the Upjohn Business’s employees or agents are found to have engaged in such practices, the Upjohn Business could suffer severe criminal or civil penalties, reputational harm and other consequences that could have a material adverse effect on the Upjohn Business and its business, financial condition and results of operations.

The Upjohn Business may not be able to realize the expected benefits of its investments in emerging markets.

The Upjohn Business has been taking steps to increase its presence in emerging markets, including by expanding its manufacturing presence, sales organization and product offerings in these markets. Failure to continue to maintain and expand its business in emerging markets could also materially adversely affect its business, financial condition and results of operations.

Some countries within emerging markets may be especially vulnerable to periods of local, regional or global economic, political or social instability or crisis. For example, the Upjohn Business’s sales in certain emerging market countries have suffered from extended periods of disruption due to natural disasters. Furthermore, the Upjohn Business has also experienced lower than expected sales in certain emerging market countries due to local, regional and global restrictions on banking and commercial activities in those countries. In addition, certain emerging market countries have currencies that fluctuate substantially, which may impact the Upjohn Business’s financial performance. For all these and other reasons, sales within emerging markets carry significant risks.

The Upjohn Business is subject to risk based on global and industry-specific economic conditions.

The Upjohn Business is exposed to both global and industry-specific economic conditions. While global economic conditions have been fairly stable as a whole in recent years, continued concerns about the systemic

 

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impact of potential geopolitical issues and economic policy uncertainty, particularly in areas in which the Upjohn Business operates, could potentially cause economic and market instability in the future and could adversely affect the Upjohn Business, including its financial performance. Challenging economic conditions could also adversely affect the ability of patients or payers to purchase pharmaceutical products or the ability of third-party distributors, partners, manufacturers and suppliers to buy inventory or raw materials and to perform their obligations under agreements with the Upjohn Business, any of which could disrupt the Upjohn Business’s operations.

Global efforts toward healthcare cost containment continue to exert pressure on product pricing and market access. Governments, corporations and insurance companies, which provide insurance benefits to patients, have implemented increases in cost-sharing and restrictions on access to medicines, potentially causing patients to switch to lower-cost generic products and away from branded products, delay treatments, skip doses or use less effective treatments. Any of these patient behaviors may decrease demand for the Upjohn Business’s branded products or cause the Upjohn Business to decrease its prices. Moreover, government financing pressures can lead to negative pricing pressure in various markets where governments take an active role in setting prices, access criteria (e.g., through public or private health technology assessments) or other means of cost control. Examples include China, Europe, Japan, Canada, Saudi Arabia and a number of other international markets. The United States continues to maintain competitive insurance markets, but has also seen significant increases in patient cost-sharing and growing government influence as government programs continue to grow as a source of coverage, which may increase negative pricing pressure in that market. The Upjohn Business’s success in the United States depends in large part on insurance coverage of its products. If large insurers cease to cover the Upjohn Business’s products, its business, financial condition and results of operations may be materially adversely affected.

Changes in China’s economic, political and social conditions, as well as government policies, could have a material adverse effect on the Upjohn Business, its financial condition and its results of operations.

A substantial portion of the Upjohn Business’s revenue is derived from its businesses in China and the Upjohn Business’s current global headquarters is located in Shanghai, China. In the nine months ended September 29, 2019 and in the year ended December 31, 2018, approximately 23% and 19% of the Upjohn Business’s revenue was generated in its Greater China business segment, respectively. Accordingly, the Upjohn Business’s financial condition and results of operations are, to a material extent, affected by economic, political and legal developments in China. China’s economy differs from the economies of developed countries in many respects, including, among others, the degree of government involvement, investment control, level of economic development, growth rate, foreign exchange controls and resource allocation. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention. Some of the other risks related to doing business in China include:

 

   

the Chinese government exerts substantial influence over the manner in which the Upjohn Business must conduct its business activities;

 

   

restrictions on currency exchange may limit the Upjohn Business’s ability to receive and use its cash effectively;

 

   

the Upjohn Business may face increased uncertainties related to the enforcement of intellectual property rights;

 

   

the Chinese government may favor local businesses and make it more difficult for foreign businesses to operate in China on an equal footing, or generally;

 

   

the Upjohn Business may face increased uncertainties related to the enforcement of contracts with certain parties; and

 

   

more restrictive rules on foreign investment could adversely affect the Upjohn Business’s ability to expand its operations in China.

 

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As a result of the Upjohn Business’s operations in China, these risks could have a material adverse effect on the Upjohn Business, its business, financial condition and results of operations.

Although China’s economy has been transitioning to an increasingly market-oriented economy for more than three decades, a substantial portion of productive assets in China are still owned or operated by the Chinese government. The Chinese government is also involved in allocating resources, controlling payments of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. In recent years, the Chinese government has implemented measures emphasizing the utilization of market forces, the reduction of state ownership of productive assets and the establishment of sound corporate governance practices in business enterprises. Some of these measures benefit the overall Chinese economy, but may materially and adversely affect the Upjohn Business. For example, the Upjohn Business’s financial condition and results of operations may be materially and adversely affected by government policies on the pharmaceutical industry in China or changes in tax regulations applicable to the Upjohn Business. If the market condition in China deteriorates, or if trade relations between China and the United States deteriorate, the Upjohn Business may be materially and adversely affected.

In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, Hubei Province, China. At the time of this filing, the outbreak has been largely concentrated in China, although cases have been confirmed in several other countries. The extent to which the coronavirus impacts the Upjohn Business’s operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others.

The pharmaceutical industry in China is highly regulated, and such regulations are subject to change, which may affect approval and commercialization of the Upjohn Business products.

The pharmaceutical industry in China is subject to comprehensive government regulation and supervision. In recent years, the regulatory framework in China regarding the pharmaceutical industry has undergone significant changes, which are expected to continue. While it is believed that the Upjohn Business’s strategies regarding pharmaceutical research, development, manufacturing and commercialization in China are aligned with the Chinese government’s policies, they may in the future diverge, requiring a change in such strategies. Any such change may result in increased compliance costs on the Upjohn Business or cause delays in or prevent the successful research, development, manufacturing or commercialization of the Upjohn Business products in China and reduce the current benefits that are available to the Upjohn Business from developing and manufacturing drugs in China.

Chinese authorities have become increasingly vigilant in enforcing laws in the pharmaceutical industry. Any failure by the Upjohn Business or its partners to maintain compliance with applicable laws and regulations or obtain and maintain required licenses and permits may result in the suspension or termination of Upjohn Business’s activities in China.

There are uncertainties regarding the interpretation and enforcement of the People’s Republic of China (“PRC”)’s laws, rules and regulations.

A substantial portion of the Upjohn Business is conducted in China through its Chinese subsidiaries, which are governed by PRC laws, rules and regulations. Such subsidiaries are subject to laws, rules and regulations applicable to foreign investment in China. The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions may be cited for reference but have limited precedential value.

In 1979, the PRC government began to promulgate a comprehensive system of laws, rules and regulations governing economic matters in general. The overall effect of legislation over the past four decades has significantly enhanced the protections afforded to various forms of foreign investment in China. However, China has not developed a fully integrated legal system, and recently enacted laws, rules and regulations may not

 

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sufficiently cover all aspects of economic activities in China or may be subject to significant degrees of interpretation by PRC regulatory agencies. In particular, because these laws, rules and regulations are relatively new and often give the relevant regulator significant discretion in how to enforce them, and because of the limited number of published decisions and the nonbinding nature of such decisions, the interpretation and enforcement of these laws, rules and regulations involve uncertainties and can be inconsistent and unpredictable. In addition, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all, and which may have a retroactive effect. As a result, the Upjohn Business may not be aware of its violation of these policies and rules until after the occurrence of the violation.

In addition, any administrative and court proceedings in the PRC may be protracted, resulting in substantial costs and diversion of resources and management attention. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult than in more developed legal systems to evaluate the outcome of administrative and court proceedings and the level of legal protection the Upjohn Business enjoys in China. These uncertainties may impede the ability of the Upjohn Business to enforce the contracts it has entered into and could materially and adversely affect the Upjohn Business, its financial condition and its results of operations.

Foreign exchange rate fluctuations and potential currency controls affect the Upjohn Business’s results of operations, as reported in the Upjohn Business’s financial statements.

The Upjohn Business conducts operations in many areas of the world, involving transactions denominated in a variety of currencies. In the year ended December 31, 2018 and the nine months ended September 29, 2019, the Upjohn Business generated approximately 55% and 61%, respectively, of its revenues in currencies other than the U.S. dollar, principally the Chinese renminbi, the Japanese yen, the Korean won, the euro and approximately 53 other currencies. The Upjohn Business is subject to currency exchange rate risk to the extent that its costs are denominated in currencies other than those in which it earns revenues. In addition, because the Upjohn Business’s financial statements are reported in U.S. dollars, changes in currency exchange rates between the U.S. dollar and other currencies have an impact on the Upjohn Business’s results of operations.

The Upjohn Business also faces risks arising from currency devaluations and the imposition of cash repatriation restrictions and exchange controls. Currency devaluations result in a diminished value of funds denominated in the currency of the country instituting the devaluation. Cash repatriation restrictions and exchange controls may limit the Upjohn Business’s ability to convert foreign currencies into U.S. dollars or to remit dividends and other payments by its foreign subsidiaries or businesses located in or conducted within a country imposing restrictions or controls. While the Upjohn Business currently has no need, and does not intend, to repatriate or convert cash held in countries that have significant restrictions or controls in place, should the Upjohn Business need to do so to fund its operations, it may be unable to repatriate or convert such cash, or unable to do so without incurring substantial costs.

The Upjohn Business earns a significant portion of its revenue in Renminbi. The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions and the foreign exchange policy proposed or adopted by the China, U.S. and other non-U.S. governments. It is difficult to predict how market forces or U.S., China and other non-U.S. government policies may impact the exchange rate of Renminbi and the U.S. dollar or any other currencies in the future. There remains significant international pressure on the Chinese government to adopt a more flexible currency policy, including from the U.S. government, which designated China as a “currency manipulator” in August 2019, which could result in greater fluctuation of the Renminbi against the U.S. dollar. The Chinese government, through the State Administration for Foreign Exchange of China (“SAFE”) and other government agencies, regulates conversion of Renminbi into foreign currencies. Under China’s foreign exchange regulations, payments of current account items, including dividend payments, interest payments and expenditures from trade, are freely exchangeable into foreign currencies without prior government approval, provided that certain procedural requirements are met. However, the Chinese government may limit the foreign exchange under the payments of current account items in the future.

 

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Conversion of currency in the “capital account” (e.g., capital items such as direct investments or loans) requires the approval of SAFE or its local branches. These limitations could materially and adversely affect the ability of the Upjohn Business’s Chinese operating subsidiaries and affiliated companies to obtain foreign currencies through equity financing or for capital expenditures, therefore impeding the Upjohn Business’s overall business operations.

Manufacturing problems and capacity imbalances may cause product launch delays, inventory shortages, recalls or unanticipated costs.

In order for the Upjohn Business to sell its products, it must be able to produce and ship sufficient quantities to meet current demand. The Upjohn Business has a global manufacturing network consisting of eight manufacturing facilities located in seven countries. The Upjohn Business also employs a network of approximately 54 contract manufacturing organizations. Many of the Upjohn Business’s products involve complex manufacturing processes and are sourced from only one manufacturing site.

Deviations in the Upjohn Business’s manufacturing processes, such as temperature excursions or improper package sealing, even if minor, could result in delays, inventory shortages, unanticipated costs, product recalls, product liability and/or regulatory action. In addition, a number of factors could cause production interruptions, including:

 

   

the failure of the Upjohn Business or any of the Upjohn Business’s vendors, suppliers or other third parties to comply with applicable regulations and quality assurance guidelines;

 

   

construction delays;

 

   

equipment malfunctions;

 

   

shortages of materials;

 

   

labor problems;

 

   

natural disasters;

 

   

cybersecurity issues and cyberattacks;

 

   

power outages;

 

   

export or import restrictions;

 

   

civil or political unrest;

 

   

terrorist activities;

 

   

changes in manufacturing production sites and limits to manufacturing capacity due to regulatory requirements, changes in types of products produced, shipping distributions or physical limitations; and

 

   

the outbreak of any highly contagious diseases or other health epidemics, such as coronavirus, near the Upjohn Business’s production sites.

The aforementioned interruptions could result in launch delays, inventory shortages, recalls, unanticipated costs or issues with the Upjohn Business’s agreements under which it supplies third parties, which may adversely affect the Upjohn Business’s results of operations. The Upjohn Business has experienced supply shortages with respect to its products in the past, and the Upjohn Business may experience similar shortages in the future. Any such shortages may adversely affect the Upjohn Business’s results of operations.

In addition, regulatory agencies periodically inspect the Upjohn Business’s drug manufacturing facilities to evaluate compliance with applicable current good manufacturing practice (“cGMP”) requirements. Failure to comply with these requirements may subject the Upjohn Business to possible legal or regulatory actions, such as warning letters, suspension of manufacturing, seizure of product, civil injunctions, criminal proceedings, debarment, recall of a product, delays or denials of product approvals, import bans or denial of import certifications, any of which could have a material adverse effect on the Upjohn Business, its financial condition and its results of operations.

Moreover, the Upjohn Business’s manufacturing network may be unable to meet the demand for the Upjohn Business’s products or the Upjohn Business may have excess capacity if demand for its products changes. The

 

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Upjohn Business’s strategy depends in part on its ability to drive volume growth and capture growth opportunities in its target markets. The unpredictability of a product’s regulatory or commercial success or failure, the lead time necessary to construct highly complex manufacturing sites and shifting customer demand (including as a result of market conditions or entry of branded or generic competition) increase the potential for capacity imbalances. In addition, construction of sites is expensive, and the Upjohn Business’s ability to recover costs will depend on the market acceptance and success of the products produced at the new sites, which is uncertain. Supply may also not be sufficient to meet the growing demand in certain markets. Any of these factors could materially adversely affect the Upjohn Business, its financial condition and results of operations. In addition, Newco will enter into the Manufacturing and Supply Agreements, pursuant to which Newco will manufacture and supply certain products to Pfizer on an interim, transitional basis. See “Additional Transaction Agreements—Manufacturing and Supply Agreements.”

Newco may incur substantial costs and be subject to adverse outcomes in litigation and other legal matters.

The Upjohn Business is or may become the subject of various legal proceedings, including product liability, personal injury, consumer, off-label promotion, securities, antitrust and breach of contract claims; commercial, environmental, government investigations, employment, and tax litigation; and other legal proceedings that arise from time to time in the ordinary course of its business. Litigation and other legal proceedings are inherently unpredictable, and excessive verdicts and judgments do occur. Although Newco believes that it has or may have meritorious defenses in these matters, it could in the future incur judgments, enter into settlements of claims or revise its expectations regarding the outcomes of certain matters, and such developments could have a material adverse effect on its results of operations in the period in which the amounts are accrued and/or its cash flows in the period in which the amounts are paid. For more information regarding legal proceedings involving the Upjohn Business, see the section titled “Information about the Upjohn Business—Legal Proceedings”

Like other pharmaceutical companies, the Upjohn Business is subject to investigations and extensive regulation by government agencies in the Unites States, China and other developed markets and emerging markets in which it operates. As a result, the Upjohn Business has interactions with government agencies on an ongoing basis. Criminal charges, substantial fines and/or civil penalties, limitations on the Upjohn Business’s ability to conduct business in applicable jurisdictions, as well as reputational harm and increased public interest in the matter could result from government investigations.

The Upjohn Business’s activities relating to the sale and marketing and the pricing of its products are subject to extensive regulation under the U.S. Federal Food, Drug, and Cosmetic Act, the Medicaid Drug Rebate Program, the FCPA, the Federal Drug Supply Chain Security Act in the United States, the Falsified Medicines Directive in the European Union and several other such regulations in other countries that require the Upjohn Business to develop electronic systems to serialize, track, trace and authenticate units of its products through the supply chain and distribution system, the Controlled Substances Act of 1970 and the related regulations administered by the Drug Enforcement Agency in the United States and other federal and state statutes, as well as anti-kickback and false claims laws, and similar laws in China and other jurisdictions. Like many companies in its industry, the Upjohn Business has from time to time received inquiries and subpoenas and other types of information demands from government authorities, and been subject to claims and other actions related to its business activities brought by governmental authorities, as well as by consumers and private payers. The Upjohn Business may incur significant expense, civil payments, fines and other adverse consequences as a result of these claims, actions and inquiries. For example, these claims, actions and inquiries may relate to alleged failures to accurately interpret or identify or prevent non-compliance with the laws and regulations associated with the dissemination of product information (approved and unapproved), potentially resulting in government enforcement and damage to the Upjohn Business’s reputation. This risk may be heightened by digital marketing, including social media, mobile applications and blogger outreach.

 

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The Upjohn Business is subject to complex environmental, health and safety laws and regulations.

The Upjohn Business is subject to various federal, state, local and international environmental, health and safety laws and regulations. These laws and regulations govern matters such as the emission and discharge of hazardous materials into the ground, air or water; the generation, use, storage, handling, treatment, packaging, transportation, exposure to, and disposal of hazardous and biological materials, including record keeping, reporting and registration requirements; climate change; and the health and safety of the Upjohn Business employees. These laws and regulations also require the Upjohn Business to obtain, and comply with, permits, registrations or other authorizations issued by governmental authorities. These authorities can modify or revoke the Upjohn Business’s permits, registrations or other authorizations and can enforce compliance through fines and injunctions.

Given the nature of the Upjohn Business, the Upjohn Business may incur liabilities under the United States Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“CERCLA”), or under other federal, state, local and international environmental cleanup laws, with respect to Upjohn Business sites, adjacent or nearby third-party sites, or offsite disposal locations. The costs associated with future cleanup activities that the Upjohn Business may be required to conduct or finance could be material. Additionally, the Upjohn Business may become liable to third parties for damages, including personal injury and property damage, resulting from the disposal or release of hazardous materials into the environment. Such liability could materially adversely affect the Upjohn Business’s operating results and financial condition.

The Upjohn Business’s failure to comply with the environmental, health and safety laws and regulations to which it is subject, including any permits issued thereunder, may result in environmental remediation costs, loss of permits, fines, penalties or other sanctions, adverse governmental or private actions, including regulatory or judicial orders enjoining or curtailing operations or requiring corrective measures, installation of pollution control equipment or other remedial measures. The Upjohn Business could also be held liable for any and all consequences arising out of human exposure to hazardous materials or environmental damage in connection with its current, future or past operations. Environmental laws and regulations are complex, change frequently, have tended to become more stringent and stringently enforced over time and may be subject to new interpretation in the future. The costs of complying with, or liabilities under, such laws and regulations are difficult to accurately predict, and the Upjohn Business’s environmental capital expenditures and costs for environmental compliance may increase substantially in the future as a result of changes in environmental laws and regulations, the development and manufacturing of a new product or increased development or manufacturing activities at any of the Upjohn Business’s facilities. Accordingly, the Upjohn Business’s costs of complying with current and future environmental, health and safety laws, and its liabilities arising from past or future releases of, or exposure to, hazardous materials could exceed current estimates and materially adversely affect its business, financial condition and results of operations.

The Upjohn Business relies on the effectiveness of its trademarks for its branded products and a combination of other intellectual property rights to protect its business and proprietary technology, and if those trademarks or other intellectual property rights are violated or not upheld, its results of operations may be negatively affected.

The sales of the Upjohn Business’s branded products, including for a price greater than the price of generic alternatives, depends in part on the trademark for those brands. If those trademarks are violated or not upheld, and other companies begin to sell alternatives using the same name, the Upjohn Business could be negatively affected. Any challenge to, or invalidation or circumvention of, the Upjohn Business’s trademark rights could be costly, require significant time and attention of the Upjohn Business’s management, and materially adversely affect the Upjohn Business, its results of operations or its financial condition.

In the United States and other countries, the Upjohn Business currently holds issued trademark registrations and has trademark applications pending, any of which may be the subject of a governmental or third-party

 

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objection, which could prevent the maintenance or issuance of the same and thus create the potential need to rebrand or relabel a product and which could result in substantial cost, loss of brand recognition and could require the Upjohn Business to devote additional resources to advertising and marketing new brands. The Upjohn Business relies on its trademarks and brand to differentiate it from its competitors and, as a result, if it is unable to prevent third parties from adopting, registering or using trademarks and trade dress that infringe, dilute or otherwise violate its trademark rights, its business could be materially adversely affected. Even if the Upjohn Business is successful in defending the use of its trademarks or preventing third parties from infringing its trademarks, resolution of such disputes may result in substantial costs.

Although the majority of the Upjohn Business’s branded products have lost exclusivity in their major markets and are no longer protected by any patents, the Upjohn Business continues to rely on patent protection for certain of its products. The Upjohn Business still maintains market exclusivity of Celebrex in Japan at least until June 2020, following patent expiration of the compound patent in November 2019. The Upjohn Business also still maintains market exclusivity of Lyrica in Japan until December 2022, following patent expiration in April 2022. However, the Lyrica pain use patent is currently subject to an invalidity proceeding in Japan. In February 2019, the JPO issued an interim ruling finding that the claims of the Lyrica pain use patent were invalid and, in July 2019, Pfizer submitted to the JPO proposed claim amendments and objections to the JPO’s decision, which are currently under review by the JPO. In November 2019, rebuttal briefs of the third-party challengers in the proceeding were received, and Pfizer and the Upjohn Business have until February 2020 to reply. A decision on the invalidity action is anticipated in the first half of 2020. Any loss of, or legal challenge to, the validity of patent protection, including in connection with the JPO actions with respect to the Lyrica pain use patent, could result in a material adverse effect to the Upjohn Business’s business, financial condition and results of operations. The Upjohn Business additionally relies, and expects to continue to rely, on a combination of other intellectual property rights, including trademark, trade dress, copyright, trade secret and domain name protection laws, as well as confidentiality and license agreements with its employees and others, to protect its products and proprietary technology.

In addition, the Upjohn Business is party to various license and other agreements pursuant to which third parties grant the Upjohn Business certain intellectual property rights necessary for its current products. These license agreements include various payment and other obligations, and if the Upjohn Business is unable to maintain its existing license agreements or other agreements, including because such agreements expire or are terminated, the Upjohn Business would lose its ability to develop and commercialize products and technology covered by these license agreements, and its financial condition and results of operations could be materially adversely affected.

If the Upjohn Business fails to obtain and maintain adequate intellectual property protection, it may not be able to prevent third parties from using its proprietary technologies or from marketing products that are very similar or identical to the Upjohn Business’s. The infringement, misappropriation or other violation of the Upjohn Business’s intellectual property, particularly in jurisdictions outside of the United States where the law may not protect the Upjohn Business’s proprietary rights as fully as in the United States (including China), may occur even when the Upjohn Business takes steps to prevent it. If a third party infringes, misappropriates or otherwise violates the Upjohn Business’s intellectual property in such a jurisdiction, the Upjohn Business may not be able to enforce its rights, obtain any meaningful remedies or otherwise protect its intellectual property effectively.

The illegal distribution and sale by third parties of counterfeit versions of Upjohn products or of stolen Upjohn products could have a negative impact on the Upjohn Business’s reputation and a material adverse effect on its business, financial condition and results of operations.

A counterfeit medicine is one that has been deliberately and fraudulently mislabeled as to its identity and source. A counterfeit Upjohn medicine, therefore, is one manufactured by someone other than the Upjohn Business, but which is offered for sale as an authentic Upjohn medicine. The prevalence of counterfeit medicines

 

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is a significant and growing industry-wide issue due to a variety of factors, including, but not limited to: the widespread use of the internet, which has greatly facilitated the ease by which counterfeit medicines can be advertised, purchased and delivered to individual patients; the availability of sophisticated technology that makes it easier for counterfeiters to make counterfeit medicines; the growing involvement in the medicine supply chain of under-regulated wholesalers and repackagers; the lack of adequate inspection at certain international postal facilities as counterfeit medicines are increasingly delivered directly to customers in small parcel packages; the tendency to misuse and abuse medicines; and the relatively modest risk of penalties faced by counterfeiters compared to the large profits that can be earned by them from the sale of counterfeit medicines. Further, laws against pharmaceutical counterfeiting vary greatly from country to country, and the enforcement of existing law varies greatly from jurisdiction to jurisdiction. For example, in some countries, pharmaceutical counterfeiting is not a crime; in others, it may result in only minimal sanctions. In addition, those involved in the distribution of counterfeit medicines use complex transport routes to evade customs controls by disguising the true source of their products.

The Upjohn Business’s global reputation makes its medicines prime targets for counterfeiting organizations. Counterfeit medicines pose a risk to patient health and safety because of the conditions under which they are manufactured—often in unregulated, unlicensed, uninspected and unsanitary sites – as well as the lack of regulation of their contents. Failure to mitigate the threat of counterfeit medicines, which is exacerbated by the complexity of the supply chain (including the Upjohn Business’s operations in China), could adversely impact the Upjohn Business, by, among other things, causing the loss of patient confidence in the Upjohn name and in the integrity of its medicines, potentially resulting in lost sales, product recalls, and an increased threat of litigation. In addition, thefts of inventory at warehouses, plants or while in transit, which are then not properly stored and which are subsequently sold through unauthorized channels could adversely impact patient safety, the Upjohn Business’s reputation and its business.

The Upjohn Business undertakes significant efforts to counteract counterfeit medicines and to secure its supply and distribution chain. However, its efforts and the efforts of others may not be entirely successful, and the presence of counterfeit medicines may continue to increase.

The Upjohn Business may suffer business disruptions as a result of cybersecurity breaches, and its third-party partners may be unable to adequately protect its customers’ privacy.

In the ordinary course of business, the Upjohn Business collects, stores and transmits large amounts of confidential information (including, but not limited to, personal information and intellectual property), and the Upjohn Business deploys and operates an array of technical and procedural controls to maintain the confidentiality and integrity of such confidential information. The Upjohn Business has also outsourced significant elements of its operations to third parties, including significant elements of its information technology infrastructure as part of Pfizer and, as a result, the Upjohn Business is managing many independent vendor relationships with third parties who may or could have access to confidential information. The size and complexity of the Upjohn Business’s information technology and information security systems, and those of its third-party vendors with whom the Upjohn Business contracts (and the large amounts of confidential information that is present on them), make such systems potentially vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by the Upjohn Business’s employees or vendors, or from attacks by malicious third parties. Such attacks are of ever-increasing levels of sophistication and are made by groups and individuals with a wide range of motives (including, but not limited to, industrial espionage) and expertise, including organized criminal groups, “hacktivists,” nation states and others. As a global pharmaceutical company, the Upjohn Business’s systems are subject to frequent attacks. Due to the nature of some of these attacks, there is a risk that they may remain undetected for a period of time. While the Upjohn Business has invested in the protection of data and information technology, there can be no assurance that its efforts will prevent service interruptions or security breaches. Any such interruption or breach of its systems could adversely affect the Upjohn Business’s operations and/or result in the loss of critical or sensitive confidential information or intellectual property, and could result in financial, legal, business and reputational harm to the Upjohn Business. Furthermore, federal, state and international laws and regulations relating to data protection

 

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and privacy, including the European Union’s General Data Protection Regulation, China’s Cybersecurity Law and the California Consumer Privacy Act, which became effective on January 1, 2020, can expose the Upjohn Business to enforcement actions and investigations by regulatory authorities, and potentially result in regulatory penalties and significant legal liability, if the Upjohn Business’s information technology security efforts fail. To the extent that any disruption or security breach were to result in a loss of, or damage to, the Upjohn Business’s data or applications, or inappropriate disclosure of confidential or proprietary information, the Upjohn Business could incur significant liability and its competitive position could be harmed. Any security compromise in the Upjohn Business’s industry, whether actual or perceived, could harm the Upjohn Business’s reputation, erode confidence in the effectiveness of its security measures, negatively affect its ability to grow the Upjohn Business or subject the Upjohn Business to third-party lawsuits, regulatory fines or other action or liability, which could harm the Upjohn Business.

U.S. healthcare or tax reform legislation could adversely affect the Upjohn Business, its financial condition or its results of operations.

There have been significant efforts at the U.S. federal and state levels to reform the healthcare system by enhancing access to healthcare, improving the delivery of healthcare and further rationalizing payment for healthcare. For example, the Upjohn Business faces uncertainties due to U.S. federal legislative and administrative efforts to repeal, substantially modify or invalidate some or all of the provisions of the U.S. Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (the “ACA”). There is additional uncertainty given the ruling in December 2019 by the U.S. Court of Appeals for the Fifth Circuit in Texas v. Azar that the individual mandate, which is a significant provision of the ACA, is unconstitutional. The case has been remanded to a lower court to determine whether the individual mandate is inseverable from the entire ACA, in which case the ACA as a whole would be rendered unconstitutional. In the meantime, the remaining provisions of the law remain in effect. Any future replacement of the ACA may adversely affect the Upjohn Business and its financial results, particularly if the legislation reduces incentives for employer-sponsored insurance coverage or dramatically increases industry taxes and fees. Any future healthcare reform efforts may adversely affect the Upjohn Business, its financial condition or its results of operations.

Risks Relating to the Combined Company

The combined company may not successfully acquire and integrate other businesses, license rights to technologies or products, form and manage alliances or divest businesses.

The combined company may pursue acquisitions, licensing arrangements, strategic alliances or divestitures of some of its products. Proposing, negotiating and implementing these opportunities may be a lengthy and complex process. The combined company may not be able to identify, secure, or complete any such transactions or arrangements in a timely manner, on a cost-effective basis, on acceptable terms, or at all, and such transactions may divert the attention of management from the day-to-day operation of the business. In addition, the combined company may be subject to regulatory constraints or limitations or other unforeseen factors that prevent the combined company from realizing the expected benefits. Such transactions or arrangements may also require actions, consents, approvals, waivers, participation or involvement of various degrees from third parties, such as regulators, government authorities, creditors, licensors or licensees, related individuals, suppliers, distributors, stockholders or other stakeholders or interested parties. The combined company may not obtain such required or desired actions, consent, approval, waiver, participation or involvement on a timely basis, on acceptable terms, or at all. Furthermore, partners, collaborators or other parties to such transactions or arrangements may fail to fully perform their obligations or meet the combined company’s expectations or cooperate with the combined company satisfactorily for various reasons, including risks or uncertainties related to their business and operations. There may be conflicts or other collaboration failures and inefficiencies between the combined company and the other parties.

 

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Even if the combined company is successful in making an acquisition, the products and technologies that are acquired may not be successful or may require significantly greater resources and investments than originally anticipated. The combined company may be unable to integrate acquisitions successfully into its existing business, and the combined company may be unable to achieve expected gross margin improvements or efficiencies. The combined company also could incur or assume significant debt and unknown or contingent liabilities. The combined company’s reported results of operations could be negatively affected by acquisition- or disposition-related charges, amortization of expenses related to intangibles and charges for impairment of long-term assets. The combined company may be subject to litigation in connection with, or as a result of, acquisitions, dispositions, licenses or other alliances, including claims from terminated employees, customers or third parties, and the combined company may be liable for future or existing litigation and claims related to the acquired business, disposition, license or other alliance because either it is not indemnified for such claims or the indemnification is insufficient. These effects could cause the combined company to incur significant expenses and could materially adversely affect the combined company’s financial condition and results of operations.

In addition, certain provisions of the Tax Matters Agreement, which are intended to preserve the intended tax treatment of the Distribution and certain related transactions, may discourage, delay or prevent acquisition proposals and otherwise limit the combined company’s ability to pursue certain strategic transactions or engage in other transactions, including mergers or consolidations for a period of time following the closing of the transactions. Under the Tax Matters Agreement, the combined company will be restricted from taking certain actions for a period of time following the transactions because such actions could adversely affect the intended tax treatment of the Distribution and certain related transactions, and such restrictions could be significant. See “Additional Transaction Agreements—Tax Matters Agreement.”

The combined company will have a substantial amount of indebtedness following the transactions, which could materially adversely affect its financial condition.

The combined company’s level of indebtedness could have important consequences, including but not limited to:

 

   

increasing the combined company’s vulnerability to adverse economic and industry conditions;

 

   

requiring the combined company to dedicate a substantial portion of its cash flow from operations to make debt service payments, thereby reducing the availability of cash flow to fund working capital, capital expenditures, dividends, acquisitions and investments and other general corporate purposes;

 

   

limiting the combined company’s flexibility in planning for, or reacting to, challenges and opportunities, and changes in the combined company’s businesses and the markets in which the combined company operates;

 

   

limiting the combined company’s ability to obtain additional financing to fund its working capital, capital expenditures, dividends, acquisitions and debt service requirements and other financing needs;

 

   

increasing the combined company’s vulnerability to increases in interest rates in general because a substantial portion of the combined company’s indebtedness is expected to bear interest at floating rates; and

 

   

placing the combined company at a competitive disadvantage to its competitors that have less debt.

The combined company’s ability to service its indebtedness will depend on its future operating performance and financial results, which will be subject, in part, to factors beyond its control, including interest rates and general economic, financial and business conditions. If the combined company does not have sufficient cash flow to service its indebtedness, it may need to refinance all or part of its indebtedness, borrow more money or sell securities or assets, some or all of which may not be available to the combined company at acceptable terms or at all. In addition, the combined company may need to incur additional indebtedness in the future. Although the terms of the combined company’s indebtedness are expected to allow the combined company to incur additional

 

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debt, this would be subject to certain limitations which may preclude the combined company from incurring the amount of indebtedness it otherwise desires.

In addition, although the combined company is expected to maintain an investment grade credit rating, a downgrade in the credit rating of the combined company or any indebtedness of the combined company or its subsidiaries could increase the cost of further borrowings or refinancings of such indebtedness, limit access to sources of financing in the future or lead to other adverse consequences.

If the combined company incurs additional debt, the severity of the risks described above could increase. If global credit markets contract, future debt financing may not be available to the combined company when required or may not be available on acceptable terms or at all, and as a result the combined company may be unable to grow its business, take advantage of business opportunities, respond to competitive pressures or satisfy its obligations under its indebtedness. Any of the foregoing could have a material adverse effect on the combined company’s business, financial condition, results of operations, cash flows, and/or share price.

The combined company’s outstanding indebtedness following the consummation of the transactions and any additional indebtedness the combined company incurs in the future may impose significant operating and financial restrictions on the combined company. These restrictions may limit the combined company’s ability to, among other things, incur additional indebtedness, make investments, pay certain dividends, merge, consolidate or sell all or substantially all of its assets, incur certain liens and enter into agreements with its affiliates. In addition, the company’s outstanding indebtedness may require the company to maintain specified financial ratios. A breach of any of these covenants or the combined company’s inability to maintain the required financial ratios could result in a default under the related indebtedness. If a default occurs, the relevant lenders could elect to declare the combined company’s indebtedness, together with accrued interest and other fees, to be immediately due and payable. These factors could have a material adverse effect on the combined company’s business, financial condition, results of operations, cash flows, and/or share price.

The ability of the combined company to raise additional capital for future needs will impact the combined company’s ability to compete.

The combined company’s credit ratings will be based upon information furnished by Pfizer, Mylan or the combined company or obtained by a rating agency from its own sources and are subject to revision, suspension or withdrawal by one or more rating agencies at any time. Rating agencies may review the ratings assigned to the combined company due to developments that are beyond the combined company’s control, including as a result of new standards requiring the agencies to reassess rating practices and methodologies.

If changes in the combined company’s credit ratings were to occur, it could result in higher interest costs under the combined company’s credit facilities. It would also cause the combined company’s borrowing costs to increase and could limit the combined company’s access to capital markets. Any downgrades could negatively impact the perception of the combined company by lenders and other third parties. In addition, certain of the combined company’s major contracts are expected to provide customers with a right of termination in certain circumstances in the event of a rating downgrade below investment grade.

The combined company could suffer additional losses due to asset impairment charges.

The combined company is expected to have significant amounts of goodwill and intangible assets on its balance sheet. Mylan tests, and the combined company is expected to test, goodwill for impairment during the second quarter of every fiscal year, and on an interim date should events or changes in circumstances indicate the carrying value of goodwill may not be recoverable in accordance with Accounting Standards Codification (“ASC”) 350 “Goodwill and Other Intangible Assets.” If the fair value of a reporting unit is revised downward due to declines in business performance or other factors, an impairment under ASC 350 could result and a non-cash charge could be required. Mylan tests, and the combined company is expected to test, intangible assets

 

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with finite lives for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. This assessment of the recoverability of finite-lived intangible assets could result in an impairment and a non-cash charge could be required. Such impairments could materially affect the combined company’s reported net earnings.

Unanticipated changes in the combined company’s tax provisions or exposure to additional income tax liabilities and changes in income tax laws and tax rulings may have a significant adverse impact on the combined company’s effective tax rate and income tax expense.

The combined company is subject to income taxes in many jurisdictions. Significant analysis and judgment are required in determining the combined company’s worldwide provision for income taxes. In the ordinary course of business, there are many transactions and calculations where the ultimate tax determination is uncertain. The final determination of any tax audits or related litigation could be materially different from the combined company’s income tax provisions and accruals.

Additionally, changes in the combined company’s effective tax rate as a result of a change in the mix of earnings in countries with differing statutory tax rates, changes in the combined company’s overall profitability, changes in the valuation of deferred tax assets and liabilities, the results of audits and the examination of previously filed tax returns by taxing authorities, changes in tax laws or their interpretation and continuing assessments of the combined company’s tax exposures could impact the combined company’s tax liabilities and affect its income tax expense, which could have a material adverse effect on the combined company’s business, financial condition, results of operations, cash flows, and/or share price.

If the intercompany terms of cross border arrangements that the combined company has among its subsidiaries are determined to be inappropriate or ineffective, its tax liability may increase.

The combined company has potential tax exposures resulting from the varying application of statutes, regulations, and interpretations which include exposures on intercompany terms of cross-border arrangements among its subsidiaries (including intercompany loans, sales, and services agreements) in relation to various aspects of its business, including manufacturing, marketing, sales, and delivery functions. Although the combined company believes its cross-border arrangements among its subsidiaries are based upon internationally accepted standards and applicable law, tax authorities in various jurisdictions may disagree with and subsequently challenge the amount of profits taxed in their country, which may result in increased tax liability, including accrued interest and penalties, which would cause the combined company’s tax expense to increase and could have a material adverse effect on the combined company’s business, financial condition, results of operations, cash flows, and/or share price.

The combined company may be adversely affected by disruptions in the credit markets, including disruptions that reduce customers’ access to credit and increase the costs to customers of obtaining credit.

The credit markets have historically been volatile and therefore it is not possible to predict the ability of the combined company’s customers to access short-term financing and other forms of capital. If a disruption in the credit markets were to occur, the combined company could be unable to refinance its outstanding indebtedness on reasonable terms or at all. Such a disruption could also pose a risk to the combined company’s business if customers or suppliers are unable to obtain financing to meet payment or delivery obligations to the combined company. In addition, customers may decide to downsize, defer or cancel contracts which could negatively affect revenue of the combined company.

Further, assuming that the combined company incurs $12 billion of floating rate debt in connection with the transactions, the combined company would have had $13.3 billion of floating rate debt as of September 30, 2019, on a pro forma basis giving effect to the transaction and the Financing. A one percentage point increase in the average interest rate of this debt would increase the combined interest expense by approximately $133 million

 

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per year. Accordingly, a spike in interest rates would adversely affect the combined company’s results of operations and cash flows. See the section of this document entitled “Description of Financing” for more information on the Financing.

The combined company will assume or retain certain material obligations relating to defined benefit pension and termination benefits and retiree medical and dental benefits associated with current and former employees of the Upjohn Business and/or sponsored by the Upjohn Entities. These liabilities and the related future funding obligations could restrict cash available for operations of the combined company, capital expenditures and other requirements, and may materially adversely affect the financial condition and liquidity of the combined company.

Pursuant to the Employee Matters Agreement, the Newco Group (as defined below under “Separation and Distribution Agreement—Overview”) will retain all liabilities relating to the Puerto Rico defined benefit pension plans and Pfizer Puerto Rico Retiree Medical and Dental Plan. In addition, with respect to non-U.S. defined benefit pension and termination benefit plans, Newco will generally establish or designate plans similar to the Pfizer plans to assume assets and liabilities for the benefit of current and former employees of the Upjohn Business. The Newco Group will also retain liabilities for current employees of the Upjohn Business who participate in the Japan defined benefit pension plan and will assume liabilities in respect of current employees of the Upjohn Business under the Pfizer Canada ULC Post-Retirement Benefit Plan.

Each of these liabilities and the related future payment obligations could restrict cash available for operations of the combined company, capital expenditures and other requirements, and may materially affect the financial condition and liquidity of the combined company.

The combined company could incur operational difficulties or losses if Pfizer were unable to perform under the agreements entered into as part of the Separation or if the combined company is required to make payments to Pfizer pursuant to indemnities agreed to as part of the transactions.

In connection with the Separation, Newco will, before the closing of the transactions, enter into several agreements with Pfizer or its subsidiaries, including among others, the Transition Services Agreements and the Manufacturing and Supply Agreements, which in general provide for the performance of certain services or obligations by each of Pfizer and Newco for the benefit of each other for a transitional period following the Separation. See “Additional Transaction Agreements.” If either party is unable to satisfy its obligations under such agreements in a timely manner or at all, or if the transitional agreements fail to provide for or cover certain essential services needed by Newco during the transitional period, there is limited recourse for Mylan, and Newco could incur operational difficulties or losses or face liability that could have a material adverse effect on the business, financial condition and results of operations of the combined company. Since Newco will be reliant on Pfizer for such services during the transitional period, any interruption, disruption or breach of Pfizer’s systems relating to such services, including information technology and information security systems, could have a material adverse effect on the business, financial condition and results of operations of the combined company. In addition, in connection with the Separation, the Distribution and the Combination, Newco has agreed to indemnify Pfizer for certain liabilities. Payments pursuant to these indemnities could be significant and could have a material adverse effect on the share price, business, financial condition and results of operations of the combined company.

The combined company’s results may be negatively affected if Newco is unable to obtain the same types and level of services and resources that historically have been provided to the Upjohn Business by Pfizer, or may be unable to provide them at the same cost.

The Upjohn Business has historically received benefits and services from Pfizer. After the transactions, the combined company will no longer benefit from Pfizer’s services or business relationships to the extent not otherwise addressed in the Transaction Documents. While Pfizer has agreed to provide certain transition services

 

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to the combined company, generally for an initial period of 24 months following the date on which Pfizer no longer holds shares of Newco common stock as a consequence of the Distribution (with certain possibilities for extension), and, although Pfizer, Mylan and Newco will enter into certain other agreements that will provide for continued services to be provided from Pfizer to the combined company, it cannot be assured that the combined company will be able to adequately replace or provide resources formerly provided by Pfizer, or replace them at the same or lower cost. See “Additional Transaction Agreements”. In addition, the combined company may incur significant costs and experience operational disruptions associated with ending the transition services that Pfizer has agreed to provide Newco, as Newco transitions off of and attempts to replace these services. If the combined company is not able to replace the resources provided by Pfizer or is unable to replace them without incurring significant additional costs or is delayed in replacing the resources provided by Pfizer, or if the potential customers or other partners of the combined company do not view the combined company’s business relationships as equivalent to Pfizer’s, there could be a material adverse effect on the combined company’s share price, business, financial condition or results of operations.

Risks Relating to Newco Common Stock

No assurance can be given as to the market price of Newco common stock.

There is currently no public trading market for Newco common stock, although Newco intends to apply to list its common shares on the NASDAQ in connection with the transactions, and receipt of approval for such listing is a condition to the closing of the transactions. No assurance can be provided as to the value at which shares of Newco common stock will trade following the closing of the transactions. The trading price of shares of Newco common stock will depend on a number of conditions, including changes in the businesses, operations, results of the combined company, general market and economic conditions, governmental actions, regulatory considerations, legal proceedings and developments or other factors. A number of these factors and conditions are beyond the control of Pfizer, Mylan and Newco.

In addition, because the business of Mylan and the Upjohn Business differ in some respects, the market price of Newco common stock after the transaction may be affected by factors different from those currently affecting the market price of Mylan ordinary shares.

The shares of Newco common stock to be received by holders of Mylan ordinary shares as a result of the Combination will have different rights from the Mylan ordinary shares.

In the Combination, holders of Mylan ordinary shares will become holders of Newco common stock and their rights as shareholders will be governed by Delaware law and Newco’s governing documents. The rights associated with Newco common stock are different from the rights associated with Mylan ordinary shares. See “Comparison of the Rights of Mylan Shareholders and Newco Stockholders” for a discussion of the different rights associated with Newco common stock and Mylan ordinary shares.

Sales of Newco common stock, or perceptions that such sales may occur, may negatively affect the market price of Newco common stock.

The shares of Newco common stock to be issued in the Distribution and the Combination will generally be eligible for immediate resale. The market price of Newco common stock could decline as a result of sales of a large number of shares of Newco common stock in the market, or even the perception that these sales could occur. Sales of Newco common stock could occur for a variety of reasons. For example, some of Pfizer’s stockholders may sell the Newco common stock that they receive in the Distribution because Newco is not included in the same indices as Pfizer common stock, such as the Dow Jones Industrial Average. These sales, or the possibility that these sales may occur, may result in a decline in the price of Newco common stock. A decline in Newco’s stock price may also make it more difficult for Newco to obtain additional capital by selling equity securities in the future on favorable terms when desired.

 

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Newco cannot assure investors that it will make dividend payments in the future.

Dividend payments to Newco stockholders will depend upon a number of factors, including the results of operation, cash flows and financial position, contractual restrictions and other factors considered relevant by the Newco Board. Although Newco and Mylan intend that Newco will pay dividends to its stockholders, there is no assurance that Newco will declare and pay, or have the ability to declare and pay, any dividends on Newco common stock in the future.

Provisions in the Newco Charter and the Newco Bylaws and of applicable law may prevent or delay an acquisition of the combined company, which could decrease the trading price of the Newco common stock.

Newco’s amended and restated certificate of incorporation (the “Newco Charter”), Newco’s amended and restated bylaws (the “Newco Bylaws”) and Delaware law, contain provisions that may have the effect of deterring takeovers by making such takeovers more expensive to the acquiror and by encouraging prospective acquirors to negotiate with the Newco Board rather than to attempt a hostile takeover. These provisions include the division of the Newco Board into three classes of directors until the 2023 annual meeting of Newco stockholders, with each class serving a staggered three-year term, which could have the effect of making the replacement of incumbent directors more time-consuming and difficult, rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings and the right of the Newco Board to issue preferred stock without stockholder approval. Delaware law also imposes some restrictions on mergers and other business combinations between Newco and any holder of 15% or more of Newco’s outstanding common stock. For more information, see the section titled “Description of Newco Capital Stock—Anti-Takeover Effects of Various Provisions of Delaware Law, the Newco Charter and the Newco Bylaws after the Combination.”

These provisions are intended to protect Newco’s stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirors to negotiate with the Newco Board and by providing the Newco Board with more time to assess any acquisition proposal. These provisions are not intended to make Newco immune from takeovers. However, these provisions apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that the Newco Board determines is not in the best interests of Newco and its stockholders. Accordingly, if the Newco Board determines that a potential business combination transaction is not in the best interests of Newco and its stockholders, but certain stockholders believe that such a transaction would be beneficial to Newco and its stockholders, such stockholders may elect to sell their shares in Newco and the trading price of Newco common stock could decrease.

These and other provisions of the Newco Charter, the Newco Bylaws and the Delaware General Corporation Law (the “DGCL”) could have the effect of delaying, deferring or preventing a proxy contest, tender offer, merger or other change in control, which may have a material adverse effect on Newco’s business, financial condition and results of operations.

The Newco Charter will designate the Court of Chancery of the State of Delaware, or, if such court lacks subject matter jurisdiction, another state court of the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware), as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by Newco’s stockholders, which could discourage lawsuits against Newco and its directors and officers.

The Newco Charter will provide that unless Newco, through approval of the Newco Board, otherwise consents in writing, the Court of Chancery of the State of Delaware or, if and only if the Court of Chancery of the State of Delaware dismisses such action for lack of subject matter jurisdiction, another state court sitting in the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware), will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of Newco, any action asserting a claim of breach of a fiduciary duty owed by any director or officer of Newco to Newco or its stockholders, creditors or other constituents, any action asserting a claim

 

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against Newco or any of its directors, officers or other employees arising pursuant to any provision of the DGCL or the Newco Charter or the Newco Bylaws, as each may be amended from time to time, any action asserting a claim against Newco or any of its directors, officers or other employees governed by the internal affairs doctrine or any action or proceeding as to which the DGCL (as it may be amended from time to time) confers jurisdiction on the Court of Chancery of the State of Delaware.

To the fullest extent permitted by law, this exclusive forum provision will apply to state and federal law claims, including claims under the federal securities laws, including the Securities Act and the Exchange Act. However, Newco stockholders will not be deemed to have waived Newco’s compliance with the federal securities laws and the rules and regulations thereunder. The enforceability of similar choice of forum provisions in other companies’ charters and bylaws has been challenged in legal proceedings, and it is possible that, in connection with claims arising under federal securities laws or otherwise, a court could find the exclusive forum provision contained in the Newco Charter to be inapplicable or unenforceable.

This exclusive forum provision may limit the ability of Newco’s stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with Newco or its directors or officers, which may discourage such lawsuits against Newco or its directors or officers. Alternatively, if a court were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings described above, Newco may incur additional costs associated with resolving such matters in other jurisdictions or forums, which could materially and adversely affect Newco’s business, financial condition or results of operations.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

All statements and assumptions contained in this document and in the documents attached or incorporated by reference that do not directly and exclusively relate to historical facts constitute forward-looking statements. Forward-looking statements may often be identified by the use of words such as “will”, “may”, “could”, “should”, “would”, “project”, “believe”, “anticipate”, “expect”, “plan”, “estimate”, “forecast”, “potential”, “intend”, “continue”, “target” and variations of these words or comparable words.

Such forward-looking statements include, among other things, statements with respect to the expected timetable for completing the transactions, the benefits and synergies of the Combination and Mylan’s, the Upjohn Business’s or the combined company’s financial condition, results of operations, cash flows, business strategies, operating efficiencies or synergies, competitive position, growth opportunities, plans and objectives of management and other matters. Because forward-looking statements inherently involve risks and uncertainties, actual future results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to:

 

   

Mylan’s ability to obtain shareholder approval of the Combination contemplated by the Business Combination Agreement necessary to complete the transactions;

 

   

failure to satisfy conditions to the closing of the transactions;

 

   

the separation of the Upjohn Business from Pfizer and its integration with Mylan’s business, operations and culture and the ability of the combined company to operate as effectively and efficiently as expected, and the combined company’s ability to successfully manage and integrate acquisitions generally;

 

   

the combined company’s ability to realize the synergies and benefits expected to result from the Combination within the anticipated time frame or at all;

 

   

changes in governmental regulations or the adoption of new laws or regulations that may make it more difficult or expensive to operate Mylan’s business or the Upjohn Business before, or the combined company’s business after, the Combination;

 

   

potential disruption of management’s time and attention from the ongoing business operations of Mylan, the Upjohn Business or the combined company as a result of the transactions;

 

   

changes in senior management, the loss of key employees or the ability of the combined company to retain and hire key personnel and maintain relationships with key business partners;

 

   

the competitive pressures faced by the combined company;

 

   

the ability of Mylan, the Upjohn Business or the combined company to maintain existing relationships and arrangements, and develop new ones, with customers, suppliers and other business partners;

 

   

actions and decisions of healthcare and pharmaceutical regulators;

 

   

the impact of any U.S. healthcare reform or legislation, including any replacement, repeal, modification or invalidation of some or all of the provisions of the U.S. Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act;

 

   

legislation or regulatory action in markets outside the U.S., including China, affecting pharmaceutical product pricing, intellectual property, reimbursement or access, including, in particular, continued government-mandated reductions in prices and access restrictions for certain pharmaceutical products to control costs in those markets;

 

   

uncertainties regarding future demand, pricing and reimbursement for the products of Mylan, the Upjohn Business or the combined company;

 

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trends toward managed care and healthcare cost containment, and the ability of Mylan, the Upjohn Business and the combined company to obtain or maintain timely or adequate pricing or favorable formulary placement for its products;

 

   

the development and transition of new products and the enhancement of existing products to meet customer needs and respond to emerging trends in the pharmaceutical industry;

 

   

any regulatory, legal or other impediments to the ability of Mylan, the Upjohn Business or the combined company to bring new products to market, including, but not limited to, where Mylan, the Upjohn Business or the combined company uses its business judgment and decides to manufacture, market and/or sell products, directly or through third parties, notwithstanding the fact that allegations of patent infringement(s) have not been finally resolved by the courts (i.e., an “at-risk launch”);

 

   

success of clinical trials, which could result in the loss of marketing approval, changes in product labeling, and/or new or increased concerns about the side effects or efficacy of, a product that could affect its availability or commercial potential, and the ability of Mylan, the Upjohn Business or the combined company to execute on new product opportunities;

 

   

any changes in or difficulties with the manufacturing, distribution and delivery by Mylan, the Upjohn Business or the combined company of products, including any difficulties with facilities (including with respect to remediation and restructuring activities), supply chain or inventory or the ability to meet anticipated demand;

 

   

the ability to meet competition from generic and branded products after the loss or expiration of patent protection for the products of Mylan, the Upjohn Business or the combined company, or competitor products;

 

   

the success of external business-development activities of the combined company, including the ability to identify and execute on potential business development opportunities, the ability to satisfy the conditions to closing of announced transactions in the anticipated time frame or at all, the ability to realize the anticipated benefits of any such transactions;

 

   

any significant issues involving the largest wholesale distributors of Mylan, the Upjohn Business or the combined company;

 

   

the possible impact of the increased presence of counterfeit medicines in the pharmaceutical supply chain on the revenues of Mylan, Upjohn or the combined business and on patient confidence in the integrity of their respective medicines;

 

   

the end result of any negotiations between the U.K. government and the E.U. regarding the terms of the U.K.’s exit from the E.U., which could have implications on the commercial and general business operations of Mylan, the Upjohn Business or the combined company in the U.K. and the E.U., including the supply of products;

 

   

the protection of the intellectual property assets of Mylan, the Upjohn Business or the combined company, including intellectual property licensed from third parties and intellectual property shared with former parent companies;

 

   

any significant breakdown, infiltration or interruption of the information technology systems and infrastructure of Mylan, the Upjohn Business or the combined company;

 

   

contingencies related to actual or alleged environmental contamination;

 

   

risks associated with international operations;

 

   

foreign currency exchange rate fluctuations, including the impact of possible currency devaluations in countries experiencing high inflation rates;

 

   

the impact of purchase accounting adjustments and certain significant items;

 

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the risk of an impairment charge related to intangible assets or goodwill;

 

   

changes in U.S. GAAP;

 

   

risks related to internal control over financial reporting;

 

   

the resolution of pending investigations, claims and disputes;

 

   

the effects of macroeconomic and geopolitical trends and events; and

 

   

the other factors described under “Risk Factors.”

No assurance can be given that any goal or plan set forth in any forward-looking statement can or will be achieved, and readers are cautioned not to place undue reliance on such statements, which speak only as of the date they are made. None of Mylan, Pfizer or Newco undertakes any obligation to update or release any revisions to any forward-looking statement or to report any events or circumstances after the date of this document or to reflect the occurrence of unanticipated events, except as required by law.

 

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INFORMATION ABOUT THE MYLAN EXTRAORDINARY GENERAL MEETING

Overview

This document is being provided as part of a solicitation of proxies by the Mylan Board for the extraordinary general meeting of shareholders of Mylan (the “EGM”). This document is being provided to Mylan shareholders and beneficial owners of Mylan ordinary shares on or about                 , 2020 and provides Mylan shareholders with the information they need to be able to vote, grant a proxy to vote, attend and, if relevant, instruct their vote to be cast, at the EGM.    

Unless the context expressly provides otherwise, this document describes the rights of Mylan ordinary shareholders (as defined below) to attend and, if relevant, vote at the EGM and any adjournments or postponements of the EGM, including the procedures for convening the EGM and for Mylan ordinary shareholders exercising voting and other rights at such meeting. Additional or different rights, which are described in the Notice of Extraordinary General Meeting of Shareholders that accompanies this document, apply in respect of Mylan preferred shareholders, unless otherwise indicated.

Time, Date and Place

The EGM will be held on April 27, 2020 at                  Central European Time (CET) at                 .

Purpose of the Extraordinary General Meeting

The EGM is being held for Mylan shareholders to vote on the approval of the following matters relating to the Combination:

 

   

Approval of the Combination Proposal (voting item), consisting of:

 

   

Mylan Merger: Resolution to enter into and effectuate a legal triangular merger (juridische driehoeksfusie), whereby Mylan, as disappearing company, will merge with and into Mylan II B.V. (“Mylan Newco Sub”), as acquiring company, and whereby Mylan I B.V. (“Mylan Newco”) will allot shares in its capital to Mylan shareholders at the time of such merger in accordance with the merger proposal that will be deposited with the Dutch trade registry and disclosed for public inspection, prepared by the respective boards of directors of Mylan, Mylan Newco and Mylan Newco Sub (the “Mylan Merger”) (the “Mylan Merger Resolution”);

 

   

Approval of the Share Sale: Resolution to approve, under Section 2:107a of the Dutch Civil Code, the sale and transfer by Mylan Newco, immediately following the time at which the Mylan Merger becomes effective (the “Mylan Merger Effective Time”), of all issued and outstanding shares in the capital of Mylan Newco Sub to Utah Acquisition Sub Inc. (“Acquisition Sub”) or its designated nominee (the “Share Sale”) (the “Share Sale Resolution”);

 

   

Approval of the Mylan Newco Liquidation: Resolution to, effective as of the time at which the Share Sale becomes effective, approve and effectuate (i) the dissolution (ontbinding) of Mylan Newco and its subsequent liquidation (vereffening) in accordance with Sections 2:19 and 2:23b of the Dutch Civil Code, (ii) the appointment of Stichting Liquidator Mylan (the “Liquidator”) as liquidator (vereffenaar) of Mylan Newco and (iii) the appointment of an affiliate of Upjohn Inc. (the “Liquidation Custodian”) as custodian of the books and records of Mylan Newco in accordance with Section 2:24 of the Dutch Civil Code (the “Mylan Newco Liquidation Resolutions”);

 

   

Approval of the Alternative Transaction Structure: Resolution to, if the Mylan Merger is not consummated within the period specified by Section 2:318(1) of the Dutch Civil Code, (i) approve, under Section 2:107a of the Dutch Civil Code, the sale, transfer, assignment and delivery by Mylan to Acquisition Sub or its designated nominee of all of the right, title and

 

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interest of Mylan in, to and under all of its assets (the “Asset Sale”), and (ii) approve and effectuate, as soon as practicable following the Asset Sale, (x) the dissolution of Mylan (ontbinding) and its subsequent liquidation (vereffening) in accordance with Sections 2:19 and 2:23b of the Dutch Civil Code, (y) the appointment of the Liquidator as liquidator (vereffenaar) of Mylan and (z) the appointment of the Liquidation Custodian as custodian of the books and records of Mylan in accordance with Section 2:24 of the Dutch Civil Code (the “Alternative Transaction Resolutions”);

 

   

Approval of the Discharge of Directors: Resolution to, effective upon the Mylan Merger Effective Time or the effective time of the Asset Sale (which shall be 6:00 p.m., New York City time, on the date of the Asset Sale), as applicable, provide full and final discharge to each member of the Mylan Board for their acts of management or supervision, as applicable, up to the date of the EGM; provided that no discharge shall be given to any director for acts as a result of fraud (bedrog), gross negligence (grove schuld) or willful misconduct (opzet) of such director (the “Discharge Resolution” and, collectively with the Mylan Merger Resolution, the Share Sale Resolution, the Mylan Newco Liquidation Resolutions and the Alternative Transaction Resolutions, the “Combination Proposal”);

 

   

Adoption of the advisory Compensation Proposal (advisory voting item): Non-binding, advisory resolution to adopt the compensation that will or may be paid or become payable to Mylan’s named executive officers in connection with, or following, the consummation of the Combination (the “Compensation Proposal”);

 

   

Adoption of the Advisory Proposal Regarding Procedures for Determining Board Composition (advisory voting item): Non-binding, advisory resolution to adopt certain features of Newco’s governance which will replace the corresponding features of Mylan’s governance, effective upon the closing of the Combination, relating to (i) the right of stockholders to nominate directors and make other stockholder proposals at stockholder meetings and (ii) director terms and stockholder removal of directors (the “Proposal Regarding Procedures for Determining Board Composition”); and

 

   

Adoption of the Advisory Stockholder Special Meetings Proposal (advisory voting item): Non-binding, advisory resolution to adopt certain features of Newco’s governance which will replace the corresponding features of Mylan’s governance, effective upon the closing of the Combination, relating to the right of stockholders to call special meetings of stockholders (the “Stockholder Special Meetings Proposal” and, together with the advisory Proposal Regarding Procedures for Determining Board Composition, the “Governance Proposals” and, collectively with the Combination Proposal and the advisory Compensation Proposal, the “Proposals” and each, a “Proposal”).

A copy of the Business Combination Agreement is attached as Annex A to this document.

Consummation of the Combination is conditioned on, among other matters, the approval by Mylan shareholders of the Combination Proposal (consisting of the Mylan Merger Resolution, the Share Sale Resolution, the Mylan Newco Liquidation Resolutions, the Alternative Transaction Resolutions and the Discharge Resolution) in accordance with applicable law, but is not conditioned on Mylan shareholder approval of the advisory Compensation Proposal or either of the advisory Governance Proposals.

No business will be voted on at the EGM except such items as are listed as voting items in the agenda above.

Recommendations of the Mylan Board

After careful consideration and deliberation, the Mylan Board unanimously approved the Business Combination Agreement and Mylan’s execution, delivery and performance of the Business Combination Agreement and the consummation of the transactions contemplated thereby. The Mylan Board

 

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accordingly unanimously recommends that the Mylan shareholders vote “FOR” the approval and adoption of the Combination Proposal (consisting of the Mylan Merger Resolution, the Share Sale Resolution, the Mylan Newco Liquidation Resolutions, the Alternative Transaction Resolutions and the Discharge Resolution); “FOR” the adoption of the advisory Compensation Proposal; “FOR” the adoption of the advisory Proposal Regarding Procedures for Determining Board Composition; and “FOR” the adoption of the advisory Stockholder Special Meetings Proposal.

For more information regarding the recommendations of the Mylan Board, see “The Transactions—Recommendation of the Mylan Board of Directors; The Mylan Board’s Reasons for the Combination” beginning on page 105 of this document.

Record Date; Shareholders Entitled to Vote

Dutch law provides that the record date for the EGM must be 28 days prior to the date of the EGM; thus, the Record Date is March 30, 2020. Mylan ordinary shareholders who on the Record Date are registered in Mylan’s shareholder register (the “Register”) may attend the EGM and, if relevant, vote in person or authorize a third-party to attend and, if relevant, vote at the meeting on their behalf through the use of a proxy card.

Mylan ordinary shareholders who are not registered in the Register may request, if eligible for registration, to be registered in the Register no later than the Record Date by means of a request sent to Mylan in writing to the attention of Mylan’s Corporate Secretary at Building 4, Trident Place, Mosquito Way, Hatfield, Hertfordshire, AL10 9UL England (the “Corporate Address”) or by sending an e-mail to corporatesecretary@mylan.com, in each case prior to 5:00 p.m. Central European Time (CET) on April 24, 2020 (the “Cut-Off Time”).

If you are a beneficial owner of Mylan ordinary shares and hold your shares through a bank, broker, trust company or other nominee (“street name”), the relevant institution will send you instructions describing the procedure for instructing the institution how to vote the Mylan ordinary shares you beneficially own.

If you wish to vote the Mylan ordinary shares you beneficially own directly either in person at the EGM or by proxy, you first must obtain a signed “legal proxy” from the bank, broker, trust company or other nominee through which you beneficially own your Mylan ordinary shares.

Mylan preferred shareholders who on April 27, 2020 are registered in the Register may attend the EGM and, if relevant, vote in person or authorize a third-party to attend, and, if relevant, vote at the meeting on their behalf by proxy.

Unless the context otherwise requires, references to (a) “Mylan ordinary shareholders” refer to both (i) shareholders who on the Record Date are registered in the Register as holders of Mylan ordinary shares and (ii) others with meeting rights under Dutch law with respect to Mylan ordinary shares, who on the Record Date are registered as such in the Register, (b) “Mylan preferred shareholders”, if any, refer to both (i) shareholders who on April 27, 2020 are registered in the Register as holders of Mylan preferred shares and (ii) others with meeting rights under Dutch law with respect to Mylan preferred shares who, on April 27, 2020, are registered as such in the Register and (c) “Mylan shareholders” refer to Mylan ordinary shareholders and Mylan preferred shareholders.

As of the close of business on February 4, 2020, the last practicable trading day for which information is available as of the date of this document, there were 516,149,574 Mylan ordinary shares and no Mylan preferred shares outstanding and entitled to vote. Each Mylan share is entitled to one vote on each matter properly brought before the EGM. Shareholders do not have cumulative voting rights.

As of the close of business on February 4, 2020, the last practicable trading day for which information is available as of the date of this document, approximately 0.6% of the outstanding Mylan ordinary shares were held by Mylan directors and executive officers and their affiliates. Mylan expects that Mylan’s directors and executive officers will vote their shares in favor of each of the Proposals, although none of them has entered into any agreements obligating him or her to do so.

 

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Quorum, Abstentions and Non-Votes

At least one-third of the issued Mylan shares must be separately represented at the EGM with respect to a Proposal to constitute a quorum with respect to that Proposal. Abstentions, “blank votes” and invalid votes will be counted for purposes of determining the presence of a quorum (although they are considered to be votes that were not cast). Proxies returned by a broker, bank, trust company or other nominee as “non-votes” because they have not received voting instructions from the beneficial owners of the relevant Mylan ordinary shares will not be treated as shares present for purposes of determining the presence of a quorum. Failures to vote by proxy will not be counted for purposes of determining the presence of a quorum.

For the avoidance of doubt, if a Mylan shareholder returns a properly executed proxy card in a timely fashion without indicating how to vote on a Proposal (and without indicating expressly to abstain or to cast a “blank vote”), the Mylan shares represented by such proxy will be voted in favor of such Proposal in accordance with the recommendation of the Mylan Board, the vote will count for the purposes of determining the presence of a quorum, and it will not be considered a failure to vote.

Required Vote

Approval of the Combination Proposal

Approval of the Combination Proposal requires the affirmative vote of an absolute majority of the valid votes cast at the EGM where at least 50% of Mylan’s issued share capital is represented or the affirmative vote of at least two-thirds of the valid votes cast at the EGM where more than one-third but less than 50% of Mylan’s issued share capital is represented. If a quorum of the minimum number of issued share capital with respect to the Combination Proposal as described above is not present or represented at the EGM, the Combination Proposal cannot be validly adopted at the EGM.

The Combination Proposal is considered one voting item.

Adoption of the Advisory Compensation Proposal

Adoption of the advisory Compensation Proposal requires the affirmative vote of an absolute majority of the valid votes cast at the EGM where at least one-third of Mylan’s issued share capital is represented. If a quorum of at least one-third of the issued share capital is not present or represented at the EGM, the advisory Compensation Proposal cannot be validly adopted at the EGM.

The vote on the advisory Compensation Proposal is a vote separate and apart from the vote to approve the Combination Proposal and is not a condition to consummation of the Combination. Such vote is advisory only, meaning that it will not be binding on the Mylan Board or Mylan. Accordingly, if the Combination Proposal is approved by the Mylan shareholders and the Combination is consummated, the compensation will be payable regardless of the outcome of such vote.

Adoption of the Advisory Governance Proposals

Adoption of each of the advisory Governance Proposals requires the affirmative vote of an absolute majority of the valid votes cast at the EGM where at least one-third of Mylan’s issued share capital is represented. If a quorum of at least one-third of the issued share capital is not present or represented at the EGM, neither of the advisory Governance Proposals can be validly adopted at the EGM.

The vote on each of the advisory Governance Proposals is a vote separate and apart from the vote to approve the Combination Proposal and is not a condition to consummation of the Combination. Each such vote is advisory only, meaning that it will not be binding on the Mylan Board, Mylan or Newco. Accordingly, if the Combination Proposal is approved by the Mylan shareholders and the Combination is consummated, the governance features of Newco described in the advisory Governance Proposals will be adopted regardless of the outcome of such votes.

 

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The advisory Governance Proposals consist of the advisory Proposal Regarding Procedures for Determining Board Composition and the advisory Stockholder Special Meetings Proposal, each of which is a separate voting item.

Voting in Person

Mylan shareholders may cast their votes in person at the EGM. If you wish to attend the EGM in person, please so inform Mylan in writing by sending notice to the attention of Mylan’s Corporate Secretary at Building 4, Trident Place, Mosquito Way, Hatfield, Hertfordshire, AL10 9UL, England (the “Corporate Address”) or by e-mail to corporatesecretary@mylan.com, in each case prior to 5:00 p.m. Central European Time (CET) on April 24, 2020 (the “Cut-Off Time”).

If you plan to attend the EGM, ownership of your Mylan shares is reflected directly on the Register as of the Record Date, and you wish to vote in person, you will be given a ballot at the EGM. In addition, if you plan to attend the EGM, please be prepared to provide proper identification, such as a driver’s license or passport. If you are a beneficial owner of Mylan ordinary shares and hold your shares in street name, plan to attend the EGM, and wish to vote in person, you will be given a ballot at the EGM. Please note, however, that you must bring to the EGM a legal proxy executed in your favor from the relevant shareholder who is registered in the Register as the holder on the Record Date of the underlying shares (through your broker, bank, trust company or other nominee) authorizing you to vote at the EGM. You must also provide proof of ownership, such as a recent account statement or letter from your brokerage firm, bank nominee or other institution proving ownership on the Record Date.

Proper identification, such as a driver’s license or passport, must be presented at the meeting.

Persons attending the EGM will not be permitted to use cameras, recording devices or other similar electronic devices during the meeting.

Failure to comply with such notification and identification requirements may result in not being admitted to the meeting.

Voting of Proxies

If you do not plan to attend the EGM in person and ownership of your Mylan ordinary shares is reflected directly on the Register as of the Record Date, you may cast your vote, after the Record Date but no later than the Cut-Off Date, by internet or telephone or by submitting a proxy card. Mylan requests that you mark, sign and date the accompanying proxy card and return it promptly in the enclosed postage-paid envelope, or submit your proxy for ordinary shares by telephone or internet. If the ownership of your Mylan ordinary shares is reflected directly on the Register as of the Record Date and you vote by proxy, the individuals named on the enclosed proxy card will vote your Mylan ordinary shares in the manner you indicate. If the proxy is returned without an indication as to how the Mylan ordinary shares represented are to be voted with regard to a Proposal (and without expressly indicating to abstain or to cast a “blank vote”), the Mylan ordinary shares represented by the proxy will be voted in accordance with recommendations of the Mylan Board, as described in this document.

If you hold your shares in street name, see “—Shares Held in Street Name” below.

Your vote is important. Accordingly, please submit your proxy for your ordinary shares after the Record Date but no later than the Cut-Off Date by telephone, over the internet, or by marking, signing, dating and returning the enclosed proxy card in accordance with the instructions contained in this document if you do not plan to attend the EGM in person.

 

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How Proxies Are Counted

All ordinary shares represented by properly executed proxies received after the Record Date but no later than the Cut-Off Time will be voted at the meeting in the manner specified by the Mylan ordinary shareholder giving those proxies. As indicated above, if the proxy is returned without an indication as to how the Mylan ordinary shares represented are to be voted with regard to a Proposal (and without expressly indicating to abstain or to cast a “blank vote”), the Mylan ordinary shares represented by the proxy will be voted in accordance with the recommendations of the Mylan Board, as described in this document.

Shares Held in Street Name

If you are a beneficial owner of Mylan ordinary shares and hold your shares in street name, your broker, bank, trust company or other nominee cannot vote your shares on non-routine matters without instructions from you. Each of the Proposals is considered a non-routine matter. You should instruct your broker, bank, trust company or other nominee as to how to vote your Mylan ordinary shares, following the directions from your broker, bank, trust company or other nominee provided to you. If you do not provide your broker, bank, trust company or other nominee with instructions and your broker, bank, trust company or other nominee submits an unvoted proxy with respect to a Proposal, your shares will not be voted on with respect to that Proposal. Failures to vote (which include instances where you fail to instruct your broker, bank, trust company or other nominee to vote on a non-routine matter) on a Proposal will not be counted for purposes of determining the presence of a quorum with respect to that Proposal.

Beneficial owners of Mylan ordinary shares held through a broker, bank, trust company or other nominee may not vote the underlying ordinary shares at the EGM, unless they first obtain (where appropriate, through the relevant broker, bank, trust company or other nominee) a signed proxy card from the relevant shareholder who is registered in the Register as the holder on the Record Date of the underlying ordinary shares.

Revocability of Proxies

You can change your vote of your Mylan shares as indicated on your proxy card or revoke your proxy at any time prior to the Cut-Off Time. You can do this by (a) voting again by telephone or internet or (b) submitting another properly executed proxy card, dated as of a later date (but prior to the Cut-Off Time), in writing (to be sent to Mylan’s Corporate Address to the attention of Mylan’s Corporate Secretary as set forth above). Alternatively, you may give notice of your attendance at the meeting (prior to the Cut-Off Time in the manner described above) and vote in person.

If your shares are held through and/or in street name by your broker, bank, trust company or other nominee, you should contact your broker, bank, trust company or other nominee to change your vote or revoke your voting instructions.

Tabulation of Votes

The inspector of election will, among other matters, determine the number of shares represented at the EGM to confirm the presence of a quorum, determine the validity of all proxies and ballots and certify the results of voting on the Proposals.

Solicitation of Proxies

Mylan will bear all expenses incurred in connection with the solicitation of proxies including the costs associated with the filing, printing and publication of the document; however, pursuant to the Business Combination Agreement, if the Business Combination Agreement is terminated, Mylan and Pfizer will bear such costs equally and if the Combination is consummated, such costs will be borne by Newco. Mylan has retained

 

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Innisfree M&A Incorporated (“Innisfree”) to assist in its solicitation of proxies and has agreed to pay them a fee of approximately $40,000, plus certain fees and expenses, for these services. Mylan will provide funds to Innisfree for the payment of charges rendered by brokerage firms, bank nominees and other institutions for their costs in forwarding proxy materials to beneficial owners of Mylan ordinary shares. Our directors, officers and employees, some of whom may be considered participants in the solicitation, may also solicit proxies by mail, telephone or personal contact without additional remuneration.

Assistance

If you have questions about the Proposals or the EGM, need assistance in completing your proxy card, or if you desire additional copies of this document, you should contact:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, NY 10022

(877) 750-9499 (toll free)

(212) 750-5833 (banks and brokers)

 

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THE TRANSACTIONS

Overview

On July 29, 2019, Pfizer and Newco entered into a Separation and Distribution Agreement, and, on the same day, Pfizer, Newco, Mylan and certain of their affiliates entered into a Business Combination Agreement. These agreements provide for Pfizer to combine the Upjohn Business with Mylan in a Reverse Morris Trust transaction. The principal transactions to effect the Reverse Morris Trust transaction include the following:

 

   

Separation. Pfizer will contribute the Upjohn Business to Newco, so that the Upjohn Business is separated from the remainder of Pfizer’s businesses.

 

   

Distribution. Following the Separation, Pfizer will distribute to its stockholders all of the issued and outstanding shares of Newco common stock held by Pfizer by way of pro rata dividend. The number of shares of Newco common stock that will be distributed in the Distribution will be such that, after the Combination described below, Pfizer stockholders as of the record date of the Distribution will hold 57% of the fully diluted outstanding shares of Newco common stock following the Combination.

 

   

Combination. Immediately following the Distribution, Newco and Mylan will engage in a series of steps to combine their businesses, and in which Mylan shareholders will receive one share of Newco common stock for each Mylan ordinary share held by such holder, subject to any applicable withholding taxes, including any Dutch dividend withholding tax. The number of shares of Newco common stock that will be issued in the Combination will be such that, after the Combination, Mylan shareholders as of immediately before the Combination will hold 43% of the fully diluted outstanding shares of Newco common stock following the Combination.

Newco, which will be the parent entity of the combined Upjohn Business and Mylan business, will be renamed “Viatris,” effective as of the closing of the Combination.

In connection with the transactions, Pfizer and Newco will enter into several other agreements to provide a framework for their relationship after the Distribution. These agreements provide for the allocation between Pfizer, on the one hand, and Newco, on the other hand, of certain assets, liabilities and obligations related to the Upjohn Business and will govern the relationship between Pfizer and Newco after the Distribution, including with respect to employee matters, intellectual property rights, transitional services, manufacturing and supply arrangements and tax matters.

For a more complete discussion of the agreements related to the transactions, see “Business Combination Agreement,” “Separation and Distribution Agreement” and “Additional Transaction Agreements.”

Structure of the Combination

Step 1 Contribution of Upjohn Business

Pfizer will engage in a series of transactions to contribute the Upjohn Business to Newco, so that the Upjohn Business is separated from Pfizer’s other businesses.

Step 2 Cash Distribution

Newco will make a cash payment to Pfizer equal to $12 billion (the “Cash Distribution”) as partial consideration for the contribution of the Upjohn Business to Newco. Newco has obtained financing commitments from certain financial institutions that will permit Newco to incur borrowings in an aggregate principal amount of up to $12 billion. Newco may issue debt securities or incur other long-term debt financing in lieu of borrowing under the financing commitments. Newco expects to use the proceeds of such financings to make the Cash Distribution. The anticipated material terms of the financing, based on the current expectations of Newco and Mylan, are described in more detail under “Description of Financing.” After the Distribution, Pfizer will effect the Pfizer Distribution Payments by using the proceeds of the Cash Distribution to (a) repurchase Pfizer common stock, (b) make pro rata special cash distributions to its stockholders and/or (c) repay or repurchase debt (including principal, interest and associated premiums and fees) held by third-party lenders.

 

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As partial consideration for the contribution of the Upjohn Business to Newco, Newco will also issue to Pfizer additional shares of Newco common stock such that the number of shares of Newco common stock then outstanding and held by Pfizer will be equal to (a) the number of fully diluted Mylan ordinary shares (calculated as described in the Business Combination Agreement), multiplied by the quotient of 57% divided by 43%, minus (b) the number of shares of Newco common stock underlying certain awards under Newco’s stock plan that will be granted to employees of the Upjohn Business who held certain outstanding and unvested Pfizer equity awards immediately before the time at which the Distribution occurs (the “Distribution Shares”).

Step 3 Distribution

Pfizer will distribute all of the Distribution Shares to Pfizer stockholders in a spin-off or a split-off, with the payment of cash in lieu of fractional shares. In a spin-off, Pfizer will effect the Distribution by distributing on a pro rata basis all of the Distribution Shares to Pfizer stockholders entitled to shares of Newco common stock in the Distribution as of the record date of the Distribution. In a split-off, Pfizer would offer its stockholders the option to exchange all or a portion of their shares of Pfizer common stock for shares of Newco common stock in an exchange offer, resulting in a reduction in shares of Pfizer common stock outstanding. If the exchange offer is undertaken and consummated, the remaining Distribution Shares, if any, would be distributed on a pro rata basis to Pfizer stockholders whose shares of Pfizer common stock remain outstanding after the consummation of the exchange offer.

This document assumes that the Distribution will occur through a spin-off. Once a final decision is made regarding the manner of distribution of the shares, this document and the registration statement of which this document forms a part will be amended to reflect that decision, if necessary. If a split-off is ultimately selected by Pfizer, Newco will file a separate Form S-4, and Pfizer will file a Schedule TO, in each case for the split-off.

Step 4 Combination

Under the terms of the Business Combination Agreement, unless the Alternative Transaction Structure is adopted in accordance with the paragraph below, immediately following the Distribution, Newco and Mylan will effect the Combination through the following series of transactions:

 

   

First, Mylan will engage in a legal triangular merger under Dutch law, in which Mylan will merge with and into Mylan Newco Sub, with Mylan Newco Sub surviving as a wholly owned subsidiary of Mylan Newco. In the Mylan Merger, each Mylan ordinary share would be replaced by one Mylan Newco ordinary share. The Mylan Newco ordinary shares will not be listed. The Mylan Newco ordinary shares will be in existence only until the dissolution and liquidation of Mylan Newco has been completed as described below. After the Mylan Newco Liquidation Distribution has been made, we do not expect there to be any further distributions in respect of the Mylan Newco ordinary shares, nor do we expect any Mylan Newco shareholder meeting to be held at which Mylan Newco shareholders could exercise voting rights.

 

   

Second, pursuant to a sale and purchase agreement to be entered into immediately following the Distribution, immediately following the Mylan Merger Effective Time, Mylan Newco will sell and transfer to Acquisition Sub, an indirect, wholly owned subsidiary of Newco, or its designated nominee, all of the outstanding shares of Mylan Newco Sub in exchange for a note that is mandatorily exchangeable into a number of shares of Newco common stock equal to the number of Mylan Newco ordinary shares issued and outstanding as of immediately after the Mylan Merger Effective Time.

 

   

Third, as soon as practicable following the Share Sale Effective Time, but in any event on the closing date of the Combination, Mylan Newco will be dissolved and subsequently liquidated in accordance with Sections 2:19 and 2:23b of the Dutch Civil Code. In connection with the Mylan Newco Liquidation, each holder of Mylan Newco ordinary shares will receive, as a liquidation distribution, and upon the distribution of the Mylan Newco Exchangeable Note, a number of shares of Newco common stock equal to the number of Mylan Newco ordinary shares held by such shareholder as of such time, reduced by any applicable withholding taxes, including any Dutch dividend withholding tax.

 

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If the Mylan Merger is not consummated within the period specified by Section 2:318(1) of the Dutch Civil Code (generally, six months after the announcement in a Dutch nationally distributed daily newspaper that the merger proposal with respect to the Mylan Merger has been deposited with the Dutch trade registry and disclosed for public inspection), then, unless otherwise mutually determined by Pfizer, Newco and Mylan, Newco and Mylan will combine their businesses using an alternative transaction structure without effectuating the Mylan Merger described above. This alternative transaction structure, which this document refers to as the “Alternative Transaction Structure”, consists of the following:

 

   

First, following the Distribution, Mylan will sell, transfer, assign and deliver to Acquisition Sub, an indirect, wholly owned subsidiary of Newco, all of the right, title and interest of Mylan in, to and under all of its assets and liabilities in exchange for a note that is mandatorily exchangeable into a number of shares of Newco common stock equal to the number of Mylan ordinary shares issued and outstanding as of the Asset Sale Effective Time. The Asset Sale will be deemed effective as of 6:00 p.m. New York City time on the date the Distribution occurs.

 

   

Second, as soon as practicable following the Asset Sale Effective Time, but in any event on the closing date of the Combination, Mylan will be dissolved and subsequently liquidated in accordance with Sections 2:19 and 2:23b of the Dutch Civil Code. In connection with the Mylan Liquidation, each holder of Mylan ordinary shares will receive, as a liquidation distribution, and upon distribution of the Mylan Exchangeable note, a number of shares of Newco common stock equal to the number of Mylan ordinary shares held by such shareholder as of such time, reduced by any applicable withholding taxes, including any Dutch dividend withholding tax.

Each step of the Combination is intended to be completed substantially concurrently, in the order indicated.

When the Distribution and Combination are completed, Pfizer stockholders as of the record date of the Distribution will own 57% of the outstanding shares of Newco common stock, and Mylan shareholders as of immediately before the Combination will own 43% of the outstanding shares of Newco common stock, in each case on a fully diluted basis.

Calculation of the Combination Consideration

The Business Combination Agreement provides that the Exchange Ratio is equal to one share of Newco common stock for each Mylan Newco ordinary share or Mylan ordinary share, as applicable (the “Exchange Ratio”). Pursuant to either the Mylan Newco Liquidation, or, if the Alternative Transaction Structure is adopted, the Mylan Liquidation, the Mylan shareholders will receive, as a liquidation distribution, a number of shares of Newco common stock equal to the number of Mylan Newco ordinary shares or Mylan ordinary shares, as applicable, held by such shareholder as of such time, reduced by any applicable withholding taxes, including any Dutch dividend withholding tax.

The Business Combination Agreement provides that after the Distribution but before the Combination, the number of outstanding shares of Newco common stock will be equal to the number of Distribution Shares.

When the Distribution and Combination are completed, Pfizer stockholders as of the record date of the Distribution will own 57% of the outstanding shares of Newco common stock, and Mylan shareholders as of immediately before the Combination will own 43% of the outstanding shares of Newco common stock, in each case on a fully diluted basis.

In addition, the $12 billion of debt to be incurred by Newco and utilized towards the Cash Distribution is not currently reflected in the historical combined financial statements of the Upjohn Business as Newco will incur borrowings for the Cash Distribution on or prior to the date of the Cash Distribution, which will occur immediately prior to the closing of the Combination. The $12 billion of debt to be incurred by Newco is considered debt of Newco assumed in the Combination in accordance with ASC 805. The Exchange Ratio in the Combination will not be impacted by the Cash Distribution.

 

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Furthermore, the Business Combination Agreement provides that Newco will pay Pfizer for certain losses arising out of certain third-party actions following the closing date. See “Business Combination Agreement—Certain Litigation Matters” for more information on the litigation matters for which Newco has agreed to pay Pfizer a certain amount in respect of related losses. At September 30, 2019, Mylan has not estimated or accrued for any amounts related to such contingency. Any such amount will be considered additional purchase price in the form of contingent consideration. At this time, Mylan does not have sufficient information available to make a preliminary estimate of the fair value of any contingent consideration. The Exchange Ratio in the Combination will not be impacted by this provision.

The actual total value of the consideration to be paid by Newco in connection with the Combination will depend on the trading price for shares of Newco common stock following the Combination. There currently is no trading market for shares of Newco common stock.

Trading Markets

Pfizer Common Stock

All Pfizer stockholders will receive from Pfizer, on a pro rata basis, the Distribution Shares, which would result in such stockholders owning 57% of the fully diluted outstanding shares of Newco common stock following the closing of the Combination. Pfizer stockholders will continue to hold their shares of Pfizer common stock following the Distribution, subject to the same rights as before the Separation, the Distribution and the Combination, except that their shares of Pfizer common stock will represent an interest in Pfizer that no longer reflects the ownership and operation of the Upjohn Business. Shares of Pfizer common stock will continue to be traded publicly on the NYSE. Pfizer stockholders, to the extent they are holders of record on the date of the Distribution, will also hold shares of Newco common stock after the transactions.

Newco Common Stock

There currently is no trading market for shares of Newco common stock. Newco intends to file an application to list its common stock on the NASDAQ under a symbol to be determined.

Mylan Ordinary Shares

Mylan ordinary shares are listed on the NASDAQ under the symbol “MYL.” Following the closing of the Combination, Mylan shareholders as of immediately prior to the Combination will own 43% of the outstanding shares of Newco common stock on a fully diluted basis. Upon consummation of the Combination, Mylan intends to delist the Mylan ordinary shares from the NASDAQ and all outstanding shares of Mylan ordinary shares will automatically be canceled and cease to exist at the closing of the Combination and upon their conversion into shares of Newco common stock.

Background of the Combination

Members of management and the board of directors of Pfizer regularly review and assess the performance, operations and financial condition of Pfizer’s businesses, and industry and regulatory developments in the context of its long-term strategic goals and plans. These reviews have included consideration, from time to time, of potential reorganizations and business development opportunities.

As part of that review, Pfizer determined and announced in July 2018 that it would reorganize its businesses so that, effective as of January 1, 2019, they would be managed through three distinct business segments: (1) a science-based innovative medicines business; (2) a primarily off-patent branded and generic established medicines business (which is Pfizer’s Upjohn Business); and (3) an over-the-counter consumer healthcare business. Pfizer reorganized its businesses in this manner to better position each business to achieve its growth

 

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potential. The reorganization also enhanced Pfizer’s ability to evaluate potential strategic options for each business segment in the future. One of those strategic options included potentially separating the Upjohn Business from the remainder of Pfizer and combining it with another company.

On April 25, 2019, the Pfizer Board held a meeting to discuss the possibility of such a transaction. Members of Pfizer senior management and its financial advisors, Goldman, Sachs & Co. (“Goldman”) and Guggenheim Securities, LLC (“Guggenheim”), and its outside legal counsel, Wachtell, Lipton, Rosen & Katz (“Wachtell Lipton”), were also present. The Pfizer Board discussed with Pfizer’s management the performance and prospects of the Upjohn Business, strategic opportunities and considerations applicable to the Upjohn Business, particularly in emerging markets, and the current environment for capital markets and business combination transactions. Following discussion, the Pfizer Board authorized Pfizer management to reach out to select companies, including Mylan, to explore the possibility of a strategic combination involving the Upjohn Business.

Mylan is committed to setting new standards in healthcare. Over the course of Mylan’s history, and in particular during the past decade, Mylan has become a global leader in the pharmaceutical industry—one with a leading operating platform, diversity in its portfolio across broad therapeutic areas and geographies and significant renown for the efficiency of its operations and the quality of its products. In addition to cultivating numerous organic growth drivers, Mylan has a long history of successful large-scale integrations that have advanced its ability to fulfill its mission of reaching the world’s population of seven billion, while simultaneously remaining competitive in a continuously consolidating pharmaceutical industry.

Mylan has been highly active in evaluating quality companies and assets within the industry to identify those that would most effectively build on and transform its operating platform and commercial presence, complement its existing strengths and capabilities, enhance its financial flexibility, further strengthen its competitive position, expand its global presence, promote the long-term sustainable success of its business and enhance shareholder value and/or provide benefits to its other stakeholders, including employees, creditors, customers, suppliers, relevant patient populations and communities in which Mylan operates.

In light of Mylan’s belief that the U.S. public markets underappreciated and undervalued the durability, differentiation and strengths of Mylan’s global and diversified business and pipeline and in furtherance of Mylan’s evaluation of companies and assets for potential transactions, the Mylan Board approved in August of 2018 the formation of a Strategic Review Committee to actively evaluate a wide range of available strategic alternatives to unlock the true value of Mylan’s platform. Over the course of the following months, the Mylan Strategic Review Committee, along with the Mylan Board, Mylan management and external advisors, undertook an extensive review of multiple ways to unlock value for Mylan’s shareholders and other stakeholders, including a review of companies and assets for potential transactions and other strategic and financial alternatives. The strategic review also involved a review of Mylan’s standalone strategy, including expanding the geographic reach of Mylan’s existing product portfolio and future pipeline, particularly in the Asia-Pacific region and emerging markets, and opportunities to accelerate this standalone strategy whether through a business combination transaction or other opportunity. In April and May 2019, the Mylan Board also began discussing the possibility of Robert J. Coury, non-executive Chairman of the Mylan Board and previously both Chief Executive Officer and Executive Chairman of Mylan, returning to serve in an executive capacity as Executive Chairman of Mylan. In connection with such discussions, the Compensation Committee and independent members of the Mylan Board began considering potential compensation arrangements for such role.

From time to time over the last several years, representatives of Pfizer and representatives of Mylan had engaged in discussions regarding existing commercial arrangements between Pfizer and Mylan, but not relating to a potential transaction involving Mylan and the Upjohn Business.

On May 2, 2019, following authorization from the Pfizer Board, Albert Bourla, Chief Executive Officer of Pfizer, contacted Mr. Coury regarding a potential combination of Mylan and the Upjohn Business through a Reverse Morris Trust transaction. Dr. Bourla and Mr. Coury discussed certain financial projections of the Upjohn Business on a standalone basis provided by Pfizer and the potential for value creation on a combined basis with Mylan, but did not negotiate or discuss other specific terms of a potential strategic transaction.

 

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Following that discussion, Mr. Coury updated members of the Mylan Board and the Mylan Strategic Review Committee on his discussion with Dr. Bourla. It was agreed that, in furtherance of the ongoing strategic review, it would be appropriate for Mr. Coury, consistent with his role of providing overall strategic leadership for Mylan, together with members of Mylan management and Mylan’s outside advisors, including Centerview and PJT Partners, Cravath, Swaine & Moore LLP (“Cravath”), Mylan’s outside legal counsel, and NautaDutilh N.V. (“Nauta”), Mylan’s outside Dutch legal counsel, to have preliminary discussions with Pfizer and undertake high-level due diligence to explore a potential combination of Mylan and the Upjohn Business. In furtherance of undertaking such due diligence on the Upjohn Business, Mylan obtained the assistance of external consultants, including PricewaterhouseCoopers.

Between May 5 and May 6, 2019, representatives of Mylan, Cravath, Pfizer and Wachtell Lipton negotiated a confidentiality agreement.

On May 6, 2019, the Executive Committee of the Mylan Board and certain members of the Mylan Strategic Review Committee held a telephonic update session to discuss a potential combination of Mylan and the Upjohn Business and the contemplated confidentiality agreement. Also on May 6, 2019, Pfizer and Mylan executed the confidentiality agreement, permitting the parties to exchange non-public due diligence information.

On May 7, 2019, representatives of Pfizer provided representatives of Mylan with materials regarding the Upjohn Business and a potential combination of Mylan and the Upjohn Business, including information regarding the business operations, historical financial performance and business outlook of the Upjohn Business and certain financial projections of the Upjohn Business on a standalone basis provided by Pfizer.

On May 8, 2019, a meeting was held between representatives of Pfizer and Mylan to discuss a potential combination of Mylan and the Upjohn Business and the materials previously provided by Pfizer. While the participants did not negotiate specific terms of a potential combination of Mylan and the Upjohn Business at this meeting, representatives of Pfizer proposed that the combined company resulting from a combination of Mylan and the Upjohn Business be organized in the United States and pay a dividend given that Pfizer pays a dividend to its stockholders. The participants noted that each of Mylan and Pfizer would need to perform due diligence in order to evaluate any potential transaction involving Mylan and the Upjohn Business.

During the next several weeks, representatives of Mylan and representatives of Pfizer discussed the process for conducting mutual due diligence and the preparation of virtual data rooms for due diligence purposes.

On May 22, 2019, Pfizer granted Mylan and its advisors access to Pfizer’s virtual data room.

On May 24, 2019, Mylan granted Pfizer and its advisors access to Mylan’s virtual data room.

Also on May 24, 2019, the Mylan Strategic Review Committee held a telephonic update session, with members of the Mylan Board, Mylan senior management and representatives of each of Centerview, PJT Partners, Cravath and Nauta participating. The Mylan directors received an update on the status of discussions with Pfizer regarding a potential combination of Mylan and the Upjohn Business. Also at this session, the Mylan directors reviewed the business and financial profile of the Upjohn Business and discussed various strategic and financial considerations regarding a potential combination of Mylan and the Upjohn Business in light of the ongoing strategic review including, among other matters, the diversification of product and geographic mix and the financial flexibility that a combination with the Upjohn Business could provide Mylan. The Mylan directors, with input from Mylan’s financial and legal advisors, also discussed certain aspects of a Reverse Morris Trust transaction structure—a structure that would involve the separation of the Upjohn Business from Pfizer and subsequent spin-off or split-off distribution of Upjohn shares to Pfizer stockholders, immediately followed by the combination of the Upjohn Business with Mylan—including that such structure may entail the combined company being organized in the United States, paying a dividend and incurring debt and distributing the proceeds to Pfizer and that such structure would enable Pfizer to divest the Upjohn Business in a tax-efficient manner,

 

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subject to certain legal requirements, such as Pfizer’s stockholders owning a majority of the shares of the combined company immediately following the combination. The Mylan directors also reviewed standalone financial projections that had previously been prepared by Mylan management in connection with Mylan’s standalone strategy. The participants discussed potential next steps and it was agreed that Mylan and its advisors should continue to engage in due diligence of the Upjohn Business and discussions with Pfizer and its advisors regarding a potential combination of Mylan and the Upjohn Business. The participants set a tentative goal of determining on or around June 14, 2019 whether or not to proceed in earnest with transaction negotiations with Pfizer.

During the following weeks, Mylan and Pfizer and their respective advisors held a series of calls and in-person meetings in the course of performing mutual due diligence.

On May 31, 2019, Mylan and Pfizer entered into a clean team confidentiality agreement to permit certain competitively sensitive confidential information to be exchanged between certain representatives and advisors of Mylan and Pfizer in connection with the mutual due diligence process.

On June 4 and June 5, 2019, as part of each party’s due diligence process, representatives of Pfizer (including members of management of Pfizer’s Upjohn Business) and representatives of Mylan, and their respective advisors, met in New York, New York to discuss their respective management presentations and certain due diligence matters, including information regarding Mylan’s and the Upjohn Business’s respective business operations, historical financial performance and business outlooks, as well as certain financial projections of each of Mylan and the Upjohn Business on a standalone basis. The participants also discussed estimates by Pfizer of possible cost synergies that may result from a potential combination of Mylan and the Upjohn Business.

On June 13, 2019, the Mylan Strategic Review Committee held an update session in New York, New York, with members of the Mylan Board and Mylan senior management and representatives of each of Centerview, PJT Partners, Cravath and Nauta participating. Mr. Coury and members of Mylan’s senior management updated the Mylan directors on the status of discussions with Pfizer. Mylan’s senior management provided the Mylan directors with preliminary due diligence findings on the Upjohn Business. In particular, the Mylan directors reviewed with Mylan management potential strategic and financial benefits of a potential combination of Mylan and the Upjohn Business, including diversification of Mylan’s geographic exposure and portfolio and increased financial flexibility and cash flow generation. Mylan’s senior management also provided its perspectives on the financial projections of the Upjohn Business based on Mylan’s due diligence review of the Upjohn Business to date. Also during this session, representatives of Centerview and PJT Partners provided an overview of, among other matters, a potential combination of Mylan and the Upjohn Business, including illustrative ranges of pro forma ownership of the combined company by former Mylan shareholders. The Mylan directors then discussed next steps and an upcoming meeting to be held between Mr. Coury, Heather Bresch, the Chief Executive Officer of Mylan, Dr. Bourla and Frank D’Amelio, the Chief Financial Officer of Pfizer, at which it was expected that certain terms of a potential combination of Mylan and the Upjohn Business, including valuation and the pro forma ownership split of the combined company between Pfizer stockholders and former Mylan shareholders, would be discussed.

On June 14, 2019, Mr. Coury, Ms. Bresch, Dr. Bourla and Mr. D’Amelio held an in-person meeting in New York, New York. Prior to such date, the parties had not discussed or negotiated specific terms of a potential strategic transaction beyond that the parties were considering a Reverse Morris Trust transaction. The participants discussed certain potential terms of a combination of Mylan and the Upjohn Business, including potential pro forma ownership splits of the combined company between Pfizer stockholders, on the one hand, and Mylan shareholders, on the other hand, ranging from 61% for the Pfizer stockholders and 39% for the Mylan shareholders to 59% for the Pfizer stockholders and 41% for the Mylan shareholders. The participants also discussed the amount of any cash dividend that would be paid from Newco to Pfizer in connection with the Separation and as partial consideration for the contribution of the Upjohn Business to Newco. Representatives of Pfizer suggested a pro forma ownership split of approximately 60% for the Pfizer stockholders and 40% for the

 

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Mylan shareholders based on the assumption that Pfizer will receive a $12 billion cash dividend funded from the proceeds of debt incurred by Newco. Following discussion, the participants agreed that, subject to further consideration by the Mylan Board and the Mylan Strategic Review Committee and the Pfizer Board and assuming continued due diligence, each party would be willing to continue negotiations with a view toward entering into a mutually agreed transaction at the end of July 2019 on the basis of a potential pro forma ownership split of the combined company such that Pfizer stockholders would own 59% of the combined company and former Mylan shareholders would own 41% of the combined company, on a fully diluted basis, and on the basis that Pfizer would receive $12 billion of cash funded from the proceeds of debt incurred by Newco in connection with the Separation and as partial consideration for the contribution of the Upjohn Business to Newco. In addition, the participants agreed that the combined company would be organized in the United States, and specifically in Delaware (the same jurisdiction of organization as Pfizer), and that it would initially have a classified board structure to allow for uninterrupted implementation of the combination and execution of the combined company’s strategy, but that such classified board structure would automatically and fully declassify within a few years of the consummation of the Combination. The participants further discussed the possibility for Newco to pay a dividend in a range of approximately 24% to 30% of Newco’s free cash flow beginning shortly after the consummation of the transactions.

On June 15, 2019, the Mylan Board held a telephonic update session, with representatives of Cravath and Nauta participating. Mr. Coury provided the Mylan Board with an update on the June 14, 2019 meeting with Ms. Bresch and Dr. Bourla and Mr. D’Amelio. Based on that meeting, it was agreed that Mylan would continue to engage in discussions and mutual due diligence with Pfizer.

On June 18, 2019, representatives of Mylan and Pfizer and their respective advisors held the first of numerous working group calls that the parties conducted over the following weeks to discuss and coordinate on various transaction workstreams and due diligence matters.

On June 20, 2019, the Mylan Board and the Mylan Strategic Review Committee met concurrently in person in Dublin, Ireland to discuss the potential combination of Mylan and the Upjohn Business and Mylan’s standalone strategic plan, with members of Mylan senior management and representatives of Centerview, PJT Partners, Cravath, Nauta and Galt & Company, advisor to Mylan, participating. Members of Mylan senior management presented an update on Mylan’s standalone strategic plan and certain contemplated business transformation initiatives, and reviewed the Mylan Financial Projections, which reflected developments in Mylan’s business and industry since the preparation and review of the prior financial projections prepared by Mylan management. See “Certain Unaudited Prospective Financial Information” for further information on the Mylan Financial Projections.

On June 27, 2019, the Pfizer Board held a regularly scheduled meeting in person, with Pfizer’s senior management participating in part for the discussions relating to the Upjohn Business. In the meeting, the Pfizer Board discussed with management various strategic alternatives for the Upjohn Business and received an update on the discussions with Mylan relating to a potential strategic combination transaction. The Pfizer Board, together with Pfizer’s management, discussed the strategic opportunities for growth in the Upjohn Business, particularly in emerging markets, and the potential for a combination transaction with Mylan to provide a complementary market footprint and product portfolio to support and enhance that potential growth. The Pfizer Board also discussed with management the market environment facing off-patent originator brands in the markets where the Upjohn Business operates and Mylan’s product pipeline and therapeutic areas. Pfizer’s management presented a review of financial considerations relating to a business combination transaction with Mylan, as well as other potential alternatives to the proposed transaction, including retaining the Upjohn Business and a spin-off or split-off of the Upjohn Business to Pfizer stockholders that would not also involve a combination with Mylan. The Pfizer Board also reviewed the evaluation and outreach with respect to the Upjohn Business that had been conducted by Pfizer previously and noted that there had not been any new developments with other potential strategic parties. The participants discussed potential next steps, and it was agreed that Pfizer and its advisors should continue to engage in due diligence of Mylan and discussions with Mylan and its advisors regarding a potential combination of Mylan and the Upjohn Business.

 

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On July 1, 2019, representatives of Pfizer (including members of management of Pfizer’s Upjohn division), representatives of Mylan and representatives of Goldman, Centerview and PJT Partners, met at Cravath’s offices in New York, New York to discuss certain financial due diligence items and valuation models, including the Mylan Financial Projections and certain revised financial projections of the Upjohn Business provided by Pfizer. Following this meeting, on July 10, 2019, Pfizer and Mylan agreed that Newco would expect to initiate a dividend of approximately 25% of Newco’s free cash flow beginning the first full quarter following the consummation of the transactions.

On July 2, 2019, on behalf of Pfizer, Wachtell Lipton delivered first drafts of the Business Combination Agreement and the Separation and Distribution Agreement to Cravath, on behalf of Mylan, which provided for, among other things, certain terms that had been discussed between the parties at the June 14, 2019 meeting. See “Business Combination Agreement” and “Separation and Distribution Agreement” for further information on these agreements. The Separation and Distribution Agreement also reflected Pfizer’s proposal that Newco would assume all of the historical liabilities related to the Upjohn Business, except that the allocation of tax liabilities would be set forth in a separate Tax Matters Agreement that would be delivered at a later date and the allocation of pension and employee liabilities would be set forth in a separate Employee Matters Agreement that would be delivered at a later date.

On the same day, on behalf of Pfizer, Wachtell Lipton also delivered first drafts of the amended and restated certificate of incorporation and bylaws of Newco to Cravath, on behalf of Mylan, which provided for, among other things, a classified board that would automatically and fully declassify by Newco’s 2023 annual stockholders’ meeting. See “Description of Newco Capital Stock” and “Comparison of the Rights of Mylan Shareholders and Newco Stockholders” for further information on the amended and restated certificate of incorporation and bylaws of Newco.

On the same day, the Compensation Committee of the Mylan Board held an update session to discuss the status of a potential new employment agreement with Mr. Coury to serve as Executive Chairman both in the event an agreement on the potential combination was reached with Pfizer and in the event an agreement on the potential combination was not reached with Pfizer, including the work that had been done through May and June 2019 with the Compensation Committee of the Mylan Board’s independent compensation consultant to develop a compensation package for such role.

On July 6, 2019, Pfizer provided Mylan with illustrative financial estimates for the combined company and updates to the financial projections of the Upjohn Business provided to Mylan in June 2019 to reflect Pfizer and Upjohn management’s latest assessment of the Upjohn Business and its industry. On July 8, 2019, Mr. Coury and Ms. Bresch met with Mr. D’Amelio to discuss the financial information provided by Pfizer on July 6, 2019.

Between July 7, 2019 and July 11, 2019, on behalf of Pfizer, Wachtell Lipton delivered first drafts of other ancillary agreements, including forms of each of the Transition Services Agreement, Manufacturing and Supply Agreement, Employee Matters Agreement and the Intellectual Property Matters Term Sheet. The draft of the Employee Matters Agreement reflected Pfizer’s proposal and ultimate agreement between the parties that Newco would generally assume all of the pension and post-retirement obligations associated with employees of the Upjohn Business, including obligations under plans sponsored by Pfizer, other than certain U.S. defined benefit plan and post-retirement liabilities. During that period, Davis Polk and Wardwell LLP (“Davis Polk”), tax counsel to Pfizer, delivered on behalf of Pfizer a first draft of the Tax Matters Agreement to Cravath, on behalf of Mylan, which reflected certain terms the parties previously discussed, including Pfizer’s proposal and ultimate agreement between the parties that Pfizer would generally be responsible for tax liabilities attributable to periods on or prior to the date of the Distribution, including those attributable to the Upjohn Business (such tax liabilities retained by Pfizer, “Pre-Distribution Tax Liabilities”), and that Pfizer would generally retain the tax benefits attributable to the Upjohn Business attributable to periods on or prior to the date of the Distribution. Pfizer’s draft also provided that Newco would generally be responsible for any tax liabilities of the combined company attributable to periods after the date of the Distribution. As of September 29, 2019, the total amount of Pre-Distribution Tax Liabilities attributable to the Upjohn Business, as set forth in the Upjohn Business’s unaudited

 

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condensed combined financial statements, was $5,090 million, and the total tax benefit as of such date attributable to the Upjohn Business, as set forth in the Upjohn Business’s unaudited condensed combined financial statements, was $289 million. Because Pfizer retained the Pre-Distribution Tax Liabilities and the tax benefits mentioned above, such amounts are reflected as a pro forma adjustment to the Upjohn Business’s unaudited condensed combined balance sheet as of September 29, 2019 (see “Unaudited Pro Forma Condensed Combined Financial Information of Mylan and the Upjohn Business”). See “Additional Transaction Agreements” for further information on these agreements. Negotiations of the terms of the Business Combination Agreement, the Separation and Distribution Agreement, the additional Transaction Agreements and related schedules and exhibits took place in a number of telephone calls and meetings among the parties and their respective counsel through July 29, 2019.

On July 9, 2019, on behalf of Mylan, Cravath delivered revised drafts of the Business Combination Agreement and the Separation and Distribution Agreement to Wachtell Lipton, on behalf of Pfizer. The drafts included, among other items, revisions to the provisions regarding the assessment of alternative proposals and related actions by the Mylan Board. The revised drafts also provided for a lower termination fee payable by Mylan to Pfizer than the termination fee proposed in Wachtell Lipton’s July 2, 2019 draft and a broader definition of “material adverse effect” with respect to Mylan or the Upjohn Business. The draft also provided that Newco would acquire the assets of the Upjohn Business, but would not assume any liabilities related to the Upjohn Business occurring or existing before the Distribution (“Pre-Distribution Upjohn Liabilities”). The liabilities of the Upjohn Business are reflected in the Upjohn Business’s audited combined financial statements or accompanying notes and the Upjohn Business’s unaudited condensed combined financial statements or accompanying notes included in this document (in each case, as of the date indicated in such financial statements or accompanying notes), consistent with Pfizer’s accounting policies. As of September 29, 2019, the total Pre-Distribution Upjohn Liabilities reflected in such unaudited condensed combined financial statements were $3,978 million, excluding the total Pre-Distribution Tax Liabilities of $5,090 million as of such date (which Pre-Distribution Tax Liabilities would generally be retained by Pfizer). As of September 29, 2019, the net pension and post-retirement obligations that were not reflected in the Upjohn Business’s unaudited condensed combined financial statements but that would be assumed by Newco under the Employee Matters Agreement were $29 million, which reflects approximately $86 million of projected obligations associated with Upjohn employees participating in plans sponsored by Pfizer and approximately $57 million of assets associated with these obligations, in each case as of September 29, 2019. This $29 million is reflected as a pro forma adjustment to the Upjohn Business’s unaudited condensed combined balance sheet as of September 29, 2019 (see “Unaudited Pro Forma Condensed Combined Financial Information of Mylan and the Upjohn Business”).

On July 10, 2019, Mr. Coury and Ms. Bresch met with Dr. Bourla and Mr. D’Amelio to discuss certain transaction terms and valuation matters in light of the updates contained in the Upjohn Business Financial Projections. The participants discussed, among other matters, Mylan’s proposal to change the ownership split of the combined company in light of the recently provided Upjohn Business Financial Projections, such that Pfizer stockholders would own 57% of the combined company and former Mylan shareholders would own 43% of the combined company, on a fully diluted basis, on the basis that Pfizer would receive $12 billion of cash funded from the proceeds of debt incurred by Newco in connection with the Separation and as partial consideration for the contribution of the Upjohn Business to Newco. No definitive agreement to change the ownership split of the combined company was reached at this meeting, and Dr. Bourla and Mr. D’Amelio noted that any change in the ownership percentage would be subject to the review and approval of the Pfizer Board. The parties also discussed the treatment of Pre-Distribution Upjohn Liabilities (other than Pre-Distribution Tax Liabilities, which Pfizer had previously agreed to retain) and the scope of exclusions from the “material adverse effect” definition. Pfizer’s proposal was that the combined company should assume all Pre-Distribution Upjohn Liabilities (other than Pre-Distribution Tax Liabilities), consistent with other Reverse Morris Trust and spin-off transactions. Pfizer also proposed that the “material adverse effect” definition should have a broader set of exclusions, particularly relating to effects on the Upjohn Business or Mylan’s business, as applicable, arising from any changes or developments in governmental drug policy initiatives in China. Mylan’s proposal was that the combined company should not assume any Pre-Distribution Upjohn Liabilities (in addition to not assuming any Pre-Distribution Tax Liabilities), and that there should be a narrower set of exclusions from the “material adverse effect” definition, including that the definition would not specifically exclude the effects on the Upjohn Business

 

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or Mylan’s business, as applicable, arising from any changes or developments in governmental drug policy initiatives in China. For a description of the potential downward pricing pressure faced by the Upjohn Business from government initiatives in China, see “Risk Factors—Risks Related to the Upjohn Business—The Upjohn Business faces downward pricing pressure from government initiatives in China. Any decrease in the price, or reduction in the sales volume, of Upjohn products could have a negative effect on the Upjohn Business’s results of operations”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Upjohn Business—Industry Trends” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Upjohn Business—Industry-Specific Challenges—International”. The scope of exclusions from the definition of “material adverse effect” was important to each party because the parties’ respective obligations to complete the transaction would be conditioned on the accuracy of the other party’s representations and warranties generally tested using a “material adverse effect” standard (see “Business Combination Agreement—Conditions to the Combination”). No definitive understanding on these matters was reached at this meeting.

On July 10, 2019, on behalf of Mylan, Cravath delivered initial drafts of debt commitment papers related to the debt financing commitments to be obtained by Upjohn in connection with the proposed transaction to permit Upjohn to incur borrowings or issue debt securities in an aggregate principal amount of up to $12 billion, to Pfizer, Wachtell Lipton and affiliates of Goldman, as lenders.

On July 12, 2019, the Pfizer Board met, with Pfizer’s management and advisors also in attendance, to review the status of discussions with Mylan. Pfizer’s management and advisors updated the Pfizer Board on negotiations with Mylan, including Mylan’s proposal that, after the combination of the Upjohn Business and Mylan, the Pfizer stockholders would own 57% of the combined company on a fully diluted basis and former Mylan shareholders would own 43% of the combined company on a fully diluted basis, and Mylan’s proposal that the combined company would not assume any Pre-Distribution Upjohn Liabilities (in addition to not assuming any Pre-Distribution Tax Liabilities). It was explained that, in the contemplated transaction, Pfizer would receive $12 billion of cash funded from the proceeds of debt incurred by Newco in connection with the Separation and as partial consideration for the contribution of the Upjohn Business to Newco. The Pfizer Board discussed with Pfizer’s management and advisors certain financial considerations relating to the proposed combination transaction, including with respect to the proposed pro forma ownership of the combined company and certain potential synergies which the Pfizer stockholders would be expected to benefit from on a pro rata basis, as well as the relative contributions of each company to the combined company’s potential financial condition and prospects. Pfizer’s advisors discussed terms of recent Reverse Morris Trust transactions and other business combination and M&A transactions, and the Pfizer Board discussed with Pfizer management and advisors various considerations regarding Mylan’s proposed allocation of Pre-Distribution Upjohn Liabilities and the treatment of certain potential Mylan Liabilities, in light of the fact that the combined company would be assuming historical liabilities of Mylan’s business under the contemplated structure of the Combination, including potential liabilities arising out of third-party actions relating to the manufacture, distribution, marketing, promotion or sale of opioids by or on behalf of Mylan or its subsidiaries (the “Opioid

Matters”). The participants discussed potential next steps and the Pfizer Board authorized and instructed Pfizer and its advisors to continue to engage in due diligence of Mylan and negotiations with Mylan and its advisors regarding a potential combination of Mylan and the Upjohn Business.

Also on July 12, 2019, members of the senior management teams of Mylan and Pfizer as well as other representatives of Mylan and Pfizer met with representatives of Moody’s Investor Service, Standard & Poor’s Financial Services LLC and Fitch credit rating agencies to present an overview of the proposed transaction and the expected financial profile of the combined company following completion of the proposed transaction.

On July 15, 2019, Mr. Coury, Ms. Bresch and Dr. Bourla and Mr. D’Amelio engaged in conversations regarding outstanding transaction terms. As a result of those discussions, they tentatively agreed to proceed with negotiations on the basis of certain terms, including a pro forma ownership split of the combined company such that Pfizer stockholders would own 57% of the combined company on a fully diluted basis and former Mylan shareholders would own 43% of the combined company on a fully diluted basis. The parties also discussed a potential approach whereby the combined company would assume all of the Pre-Distribution Upjohn Liabilities,

 

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other than (1) Pre-Distribution Tax Liabilities (as previously agreed upon between the parties) and (2) certain specified antitrust matters related to the Upjohn products, and that, in exchange for Pfizer’s retention of these specified antitrust matters, the combined company would make a payment to Pfizer in the event that the combined company suffered a loss in respect of the Opioid Matters. Despite this discussion, no definitive understanding on the allocation of liabilities arising from antitrust matters or the Opioid Matters was reached at this meeting.

On July 16, 2019, the Mylan Strategic Review Committee held an update session in New York, New York, with members of the Mylan Board and Mylan senior management and representatives of Centerview, PJT Partners, Cravath and Nauta participating. Mr. Coury and members of Mylan senior management provided an update on the status of discussions with Pfizer to date. At this meeting, Centerview and PJT Partners presented an overview of the potential combination based on the most recently discussed pro forma ownership split and using the Mylan Financial Projections and the Upjohn Business Financial Projections, and certain cost synergy estimates that had been developed by management of each of Mylan, Pfizer and the Upjohn Business. Also at this meeting, Mylan management provided an overview of its due diligence findings to date with respect to the Upjohn Business. Cravath and Nauta reviewed the duties of the Mylan directors under Dutch law, the contemplated structure of the proposed transaction, certain terms of the latest drafts of the transaction documents, including with respect to the allocation of liabilities in connection with the transaction, and certain aspects of Delaware law to which the combined company would be subject upon closing of the proposed transaction. The Mylan directors discussed various considerations relating to the proposed transaction and the strategic and financial logic of the proposed transaction, particularly in light of the strategic review process and the alternatives to unlock value that had been explored to date, as well as Mylan’s standalone strategic plan and prospects. Following this discussion, the independent members of the Mylan Board held a discussion with Michael Goettler, the group president of Pfizer’s Upjohn Business, in connection with the consideration by the Mylan Board of a suggestion previously made by Dr. Bourla that Mr. Goettler be considered as a potential candidate to serve as the Chief Executive Officer of the combined company. Also on July 16, 2019, the Compensation Committee and independent directors of the Mylan Board held an update session at which they discussed and expressed support for a potential new employment agreement with Mr. Coury to serve as Executive Chairman both in the event an agreement on the potential combination was reached with Pfizer and in the event an agreement on the potential combination was not reached with Pfizer.

Also on July 16, 2019, on behalf of Pfizer, Wachtell Lipton sent revised drafts of the Business Combination Agreement and the Separation and Distribution Agreement to Cravath, on behalf of Mylan. The drafts reflected certain terms that the parties previously discussed, including a pro forma ownership split of the combined company such that Pfizer stockholders would own 57% of the combined company on a fully diluted basis and former Mylan shareholders would own 43% of the combined company on a fully diluted basis and that the combined company would assume the Pre-Distribution Upjohn Liabilities, other than (1) Pre-Distribution Tax Liabilities (as previously agreed upon between the parties) and (2) liabilities related to certain specified antitrust matters related to the Upjohn products, both of which would be retained by Pfizer. The revised drafts of the Business Combination Agreement and the Separation Agreement sent by Wachtell Lipton also provided for, among other things, a higher termination fee payable by Mylan to Pfizer than the termination fee proposed in Cravath’s July 9, 2019 draft, and certain changes to the provisions regarding the assessment of alternative proposals.

On July 20, 2019, on behalf of Mylan, Cravath sent Wachtell Lipton, on behalf of Pfizer, a proposal regarding certain unresolved transaction terms including the treatment of liabilities arising out of the Opioid Matters. Mylan noted that its willingness to consider a proposal to indemnify Pfizer for the Opioid Matters based on the pro forma ownership of the combined company was subject to Pfizer’s agreement that Pfizer would retain all liabilities in respect of pre-Distribution antitrust litigation or investigations related to the Upjohn Business.

From July 22 through July 24, 2019, representatives of Mylan, Pfizer, Cravath and Wachtell Lipton held in-person meetings to negotiate unresolved transaction terms and contract provisions, including the scope of the antitrust litigation or investigations related to the Upjohn Business that Pfizer would agree to retain and the

 

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scope of the “material adverse effect” definition, and made progress in resolving outstanding items, including agreeing in principle that there would be a cash payment from the combined company to Pfizer after the closing equal to 57% of any losses related to any Opioid Matters incurred by the combined company after the execution of the Business Combination Agreement.

Between July 24, 2019 and July 26, 2019, representatives of Cravath and Wachtell Lipton discussed on behalf of their respective clients the terms of the proposed employment agreement with Mr. Coury to return as Executive Chairman of Mylan and as Executive Chairman of Newco following the closing of the transactions as described under the heading “Interests of Mylan Directors and Executive Officers in the Transactions—Discussions Regarding Executive Chairman Compensation”. While the Compensation Committee and independent directors of the Mylan Board were supportive of the potential employment agreement, following such discussions, the Mylan Board determined not to adopt any new arrangements for Mr. Coury at the time. The Mylan Board and Mr. Coury determined that he would remain in his current role through the closing of the transactions and that the Newco Compensation Committee and independent directors of the Newco Board would determine the compensation arrangements of the Newco executive officers, including for Mr. Coury as Executive Chairman of Newco.

On July 26, 2019, the Pfizer Board held a special telephonic meeting, with members of Pfizer senior management and representatives of Goldman, Guggenheim and Wachtell Lipton participating, to review the terms and conditions of the transaction documents that had been negotiated between representatives of Pfizer and Mylan and which were substantially complete, including the terms that were subject to final resolution of the parties, and to review with Pfizer’s financial and legal advisors their views on the proposed transactions and the benefits afforded by the transactions to Pfizer and its stockholders as well as the Upjohn Business, including in comparison to potential strategic alternatives such as retaining the Upjohn Business. Following discussion with Pfizer’s management and advisors, the Pfizer Board unanimously determined, among other things, that the Separation and Distribution Agreement, the Business Combination Agreement, the other transaction agreements and the transactions contemplated thereby were advisable, fair to and in the best interests of Pfizer and its stockholders and approved and authorized the execution, delivery and performance of the Separation and Distribution Agreement, the Business Combination Agreement, the other transaction agreements and the transactions contemplated thereby.

On July 26, 2019, the Mylan Board and the Mylan Strategic Review Committee met concurrently in person in London, England, with members of Mylan senior management and representatives of Centerview, PJT Partners, Cravath and Nauta participating. Mr. Coury and members of Mylan senior management provided an update on the outcome of negotiations with Pfizer regarding the proposed transaction and discussed the strategic rationale for the proposed transaction. At this meeting, representatives of Centerview and PJT Partners (which are referred to collectively as Mylan’s financial advisors) jointly reviewed with the Mylan Board and the Mylan Strategic Review Committee their financial analyses of the Exchange Ratio, which will result in a pro forma ownership of the fully diluted shares of Newco common stock being held 43% by former Mylan shareholders and 57% by Pfizer stockholders in accordance with the Business Combination Agreement. Following this discussion, each of Centerview and PJT Partners rendered to the Mylan Board and the Mylan Strategic Review Committee an oral opinion, each of which was subsequently confirmed by delivery of a written opinion dated July 26, 2019, that, as of such date and based upon and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations upon the review undertaken in connection with preparing such opinion, the Exchange Ratio, which will result in a pro forma ownership of the fully diluted shares of Newco common stock being held 43% by former Mylan shareholders and 57% by Pfizer stockholders in accordance with the Business Combination Agreement, was fair, from a financial point of view, to the holders of Mylan ordinary shares (other than Excluded Shares). For a detailed discussion of Centerview’s opinion, please see below under the caption “Opinions of Mylan’s Financial Advisors—Opinion of Centerview Partners LLC”. For a detailed discussion of PJT Partners’ opinion, please see below under the caption “Opinions of Mylan’s Financial Advisors—Opinion of PJT Partners LP”. As described in such sections, among the assumptions made, procedures followed, matters considered and qualifications and limitations upon the reviews undertaken in preparing their respective opinions, each of Centerview and PJT Partners assumed that Newco would not assume

 

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any contingent liabilities of the Upjohn Business that are meaningful to their respective analyses or opinions, and did not take into account, for purposes of their respective analyses, the assumption by Newco of any contingent liabilities of the Upjohn Business. In addition, at the direction of Mylan’s management, each of Centerview and PJT Partners assumed that Newco would not assume any Pre-Distribution Tax Liabilities that are meaningful to their respective analyses or opinions. Also at this meeting, Cravath and Nauta reviewed the duties of the members of the Mylan directors under Dutch law, the structure of the proposed transaction, certain terms of the latest drafts of the transaction documents, the debt commitment papers and the arrangements for the potential transfer of Pfizer’s Meridian Medical Technologies business to the combined company, and certain aspects of Delaware law to which the combined company would be subject upon closing of the proposed transaction. The Mylan directors discussed various considerations in evaluating the proposed transaction, noting that the proposed transaction was superior to Mylan’s standalone strategic plan and the various available alternatives that had been explored to date in connection with the strategic review. Following this discussion, the Mylan Strategic Review Committee unanimously recommended that the Mylan Board approve the execution, delivery and performance of the Business Combination Agreement and the transactions contemplated thereby and certain other matters in connection with the transactions. The Mylan Board then unanimously approved and authorized the execution, delivery and performance of the Business Combination Agreement and the transactions contemplated thereby, recommended that the Mylan shareholders approve the Business Combination Agreement and the transactions and matters contemplated thereby and approved and authorized certain other matters in connection with the transactions.

From July 26 to July 28, 2019, representatives of Mylan, Pfizer, Cravath and Wachtell Lipton continued to negotiate unresolved contract provisions, including the scope of exclusions from the “material adverse effect” determination, and exchanged drafts of transaction documents and related documentation to finalize all contract provisions to reflect agreed positions, including agreeing on July 26, 2019 to the scope of the exclusions in the “material adverse effect” definition, as reflected in the definitive Business Combination Agreement. During this period, the parties also negotiated the scope of the antitrust litigations or investigations related to the Upjohn products that would be retained by Pfizer, and resolved that Pfizer would retain antitrust litigations or investigations relating to the Greenstone generics business to the extent arising from conduct during the period prior to the Distribution and certain specified antitrust litigations or investigations relating to the Upjohn Business set forth on a schedule (the material matters on such schedule are set forth in and discussed under “Note 13A2. Commitments and Contingencies: Legal Proceedings—Product Litigation—Effexor; and —Lipitor—Antitrust Actions” and “Note 13A4. Commitments and Contingencies: Legal Proceedings—Government Investigations—Phenytoin Sodium Capsules; and —Greenstone Investigations” to the unaudited condensed combined financial statements of the Upjohn Business as of and for the nine months ended September 29, 2019). As of September 29, 2019, Pfizer had accrued approximately $66 million in connection with the antitrust litigation or investigations related to the Upjohn Business that will be retained by Pfizer, which amount reflects losses that are both probable and reasonably estimable, as of such date, consistent with Pfizer’s accounting policies applicable to such matters (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Upjohn Business—Contingencies—Legal Matters”). This $66 million of litigation related accruals remaining with Pfizer is reflected as a pro forma adjustment to the Upjohn Business’s unaudited condensed combined balance sheet as of September 29, 2019 (see the Unaudited Pro Forma Condensed Combined Financial Information of Mylan and the Upjohn Business).

On the morning of July 29, 2019, before the opening of trading on Nasdaq and the NYSE, the applicable parties entered into the Business Combination Agreement, the Separation and Distribution Agreement and other agreements related to the transactions, and Mylan and Pfizer issued a joint press release announcing the transactions. Mylan and Pfizer then held a joint conference call to discuss the transactions.

Recommendation of the Mylan Board of Directors; The Mylan Board’s Reasons for the Combination

On July 26, 2019, the Mylan Board determined to unanimously approve the Business Combination Agreement and the transactions contemplated thereby, including the Combination, and to unanimously recommend the approval and adoption of the Combination Proposal by the general meeting of shareholders of Mylan. In reaching its determination, the Mylan Board consulted with members of Mylan’s management, as well

 

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as with financial and legal advisors, reviewed a significant amount of information and carefully considered a number of factors in concluding that the transactions are likely to result in strategic and financial benefits to Mylan, its shareholders and other stakeholders, including the material factors set forth below.

Strategic Considerations

 

   

the transactions are expected to result in a combined company that will offer a sustainable, diverse and differentiated portfolio of prescription medicines, complex generics, over-the-counter products and biosimilars, supported by commercial and regulatory expertise, established infrastructure, best-in-class R&D capabilities and high-quality manufacturing and supply chain excellence;

 

   

the Upjohn Business will provide Mylan’s platform with complementary market access and capabilities, including commercial expertise and experience in growth markets that the management and employees of the Upjohn Business will bring to the combined company;

 

   

the transactions will accelerate Mylan’s standalone strategy of meaningfully expanding the geographic reach of Mylan’s existing broad product portfolio and future pipeline, particularly in the Asia-Pacific region and emerging markets;

 

   

the transactions are expected to result in a combined company with enhanced global scale and geographic reach as compared to Mylan on a standalone basis, offering greater capabilities to expand access to medicine and meet the world’s diverse therapeutic and evolving health needs;

 

   

the transactions are expected to create a unique company with no direct pharmaceutical peer set and, by bringing the two highly complementary businesses together, will transform and accelerate the ability of both businesses to serve patients’ needs and expand their capabilities across more than 165 markets;

 

   

the transactions are expected to deliver meaningful value to Mylan’s shareholders and further the interests of Mylan’s other stakeholders; and

 

   

the fact that the Mylan Strategic Review Committee had, beginning in August 2018, engaged in an extensive strategic review of alternatives, as well as of Mylan’s standalone strategy, and determined that the transactions were superior to the alternatives considered and Mylan’s standalone strategy and unanimously recommended that the Mylan Board approve the Business Combination Agreement.

Financial Considerations

 

   

the potential cost savings expected to result from the transactions, which are expected to include approximately $1 billion of annual cost synergies achieved by 2023;

 

   

the expected financial performance of the combined company and the enhanced financial flexibility that the transactions can provide, including the expectation that the combined company will be able to de-lever over time;

 

   

the anticipated focus of the combined company on capital return, through dividends and the potential for share repurchases, in addition to paying down debt;

 

   

the oral opinions of each of Centerview and PJT Partners rendered to the Mylan Board and the Mylan Strategic Review Committee on July 26, 2019, each of which was subsequently confirmed by delivery of a written opinion dated July 26, 2019, that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations upon the review undertaken in connection with preparing such opinion, the Exchange Ratio, which will result in a pro forma ownership of the fully diluted shares of Newco common stock being held 43% by former Mylan shareholders and 57% by Pfizer stockholders in accordance with the Business Combination Agreement, was fair, from a financial point of view, to the holders of Mylan ordinary shares (other than Excluded Shares as set forth in such opinion), as more fully described below under the captions “—Opinions of Mylan’s Financial Advisors—Opinion of Centerview Partners LLC” and “—Opinions of Mylan’s Financial Advisors—Opinion of PJT Partners LP,” respectively;

 

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Mylan’s due diligence review of business and financial information of the Upjohn Business;

 

   

the Financial Projections and Mylan’s due diligence review and analysis of the Financial Projections;

 

   

the risk that the Financial Projections may not be achieved and the fact that the Financial Projections and prospective financial results of Newco are necessarily estimates based on assumptions made at the time such information was prepared that are subject to risks and uncertainties, including the potential impacts of regulatory developments in the jurisdictions in which the businesses operate such as downward pricing pressures in China, including in connection with the implementation of volume-based tendering, as more fully described under the section titled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements”; and

 

   

the Mylan Board’s understanding of Mylan’s business, operations, financial condition, earnings, prospects, competitive position and the nature of the industry in which Mylan operates, as well as Mylan’s historical and projected financial performance.

Terms of the Transactions and Other Considerations

 

   

the terms and conditions of the Business Combination Agreement and the other Transaction Documents, including: that the agreed pro forma ownership of the combined company will result in former Mylan shareholders owning 43% of the combined company’s issued and outstanding shares on a fully diluted basis; the covenants applicable to each party to the Transaction Documents; the conditions to consummation of the Combination; the right of the Mylan Board, under specified circumstances, to engage in discussions regarding alternative transactions and to change its recommendation to the Mylan shareholders with respect to the Combination Proposal; the circumstances under which the Business Combination Agreement can be terminated; the size of the termination fee associated with a termination and the circumstances under which such a fee would be payable by Mylan; and the agreed scope of liabilities related to the Upjohn Business that will be assumed by the combined company;

 

   

the fact that the terms of the Business Combination Agreement and the other Transaction Documents were the result of extensive arms’-length negotiations between Mylan and Pfizer;

 

   

the fact that at the Effective Time, the Newco Board will consist of thirteen directors, including the Executive Chairman of Newco, who will be Robert J. Coury (current Chairman of the Mylan Board), the Chief Executive Officer of Newco, who will be Michael Goettler (current Global President of the Upjohn Business), as well as eight members designated by Mylan and three members designated by Pfizer (in consultation in good faith with Mylan);

 

   

the fact that the combined company’s management team will consist of executive management talent from both Mylan and the Upjohn Business, including Robert J. Coury, who will become the Executive Chairman of Newco, Michael Goettler, who will become the Chief Executive Officer of Newco and the current President of Mylan, Rajiv Malik, who will become the President of Newco;

 

   

the experience and prior success of Mylan’s management in integrating large acquisitions with Mylan’s existing business;

 

   

the terms of the debt to be incurred by Newco in connection with the transactions and the payment of $12 billion of proceeds of the debt financing to Pfizer, as more fully described below under the caption “Description of Financing”; and

 

   

the fact that the combined company will be domiciled in the United States, incorporated in Delaware and subject to Delaware law rather than Dutch law, which the Mylan Board determined to be acceptable since (i) domiciling Newco in the United States allows for more certainty with respect to the tax treatment of the transaction to Pfizer and its stockholders, (ii) the Mylan Board understands that the inefficiencies of being tax resident in the United States, relative to other jurisdictions, have been reduced as a result of recent U.S. tax reform legislation, (iii) the Mylan Board believes that Delaware’s

 

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stable and balanced corporate laws and jurisprudence are familiar to many U.S. investors and would provide Newco with an effective platform from which to operate and provide value to Newco’s stockholders and other stakeholders and (iv) the Mylan Board believes that having Newco organized in Delaware and subject to a U.S.-style, stockholder-centric governance model is consistent with views expressed to Mylan by a number of Mylan shareholders;

 

   

the fact that the combined company will be incorporated in Delaware and subject to Delaware law rather than Dutch law affects certain rights of Mylan shareholders, as more fully described below under the caption “Comparison of the Rights of Mylan Shareholders and Newco Stockholders”.

The Mylan Board also considered certain countervailing factors in its deliberations concerning the Combination and the other transactions, including:

 

   

the inability of Mylan to influence the operations of the Upjohn Business during the potentially significant time period prior to closing of the Combination;

 

   

the possibility that the increased earnings, efficiencies and other potential benefits expected to result from the transactions will not be fully realized or realized within the expected time frame;

 

   

the challenges and difficulties, foreseen and unforeseen, inherent in fully and successfully separating the operations of the Upjohn Business from Pfizer and integrating such business with Mylan;

 

   

the potential impact of the restrictions under the Business Combination Agreement on Mylan’s ability to take certain actions during the period between execution of the Business Combination Agreement and the closing of the Combination, as described further in the section captioned “Business Combination Agreement—Conduct of Business Pending the Combination”;

 

   

the possibility that the public announcement of the transactions could have an adverse effect on Mylan, including on Mylan’s customers and operations and Mylan’s ability to attract and retain key management and personnel during the pendency of the transactions;

 

   

the risk that the transactions, including the integration of the Upjohn Business with Mylan, may divert management attention and resources away from operational matters;

 

   

that the combined company will be dependent on the provision of certain transition services by Pfizer, and will be required to provide certain transition services to Pfizer, for a limited period of time following the effectiveness of the Separation;

 

   

the fact that Newco will incur substantial indebtedness in connection with the transactions, which indebtedness will need to be serviced by the combined company as more fully described below under the caption “Description of Financing”;

 

   

the restrictions on Mylan’s ability to solicit alternative transactions and the fact that certain provisions of the Business Combination Agreement may dissuade third parties from seeking to acquire Mylan or otherwise increase the cost of any potential acquisition;

 

   

that, under the terms of the Business Combination Agreement, Mylan will be required to pay Pfizer a termination fee of $322 million if the Business Combination Agreement is terminated under certain circumstances, and that in the situation where Mylan’s shareholders do not approve the Combination and the Business Combination Agreement is terminated, Mylan may be required to reimburse Pfizer for certain of its costs in connection with the transactions up to $96 million;

 

   

the fact that, in order to preserve the tax-free treatment of the transactions to Pfizer and its stockholders, the combined company would be required to abide by certain restrictions for a period of time following the transactions that could reduce its ability to engage in certain future business transactions that might be advantageous;

 

   

the indemnities being provided by the combined company to Pfizer under the Separation and Distribution Agreement and the Ancillary Agreements;

 

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the risks associated with the Upjohn Business, including those described in the section captioned “Risk Factors”;

 

   

the combined company’s assumption from Pfizer of certain liabilities relating to the Upjohn Business, as described in “Separation and Distribution Agreement” and “Risk Factors”;

 

   

the possibility that the transactions may not be completed in a timely manner or at all and the potential related adverse consequences to Mylan, including the fact that there can be no assurance that all conditions to the parties’ obligations to consummate the transactions, including the receipt of regulatory approvals from multiple government agencies in multiple jurisdictions, as more fully described under the caption “—Regulatory Approvals Related to the Combination”, will be satisfied or validly waived within the time frames contemplated by the Transaction Documents, and, as a result, the transactions may not be consummated and substantial costs could be incurred as a result; and

 

   

the risk that Mylan may be unable to obtain the requisite affirmative vote of Mylan shareholders to approve the Combination Proposal.

This discussion of the information and factors considered by the Mylan Board in reaching its conclusions and recommendations includes the material factors considered by the Mylan Board, but is not intended to be exhaustive and may not include all of the factors considered by the Mylan Board. In view of the wide variety of factors considered in connection with its evaluation of the Combination and the other transactions, and the complexity of these matters, the Mylan Board did not find it useful and did not attempt to quantify, rank or assign any relative or specific weights to the various factors that it considered. Rather, the Mylan Board viewed its decisions as being based on the totality of the information presented to it and the factors it considered, including its discussions with, and questioning of, members of Mylan’s management and outside legal and financial advisors. In addition, individual members of the Mylan Board may have assigned different weights to different factors.

Certain of Mylan’s directors and executive officers have interests in the transactions that may be different from, or in addition to, those of Mylan’s shareholders generally. The Mylan Board was aware of and considered these potential interests, among other matters, in evaluating the transactions and in making its recommendations to Mylan shareholders. For a discussion of these interests, see “—Interests of Mylan Directors and Executive Officers in the Combination”.

This explanation of the factors considered by the Mylan Board is in part forward-looking in nature and, therefore, should be read in light of the factors discussed in the sections of this document captioned “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors”.

Opinions of Mylan’s Financial Advisors

Mylan retained Centerview and PJT Partners as financial advisors to the Mylan Board and the Mylan Strategic Review Committee in connection with the proposed Combination and the other transactions contemplated by the Business Combination Agreement. In connection with this engagement, the Mylan Board and the Mylan Strategic Review Committee requested that Centerview and PJT Partners evaluate the fairness, from a financial point of view, of the Exchange Ratio, which will result in a pro forma ownership of the fully diluted shares of Newco common stock being held 43% by former Mylan shareholders and 57% by Pfizer stockholders in accordance with the Business Combination Agreement, to the holders of Mylan ordinary shares (other than Excluded Shares).

Opinion of Centerview Partners LLC

On July 26, 2019, Centerview rendered to the Mylan Board and the Mylan Strategic Review Committee its oral opinion, subsequently confirmed in a written opinion dated July 26, 2019, that, as of such date and based upon and subject to various assumptions made, procedures followed, matters considered, and qualifications and

 

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limitations upon the review undertaken by Centerview in preparing its opinion, the Exchange Ratio, which will result in a pro forma ownership of the fully diluted shares of Newco common stock being held 43% by former Mylan shareholders and 57% by Pfizer stockholders in accordance with the Business Combination Agreement, was fair, from a financial point of view, to the holders of Mylan ordinary shares (other than Excluded Shares).

The full text of Centerview’s written opinion, dated July 26, 2019, which describes the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, is attached as Annex C and is incorporated by reference in this document. The summary of the written opinion of Centerview, dated July 26, 2019, set forth below is qualified in its entirety by the full text of Centerview’s written opinion attached as Annex C. Centerview’s financial advisory services and opinion were provided for the information and assistance of the Mylan Board and the Mylan Strategic Review Committee (in their capacity as directors and not in any other capacity) in connection with and for purposes of their consideration of the transactions and Centerview’s opinion only addressed the fairness, from a financial point of view, as of the date thereof, of the Exchange Ratio, which will result in a pro forma ownership of the fully diluted shares of Newco common stock being held 43% by former Mylan shareholders and 57% by Pfizer stockholders in accordance with the Business Combination Agreement, to the holders of Mylan ordinary shares (other than Excluded Shares). Centerview’s opinion did not address any other term or aspect of the Business Combination Agreement or the transactions and does not constitute a recommendation to any shareholder of Mylan or any other person as to how such shareholder or other person should vote with respect to the Mylan Merger or otherwise act with respect to the transactions or any other matter.

The full text of Centerview’s written opinion should be read carefully in its entirety for a description of the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion.

In connection with rendering the opinion described above and performing its related financial analyses, Centerview reviewed, among other things:

 

   

drafts of each of (a) the Business Combination Agreement, dated July 26, 2019 (including the draft disclosure schedules thereto), referred to in this summary of Centerview’s opinion as the “Draft Business Combination Agreement”, (b) the Separation and Distribution Agreement, dated July 26, 2019, (c) the Manufacturing and Supply Agreement, dated July 26, 2019, (d) the Transition Services Agreement, dated July 24, 2019, (e) the Intellectual Property Matters Agreement Term Sheet, dated July 23, 2019, and (f) the Trademark License Agreement Term Sheet, dated July 25, 2019 (the agreements described in the foregoing subclauses (b), (c), (d), (e) and (f) are referred to in this summary of Centerview’s opinion as the “Ancillary Agreements,” such drafts thereof are referred to as the “Draft Ancillary Agreements” and the Draft Ancillary Agreements, together with the Draft Business Combination Agreement, are referred to as the “Draft Agreements”);

 

   

Annual Reports on Form 10-K of Mylan for the years ended 2018, 2017 and 2016 and Annual Reports on Form 10-K of Pfizer for the years ended 2018, 2017 and 2016;

 

   

certain interim reports to stockholders and Quarterly Reports on Form 10-Q of each of Mylan and Pfizer;

 

   

certain publicly available research analyst reports for Mylan and Pfizer;

 

   

certain other communications from Mylan and Pfizer to their respective stockholders;

 

   

certain internal information relating to the business, operations, earnings, cash flow, assets, liabilities and prospects of Mylan, including certain financial forecasts, analyses and projections relating to Mylan prepared by management of Mylan and furnished to Centerview by Mylan for purposes of Centerview’s analysis, which are referred to in this summary of Centerview’s opinion as the “Mylan Forecasts” and which are collectively referred to in this summary of Centerview’s opinion as the “Mylan Internal Data”;

 

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certain internal information relating to the business, operations, earnings, cash flow, assets, liabilities and prospects of the Upjohn Business, including certain financial forecasts, analyses and projections relating to the Upjohn Business prepared by management of Pfizer and the Upjohn Business and furnished to Centerview by Mylan for purposes of Centerview’s analysis, which are referred to in this summary of Centerview’s opinion as the “Upjohn Business Forecasts,” and which are collectively referred to in this summary of Centerview’s opinion as the “Upjohn Business Internal Data”; and

 

   

certain cost savings and operating synergies projected by management of Mylan, Pfizer and the Upjohn Business to result from the transactions, furnished to Centerview by Mylan for purposes of Centerview’s analysis, which are referred to in this summary of Centerview’s opinion as the “Synergies.”

Centerview also participated in discussions with members of the senior management and representatives of Mylan, Pfizer and the Upjohn Business regarding their assessment of the Mylan Internal Data, the Upjohn Business Internal Data and the Synergies, as appropriate, and the strategic rationale for the Transaction. In addition, Centerview reviewed publicly available financial and stock market data, including valuation multiples, for certain companies, the securities of which are publicly traded, in lines of business that Centerview deemed relevant, and compared that data to relevant data for Mylan and the Upjohn Business. Centerview also conducted such other financial studies and analyses and took into account such other information as Centerview deemed appropriate.

Centerview assumed, without independent verification or any responsibility therefor, the accuracy and completeness of the financial, legal, regulatory, tax, accounting and other information supplied to, discussed with, or reviewed by Centerview for purposes of its opinion and, with Mylan’s consent, Centerview relied upon such information as being complete and accurate. In that regard, Centerview assumed, at Mylan’s direction, that the Mylan Internal Data (including, without limitation, the Mylan Forecasts) and the Synergies were reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of Mylan as to the matters covered thereby and that the Upjohn Business Internal Data (including, without limitation, the Upjohn Business Forecasts) were reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of Pfizer as to the matters covered thereby and Centerview relied, at Mylan’s direction, on the Mylan Internal Data, the Upjohn Business Internal Data and the Synergies for purposes of Centerview’s analysis and opinion. Centerview expressed no view or opinion as to the Mylan Internal Data, the Upjohn Business Internal Data or the Synergies or the assumptions on which they were based. In addition, at Mylan’s direction, Centerview did not make any independent evaluation or appraisal of any of the assets or liabilities (contingent, derivative, off-balance-sheet or otherwise) of Mylan, Pfizer, Newco or any other entity, nor was Centerview furnished with any such evaluation or appraisal, and Centerview was not asked to conduct, and did not conduct, a physical inspection of the properties or assets of Mylan, Pfizer, Newco or any other entity. Centerview assumed, at Mylan’s direction, that the final executed Business Combination Agreement and the Ancillary Agreements would not differ in any respect material to Centerview’s analysis or opinion from the Draft Agreements reviewed by Centerview. Centerview also assumed, at Mylan’s direction, that the transactions will be consummated on the terms set forth in the Business Combination Agreement and the Ancillary Agreements and in accordance with all applicable laws and other relevant documents or requirements, without delay or the waiver, modification or amendment of any term, condition or agreement, the effect of which would be material to Centerview’s analysis or Centerview’s opinion and that, in the course of obtaining the necessary governmental, regulatory and other approvals, consents, releases and waivers for the transactions, no delay, limitation, restriction, condition or other change, including any divestiture requirements or amendments or modifications, will be imposed, the effect of which would be material to Centerview’s analysis or Centerview’s opinion, including, without limitation, that Newco will comply with Section 8.15 of the Business Combination Agreement. Centerview also assumed that the transactions will have the tax consequences described in the Business Combination Agreement. Centerview did not evaluate and did not express any opinion as to the solvency or fair value of Mylan, Pfizer, Newco or any other entity, or the ability of Mylan, Pfizer, Newco or any such other entity to pay their respective obligations when they come due, or as to the impact of the transactions on such matters, under any state, federal or other laws relating to bankruptcy, insolvency or similar matters.

 

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Centerview assumed that Newco will not assume any contingent liabilities of the Upjohn Business that would be meaningful to Centerview’s analysis or opinion, and Centerview did not take into account for purposes of its analysis the assumption by Newco of any contingent liabilities of the Upjohn Business. Centerview is not a legal, regulatory, tax or accounting advisor, and Centerview expressed no opinion as to any legal, regulatory, tax or accounting matters.

Centerview’s opinion expressed no view as to, and did not address, Mylan’s underlying business decision to proceed with or effect the transactions, or the relative merits of the transactions as compared to any alternative business strategies or transactions that might be available to Mylan or in which Mylan might engage. Centerview’s opinion was limited to and addressed only the fairness, from a financial point of view, as of the date of Centerview’s written opinion, of the Exchange Ratio, which will result in a pro forma ownership of the fully diluted shares of Newco common stock being held 43% by former Mylan shareholders and 57% by Pfizer stockholders in accordance with the Business Combination Agreement, to the holders of Mylan ordinary shares (other than Excluded Shares). For purposes of its opinion, Centerview was not asked to, and Centerview did not, express any view on, and its opinion did not address, any other term or aspect of the Business Combination Agreement or the transactions, including, without limitation, the structure or form of the transactions, or any other agreements or arrangements contemplated by the Business Combination Agreement or entered into in connection with or otherwise contemplated by the transactions, including, without limitation, the fairness of the transactions or any other term or aspect of the transactions to, or any consideration to be received in connection therewith by, or the impact of the transactions on, the holders of any other class of securities, creditors or other constituencies of Mylan or any other party. In addition, Centerview expressed no view or opinion as to the fairness (financial or otherwise) of the amount, nature or any other aspect of any compensation to be paid or payable to any of the officers, directors or employees of Mylan or any party, or class of such persons in connection with the transactions, whether relative to the Exchange Ratio or otherwise. Centerview’s opinion relates to the relative values of Mylan and the Upjohn Business and was necessarily based on financial, economic, monetary, currency, market and other conditions and circumstances as in effect on, and the information made available to Centerview as of, the date of Centerview’s written opinion, and Centerview does not have any obligation or responsibility to update, revise or reaffirm its opinion based on circumstances, developments or events occurring after the date of Centerview’s written opinion. Centerview expressed no view or opinion as to what the value of the shares of Newco common stock actually will be when issued pursuant to the transactions or the prices at which the shares of Newco common stock (or other securities of Mylan, Pfizer, Newco or any other entity) will trade or otherwise be transferable at any time, including following the announcement or consummation of the transactions. Centerview’s opinion does not constitute a recommendation to any shareholder of Mylan or any other person as to how such shareholder or other person should vote with respect to the Mylan Merger or otherwise act with respect to the transactions or any other matter.

Centerview’s financial advisory services and its written opinion were provided for the information and assistance of the Mylan Board and the Mylan Strategic Review Committee (in their capacity as directors and not in any other capacity) in connection with and for purposes of their consideration of the Transaction. The issuance of Centerview’s opinion was approved by the Centerview Partners LLC Fairness Opinion Committee.

Opinion of PJT Partners LP

PJT Partners was retained by Mylan to act as its financial advisor in connection with the transactions and, at Mylan’s request, to render its fairness opinion to the Mylan Board and the Mylan Strategic Review Committee in connection therewith. Mylan selected PJT Partners to act as financial advisor to the Mylan Board and the Mylan Strategic Review Committee based on PJT Partners’ qualifications, expertise and reputation, its knowledge of the pharmaceutical industry and its knowledge and understanding of the business and affairs of Mylan. At a meeting of the Mylan Board and the Mylan Strategic Review Committee on July 26, 2019, PJT Partners rendered its oral opinion, subsequently confirmed in its written opinion dated July 26, 2019, to the Mylan Board and the Mylan Strategic Review Committee that, based upon and subject to the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken in connection with its opinion, as of

 

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the date thereof, the Exchange Ratio, which will result in a pro forma ownership of the fully diluted shares of Newco common stock being held 43% by former Mylan shareholders and 57% by Pfizer stockholders in accordance with the Business Combination Agreement, was fair, from a financial point of view, to the holders of Mylan ordinary shares (other than Excluded Shares).

The full text of PJT Partners’ written opinion delivered to the Mylan Board and the Mylan Strategic Review Committee, dated July 26, 2019, is attached as Annex D and incorporated by reference in this document. PJT Partners’ written opinion sets forth, among other things, the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by PJT Partners in rendering its opinion. You are encouraged to read the opinion carefully in its entirety. PJT Partners provided its opinion to the Mylan Board and the Mylan Strategic Review Committee, in their capacity as such, in connection with and for purposes of their evaluation of the transactions only and PJT Partners’ opinion does not constitute a recommendation as to any action the Mylan Board and the Mylan Strategic Review Committee should take with respect to the transactions or any other matter or how any holder of Mylan ordinary shares should vote or act with respect to the transactions or any other matter. The following is a summary of PJT Partners’ opinion and the methodology that PJT Partners used to render its opinion. This summary is qualified in its entirety by reference to the full text of the PJT Partners’ written opinion.

In arriving at its opinion, PJT Partners, among other things:

 

   

reviewed certain publicly available information concerning the business, financial condition and operations of Mylan, Pfizer and the Upjohn Business;

 

   

reviewed certain internal information concerning the business, financial condition and operations of Mylan prepared and furnished to PJT Partners by the management of Mylan;

 

   

reviewed certain internal information concerning the business, financial condition and operations of the Upjohn Business prepared by the management of Pfizer and the Upjohn Business and furnished to PJT Partners by the management of Mylan;

 

   

reviewed certain internal financial analyses, estimates and forecasts relating to Mylan, including projections that were prepared by or at the direction of and approved by the management of Mylan, which are collectively referred to in this summary of PJT Partners’ opinion as the “Mylan Projections”;

 

   

reviewed certain internal financial analyses, estimates and forecasts relating to the Upjohn Business, including projections that were prepared by or at the direction of and approved by the management of Pfizer and the Upjohn Business and furnished to PJT Partners, and approved for PJT Partners’ use, by the management of Mylan, and which are collectively referred to in this summary of PJT Partners’ opinion as the “Upjohn Business Projections”;

 

   

reviewed certain cost savings and operating synergies projected by management of Mylan, Pfizer and the Upjohn Business to result from the transactions, furnished to PJT Partners, and approved for PJT Partners’ use, by the management of Mylan for purposes of PJT Partners’ analysis, which are collectively referred to in this summary of PJT Partners’ opinion as the “Synergies”;

 

   

held discussions with members of senior management of Mylan, Pfizer and the Upjohn Business concerning, among other things, their respective evaluations of the transactions, the Synergies and Mylan’s and the Upjohn Business’s respective businesses, operating and regulatory environment, financial condition, prospects and strategic objectives;

 

   

reviewed the historical market prices and trading activity for the Mylan ordinary shares;

 

   

reviewed publicly available financial and stock market data, including valuation multiples, for certain companies, the securities of which are publicly traded, in lines of business that PJT Partners deemed relevant, and compared that data to relevant data for Mylan and the Upjohn Business;

 

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reviewed drafts of each of (a) the Business Combination Agreement, dated July 26, 2019 (including the draft disclosure schedules thereto, which are collectively referred to in this summary of PJT Partners’ opinion as the “Draft Business Combination Agreement”), (b) the Separation and Distribution Agreement, dated July 26, 2019, (c) the Manufacturing and Supply Agreement, dated July 26, 2019, (d) the Transition Services Agreement, dated July 24, 2019, (e) the Intellectual Property Matters Agreement Term Sheet, dated July 23, 2019, and (f) the Trademark License Agreement Term Sheet, dated July 25, 2019 (the agreements described in the foregoing subclauses (b), (c), (d), (e) and (f) are collectively referred to in this summary of PJT Partners’ opinion as the “Ancillary Agreements,” such drafts thereof are referred to in this summary of PJT Partners’ opinion as the “Draft Ancillary Agreements” and the Draft Ancillary Agreements, together with the Draft Business Combination Agreement, are collectively referred to in this summary of PJT Partners’ opinion as the “Draft Agreements”); and

 

   

performed such other financial studies, analyses and investigations, and considered such other matters, as PJT Partners deemed necessary or appropriate for purposes of rendering its opinion.

In preparing its opinion, with the consent of the Mylan Board and the Mylan Strategic Review Committee, PJT Partners relied upon and assumed the accuracy and completeness of the foregoing information and all other information discussed with or reviewed by PJT Partners, without independent verification thereof. PJT Partners assumed, with the consent of the Mylan Board and the Mylan Strategic Review Committee, that the Mylan Projections and the assumptions underlying the Mylan Projections, and all other financial analyses, estimates and forecasts provided to PJT Partners by Mylan management, were reasonably prepared in accordance with industry practice and represent Mylan management’s best currently available estimates and judgments as to the business and operations and future financial performance of Mylan. PJT Partners assumed, with the consent of the Mylan Board and the Mylan Strategic Review Committee, that the Upjohn Business Projections were reasonably prepared in accordance with industry practice and represent Mylan management’s best currently available estimates and judgments as to the business and operations and future financial performance of the Upjohn Business. PJT Partners assumed, with the consent of the Mylan Board and the Mylan Strategic Review Committee, that the amounts and timing of the estimated Synergies were reasonable, and that the estimated Synergies would be realized in accordance with such estimates. PJT Partners assumed no responsibility for and expressed no opinion as to the Mylan Projections, the Upjohn Business Projections, the Synergies, the assumptions upon which they were based or any other financial analyses, estimates and forecasts provided to PJT Partners by the management of Mylan. PJT Partners also assumed that there were no material changes in the assets, financial condition, results of operations, business or prospects of Mylan, Pfizer or the Upjohn Business since the respective dates of the last financial statements of Mylan, Pfizer and the Upjohn Business, as applicable, made available to PJT Partners. PJT Partners relied on the representations of the management of Mylan, Pfizer and the Upjohn Business, as applicable, regarding taxable income, standalone net operating loss utilization and other tax attributes of Mylan, Pfizer and the Upjohn Business. PJT Partners further relied, with the consent of the Mylan Board and the Mylan Strategic Review Committee, upon the assurances of the management of Mylan that they were not aware of any facts that would make the information and projections provided by them or by Pfizer’s management or the Upjohn Business’s management inaccurate, incomplete or misleading.

PJT Partners was not asked to undertake, and did not undertake, an independent verification of any information provided to or reviewed by it, nor was it furnished with any such verification and it did not assume any responsibility or liability for the accuracy or completeness thereof. PJT Partners did not conduct a physical inspection of any of the properties or assets of Mylan, Pfizer or the Upjohn Business. PJT Partners did not make an independent evaluation or appraisal of the assets or the liabilities (contingent or otherwise) of Mylan, Pfizer or the Upjohn Business, nor was it furnished with any such evaluations or appraisals, nor did it evaluate the solvency of Mylan, Pfizer or the Upjohn Business or any of their respective subsidiaries under any applicable laws. PJT Partners also assumed that Newco would not assume any contingent liabilities of the Upjohn Business that are meaningful to PJT Partners’ analyses or its opinion, and PJT Partners did not take into account, for purposes of its analysis, the assumption by Newco of any contingent liabilities of the Upjohn Business.

 

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PJT Partners also assumed, with the consent of the Mylan Board and the Mylan Strategic Review Committee, that the final executed Business Combination Agreement and Ancillary Agreements would not differ in any material respects from the Draft Agreements reviewed by PJT Partners and the consummation of the transactions would be effected in accordance with the terms and conditions of the Business Combination Agreement and the Ancillary Agreements, without waiver, modification or amendment of any material term, condition or agreement, and that, in the course of obtaining the necessary regulatory or third party consents and approvals (contractual or otherwise) for the transactions, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on Mylan or the contemplated benefits of the transactions, including, without limitation, that Newco will comply with Section 8.15 of the Business Combination Agreement. PJT Partners did not express any opinion as to any tax or other consequences that might result from the transactions, nor did its opinion address any legal, tax, regulatory or accounting matters, as to which PJT Partners understood that Mylan obtained such advice as it deemed necessary from qualified professionals. PJT Partners is not a legal, tax or regulatory advisor and relied upon without independent verification the assessment of Mylan and its legal, tax and regulatory advisors with respect to such matters.

PJT Partners did not consider the relative merits of the transactions as compared to any other business plan or opportunity that might be available to Mylan or the effect of any other arrangement in which Mylan might engage, and PJT Partners’ opinion did not address the underlying decision by Mylan to engage in the Transaction. PJT Partners’ opinion was limited to the fairness as of the date of its opinion, from a financial point of view, to the holders of Mylan ordinary shares (other than Excluded Shares) of the Exchange Ratio, which will result in a pro forma ownership of the fully diluted shares of Newco common stock being held 43% by former Mylan shareholders and 57% by Pfizer stockholders in accordance with the Business Combination Agreement, and PJT Partners’ opinion did not address any other aspect or implication of the transactions, the Business Combination Agreement or any other agreement or understanding entered into in connection with the transactions or otherwise. PJT Partners further expressed no opinion or view as to the fairness of the transactions to the holders of any other class of securities, creditors or other constituencies of Mylan or as to the underlying decision by Mylan to engage in the Transaction. PJT Partners also expressed no opinion as to the fairness of the amount or nature of the compensation to any of the Mylan officers, directors or employees, or any class of such persons, relative to the Exchange Ratio or otherwise. PJT Partners’ opinion was necessarily based upon economic, market, monetary, regulatory and other conditions as they existed and could be evaluated, and the information made available to PJT Partners, as of the date of its opinion. PJT Partners expressed no opinion as to the prices or trading ranges at which the Mylan ordinary shares, shares of Newco common stock or other securities of Mylan, Pfizer or Newco would trade at any time.

PJT Partners’ opinion does not constitute a recommendation to any shareholder of Mylan as to how such holder should vote or act with respect to the transactions or any other matter. PJT Partners assumed no responsibility for updating or revising its opinion based on circumstances or events occurring after the date of its opinion. PJT Partners’ opinion was approved by a fairness committee of PJT Partners in accordance with established procedures.

PJT Partners’ advisory services and opinion were provided for the information and assistance of the Mylan Board and the Mylan Strategic Review Committee in connection with their consideration of the transactions and PJT Partners’ opinion does not constitute a recommendation as to any action the Mylan Board or the Mylan Strategic Review Committee should take with respect to the transactions or any aspect thereof.

Summary of the Financial Analyses of Mylan’s Financial Advisors

The following is a summary of the material financial analyses jointly presented by Centerview and PJT Partners to, and reviewed with, the Mylan Board and the Mylan Strategic Review Committee in connection with the respective opinions delivered by Centerview and PJT Partners. Centerview and PJT Partners are collectively referred to in this summary of their financial analyses as “Mylan’s financial advisors.” Mylan’s financial advisors worked cooperatively in developing these analyses, and these analyses represent the joint work product of Mylan’s financial advisors.

 

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The summary set forth below does not purport to be a complete description of the financial analyses performed or factors considered by, and underlying the respective opinions of Centerview and PJT Partners, nor does the order of the financial analyses described represent the relative importance or weight given to those financial analyses by Centerview or PJT Partners. Mylan’s financial advisors may have deemed various assumptions more or less probable than other assumptions, so the reference ranges resulting from any particular portion of the analyses summarized below should not be taken to be Centerview’s or PJT Partners’ view of the actual value of Mylan or Newco. Some of the summaries of the financial analyses set forth below include information presented in tabular format. In order to fully understand the financial analyses, the tables must be read together with the text of each summary, as the tables alone do not constitute a complete description of the financial analyses performed by Mylan’s financial advisors. Considering the data in the tables below without considering all financial analyses or factors or the full narrative description of such analyses or factors, including the methodologies and assumptions underlying such analyses or factors, could create a misleading or incomplete view of the processes underlying Centerview’s and PJT Partners’ financial analyses and their respective opinions.

In performing their analyses, Mylan’s financial advisors made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of Mylan or any other parties to the Transaction. None of Mylan, Pfizer, Newco or any of their respective affiliates or Centerview or PJT Partners or any other person assumes responsibility if future results are materially different from those discussed. Any estimates contained in these analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth below. In addition, analyses relating to the value of Mylan do not purport to be appraisals or reflect the prices at which Mylan may actually be sold. Accordingly, the assumptions and estimates used in, and the results derived from, the financial analyses are inherently subject to substantial uncertainty. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before July 22, 2019, and is not necessarily indicative of current market conditions. Fully diluted share numbers for Mylan used below were provided by, and used at the direction of, Mylan management.

Current Trading Analysis

Mylan’s financial advisors calculated the multiple of Mylan’s enterprise value as of the date of Mylan’s most recent publicly filed balance sheet figures as of July 22, 2019 (calculated as the market value of Mylan ordinary shares (determined using the treasury stock method and taking into account outstanding in-the-money options, warrants and restricted stock units, as applicable) plus the book value of debt, plus minority interests, less cash and cash equivalents and equity method investments) to Mylan’s next twelve months (“NTM”) estimated adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”), per the Mylan Financial Projections, as of July 22, 2019, to be 6.2x.

Mylan’s financial advisors applied that multiple to Mylan’s estimated EBITDA for 2020, derived from the Mylan Financial Projections, to calculate Mylan’s implied enterprise value for the year ending December 31, 2019, and subtracted Mylan’s estimated debt and cash as of December 31, 2019, as provided by Mylan management, to calculate Mylan’s implied equity value.

Mylan’s financial advisors applied an assumed range of multiples of the Upjohn Business’s enterprise value (calculated using the Upjohn Business’s estimated debt as of December 31, 2019, as provided by Pfizer’s management) to NTM EBITDA of 7.5x to 8.5x to the Upjohn Business’s estimated EBITDA for 2020, derived from the Upjohn Business Financial Projections. Mylan’s financial advisors subtracted the Upjohn Business’s estimated cash and debt for the year ending December 31, 2019 to calculate the Upjohn Business’s implied equity value.

Mylan’s financial advisors calculated the implied equity ownership of former Mylan shareholders in the combined company by calculating the quotient of Mylan’s implied equity value divided by the sum of the

 

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implied equity values of Mylan and the Upjohn Business, assuming the lowest implied equity value of the Upjohn Business for the high end of the range and the highest implied equity value of the Upjohn Business for the low end of the range. Mylan’s financial advisors assumed that the implied equity value of the combined company was the sum of the implied equity values of Mylan and the Upjohn Business. The analysis implied a pro forma equity ownership percentage range for Mylan’s former shareholders of 31% to 35%, with a midpoint of 33%, as compared to the former Mylan shareholders’ pro forma ownership at the Exchange Ratio provided for in the Business Combination Agreement of 43%.

Selected Public Comparable Companies Analysis

Mylan’s financial advisors reviewed and compared certain financial information, ratios and multiples for Mylan and the Upjohn Business to corresponding financial information for the following publicly traded companies that Mylan’s financial advisors, based on their experience and professional judgment, deemed relevant to consider in relation to Mylan and the Upjohn Business:

Selected Global Companies

Teva Pharmaceutical Industries Ltd.

Sun Pharmaceutical Industries Ltd.

Hikma Pharmaceuticals Plc.

Selected U.S. Generics Companies 

Perrigo Company Plc.

Endo International Plc.

Amneal Pharmaceuticals, Inc.

Selected Companies—Europe

Ipsen S.A.

H. Lundbeck A/S

Gedeon Richter Plc.

Selected Companies—Rest of World

Aspen Pharmacare Holdings Limited

Dr. Reddy’s Laboratories Limited

Cipla Limited

Aurobindo Pharma Limited

Lupin Limited

Although none of the selected companies is directly comparable to Mylan, the Upjohn Business or the combined company, the companies listed above were chosen by Mylan’s financial advisors, among other reasons, because they are publicly traded companies that have certain operational, business and/or financial characteristics that, for purposes of Mylan’s financial advisors’ analyses, may be considered similar to those of Mylan, the Upjohn Business and the combined company. However, because none of the selected companies is exactly the same as Mylan or the Upjohn Business, Mylan’s financial advisors believed that it was inappropriate to, and therefore did not, rely solely on the quantitative results of the selected company analysis. Accordingly, Mylan’s financial advisors also made qualitative judgments, based on their experience and professional judgment, concerning differences between the business, financial and operating characteristics and prospects of Mylan, the Upjohn Business and the selected companies that could affect the public trading values of each in order to provide a context in which to consider the results of the quantitative analysis.

Using publicly available information obtained from regulatory filings and other data sources as of July 22, 2019, Mylan’s financial advisors calculated, for each selected company, among other things, aggregate enterprise values (calculated as the market value of common equity (determined using the treasury stock method and taking into account outstanding in-the-money options, warrants and restricted stock units, as applicable) plus the book

 

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value of debt, plus minority interests, less cash and cash equivalents and equity method investments) as a multiple of the NTM estimated EBITDA. From this analysis, Mylan’s financial advisors computed a range of EV/NTM estimated EBITDA multiples for the selected companies of 6.2x to 13.4x.

From this analysis, Mylan’s financial advisors computed a range of NTM EBITDA multiples for Mylan of 6.5x to 7.5x and for the Upjohn Business of 7.5x to 8.5x and applied such multiples to the 2020 estimated EBITDA for Mylan and the Upjohn Business, respectively. Based upon the implied equity values of Mylan and the Upjohn Business, Mylan’s financial advisors calculated a range of implied pro forma equity ownership of Mylan in the combined company. For purposes of this calculation, Mylan’s financial advisors assumed that the implied equity value of the combined company was the sum of the implied equity values of Mylan and the Upjohn Business. Mylan’s financial advisors calculated the low end of the Mylan shareholder implied pro forma equity ownership range assuming the lowest implied equity value for Mylan and the highest implied equity value for the Upjohn Business, and then calculated the high end of the Mylan shareholder implied pro forma equity ownership range assuming the highest implied equity value for Mylan and the lowest implied equity value for the Upjohn Business. The analysis implied a pro forma equity ownership percentage range for Mylan’s shareholders of 33% to 45%, with a midpoint of 39%, as compared to the pro forma ownership of former Mylan shareholders of 43% as a result of the Exchange Ratio provided for in the Business Combination Agreement.

Contribution Analysis

Mylan’s financial advisors performed a relative contribution analysis of Mylan and the Upjohn Business in which Mylan’s financial advisors analyzed and compared Mylan’s and Pfizer’s stockholders respective expected percentage ownership of the combined company to Mylan’s and the Upjohn Business’s respective contributions to the combined company based upon estimated EBITDA for each of Mylan and the Upjohn Business on a stand-alone basis for the year 2020, derived from the Mylan Financial Projections and the Upjohn Business Financial Projections. The relative equity contributions of Mylan and the Upjohn Business to the combined company’s 2020 estimated EBITDA are set forth below, calculated both at Mylan’s estimated NTM EBITDA multiple as of July 22, 2019 of 6.2x and an illustrative NTM EBITDA multiple of 8.0x, and utilizing various assumptions regarding the allocation of the Synergies to Mylan’s shareholders and Pfizer’s stockholders, and compared those percentages to the Mylan shareholders’ pro forma ownership at the Exchange Ratio provided for in the Business Combination Agreement of 43%:

 

EBITDA Multiple

   Synergy Allocation to Mylan     No
Synergy
Allocation
 
   0%     25%     50%     75%     100%  

Implied Mylan shareholder equity ownership at 6.2x

     35     40     44     49     54     43

Implied Mylan shareholder equity ownership at 8.0x

     38     42     46     50     54     45

Discounted Cash Flow Analysis

Mylan’s financial advisors performed a discounted cash flow analysis of Mylan based on the Mylan Financial Projections and the Upjohn Business based on the Upjohn Business Financial Projections. A discounted cash flow analysis is a traditional valuation methodology used to derive a valuation of an asset by calculating the “present value” of estimated future cash flows of the asset. “Present value” refers to the current value of future cash flows and is obtained by discounting those future cash flows by a discount rate that takes into account macroeconomic assumptions and estimates of risk, the opportunity cost of capital, expected returns and other appropriate factors.

In performing these analyses, Mylan’s financial advisors calculated the estimated present value of the standalone unlevered after-tax free cash flows that Mylan and the Upjohn Business were forecasted to generate during the year ending December 31, 2020 through the year ending December 31, 2024. Financial data of Mylan was based on the Mylan Financial Projections, and financial data of the Upjohn Business was based on the Upjohn Business Financial Projections. The terminal value of each of Mylan and the Upjohn Business at the end

 

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of the forecast period was estimated by using a range of exit multiples of 6.5x to 7.5x. The range of exit multiples was estimated by Mylan’s financial advisors utilizing their professional judgment and experience, taking into account the relevant company and, among other matters, the Mylan Financial Projections, the Upjohn Business Financial Projections and the implied perpetuity growth rates. The cash flows and terminal values were then discounted to present value (as of December 31, 2019) using a range of discount rates of 8.0% to 10.0% for each of Mylan and the Upjohn Business. The range of discount rates was determined based on Mylan’s financial advisors’ analyses of Mylan’s and the Upjohn Business’s respective weighted average cost of capital.

Based on these analyses, Mylan’s financial advisors calculated a range of approximate implied enterprise values for Mylan and the Upjohn Business. Mylan’s financial advisors then calculated the mid-point of the implied equity values for each of Mylan and the Upjohn Business to derive an implied pro forma equity ownership split under various assumptions regarding the allocation of Synergies, including a scenario in which the Synergies were not allocated to either Mylan or the Upjohn Business, and compared those percentages to Mylan’s pro forma ownership at the Exchange Ratio provided for in the Business Combination Agreement of 43%. The results of this analysis were as follows:

 

     Synergy Allocation to Mylan     No
Synergy
Allocation
 
   0%     25%     50%     75%     100%  

Implied Mylan Shareholder Equity Ownership

     42     45     48     51     54     47

General

The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to summary description. In arriving at their respective opinions, Mylan’s financial advisors did not draw, in isolation, conclusions from or with regard to any factor or analysis that it considered. Rather, Mylan’s financial advisors made their respective determinations as to fairness on the basis of their experience and professional judgment after considering the results of all of the analyses.

Mylan’s financial advisors’ financial analyses and opinions were only one of many factors taken into consideration by the Mylan Board and the Mylan Strategic Review Committee in their evaluation of the Transaction. Consequently, the analyses described above should not be viewed as determinative of the views of the Mylan Board or the Mylan Strategic Review Committee or management of Mylan with respect to the Exchange Ratio, which will result in a pro forma ownership of the fully diluted shares of Newco common stock being held 43% by former Mylan shareholders and 57% by Pfizer stockholders in accordance with the Business Combination Agreement, or as to whether the Mylan Board and the Mylan Strategic Review Committee would have been willing to determine that a different consideration was fair. The consideration for the transactions was determined through arm’s-length negotiations between Mylan and Pfizer and was approved by the Mylan Board. Mylan’s financial advisors provided advice to Mylan during these negotiations. Mylan’s financial advisors did not, however, recommend any specific amount of consideration to Mylan or the Board of Directors or that any specific amount of consideration constituted the only appropriate consideration for the Transaction.

Miscellaneous—Centerview Partners LLC

Centerview is a securities firm engaged directly and through affiliates and related persons in a number of investment banking, financial advisory and merchant banking activities. In the two years prior to the date of its written opinion, except for its current engagement, Centerview had not been engaged on a fee paying basis to provide financial advisory or other services to Mylan, and Centerview did not receive compensation from Mylan during such period. In the two years prior to the date of its written opinion, Centerview has been engaged to provide financial advisory services to Pfizer from time to time, for which it has received compensation and for which Centerview expects to receive additional compensation, including in connection with Pfizer’s joint venture

 

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with GlaxoSmithKline plc to create a global consumer healthcare company, its asset contribution agreement with Allogene Therapeutics, Inc. and its creation of Cerevel Therapeutics, LLC. Centerview has received or expects to receive between $35 million and $45 million in aggregate compensation from Pfizer for work performed during such period. Centerview may provide investment banking and other services to or with respect to Mylan, Pfizer, Newco or their respective affiliates in the future, for which Centerview may receive compensation. In addition, James Kilts, a member of the Board of Directors of Pfizer, is a partner of Centerview Capital Holdings, LLC (“Centerview Capital”), which sponsors multiple investment funds and vehicles, including Centerview Capital, L.P., an investment fund focused on the consumer sector, and a related employee fund (collectively, “Centerview Capital Consumer”). Certain partners of Centerview Partners LLC are partners in Centerview Capital, and, along with Mr. Kilts, serve on Centerview Capital Consumer’s investment committee. Centerview Partners LLC provides certain back office support to Centerview Capital Consumer. Mr. Kilts has no ownership interest in, and is not an employee of, Centerview Partners LLC. Certain (i) of Centerview and its affiliates’ directors, officers, members and employees, or family members of such persons, (ii) of Centerview’s affiliates or related investment funds and (iii) investment funds or other persons in which any of the foregoing may have financial interests or with which they may co-invest, may at any time acquire, hold, sell or trade, in debt, equity and other securities or financial instruments (including derivatives, bank loans or other obligations) of, or investments in, Mylan, Pfizer, Newco or any of their respective affiliates, or any other party that may be involved in the transactions.

The Mylan Board and the Mylan Strategic Review Committee selected Centerview as its financial advisor in connection with the transactions based on Centerview’s knowledge of the pharmaceutical industry, reputation and experience. Centerview is an internationally recognized investment banking firm that has substantial experience in transactions similar to the transactions.

In connection with Centerview’s services as the financial advisor to the Mylan Board and the Mylan Strategic Review Committee, Mylan has agreed to pay Centerview an aggregate fee of $65 million, $10 million of which was payable upon the rendering of Centerview’s opinion, $10 million of which was payable on August 1, 2019 for advisory services and $45 million of which is payable contingent upon consummation of the Combination. In addition, Mylan has agreed to reimburse certain of Centerview’s expenses arising, and to indemnify Centerview against certain liabilities that may arise, out of Centerview’s engagement.

Miscellaneous—PJT Partners LP

In connection with rendering its opinion, PJT Partners performed certain financial, comparative and other analyses as summarized below. In arriving at its opinion, PJT Partners did not ascribe a specific range of values to the Mylan ordinary shares but rather made its determination that, from a financial point of view, the Exchange Ratio, which will result in a pro forma ownership of the fully diluted shares of Newco common stock being held 43% by former Mylan shareholders and 57% by Pfizer stockholders in accordance with the Business Combination Agreement, was fair to the holders of Mylan ordinary shares (other than Excluded Shares) on the basis of various financial analyses. The preparation of a fairness opinion is a complex process and involves various determinations as to the most appropriate and relevant methods of financial and comparative analyses and the application of those methods to the particular circumstances and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying PJT Partners’ opinion. In arriving at its fairness determination, PJT Partners considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, PJT Partners made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the above analyses as a comparison is directly comparable to Mylan or the Upjohn Business or the transactions. The terms of the Business Combination Agreement, including the Exchange Ratio and the pro forma ownership, were determined through arm’s-length negotiations between Mylan and Pfizer, rather than PJT Partners, and the decision to enter into the Business Combination Agreement was solely that of Mylan and Pfizer.

 

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PJT Partners prepared these analyses for purposes of providing its opinion to the Mylan Board and the Mylan Strategic Review Committee as to the fairness from a financial point of view, as of the date of the written opinion of PJT Partners, of the Exchange Ratio, which will result in a pro forma ownership of the fully diluted shares of Newco common stock being held 43% by former Mylan shareholders and 57% by Pfizer stockholders in accordance with the Business Combination Agreement, to the holders of Mylan ordinary shares (other than Excluded Shares). These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of Mylan, Pfizer, Newco, PJT Partners or any other person assumes responsibility if future results are materially different from those forecast.

PJT Partners is an internationally recognized investment banking firm and, as part of its investment banking activities, is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. Mylan selected PJT Partners to act as financial advisor to the Mylan Board and the Mylan Strategic Review Committee based on PJT Partners’ qualifications, expertise and reputation, its experience in the valuation of businesses and securities in connection with mergers and acquisitions generally, its knowledge of the pharmaceutical industry and its knowledge and understanding of the business and affairs of Mylan.

In connection with PJT Partners’ services as the financial advisor to the Mylan Board and the Mylan Strategic Review Committee, Mylan has agreed to pay PJT Partners an aggregate fee of $35 million, $10 million of which was payable upon the rendering of PJT Partners’ opinion and $25 million of which is payable contingent upon consummation of the Combination. In addition, Mylan has agreed to reimburse PJT Partners for out-of-pocket expenses and to indemnify PJT Partners for certain liabilities arising out of the performance of such services (including the rendering of its opinion).

During the two years preceding the date of its written opinion, PJT Partners and certain of its affiliates are advising or have advised (i) Mylan in connection with general corporate governance and shareholder engagement practices unrelated to the transactions through PJT Camberview, a business PJT Partners acquired as of October 1, 2018, for which PJT Partners has received and will receive customary compensation; and (ii) Pfizer in connection with general corporate governance and shareholder engagement practices unrelated to Mylan or the transactions, through PJT Camberview, for which PJT Partners has received and will receive customary compensation. In addition, a partner of PJT Partners, who was not a member of the PJT Partners deal team advising Mylan in connection with the transactions, is the son of W. Don Cornwell, a member of the Board of Directors of Pfizer.

Certain Unaudited Prospective Financial Information

Other than the annual financial guidance provided to investors, neither Mylan nor Pfizer as a matter of course publishes projections as to the future performance, earnings or other results of their respective businesses due to, among other reasons, the uncertainty of the underlying assumptions and estimates. Each of Mylan management and management of Pfizer and the Upjohn Business, however, prepared and provided certain non-public, unaudited internal financial projections regarding Mylan and the Upjohn Business to its respective board of directors in connection with its evaluation of the Combination, as well as on a confidential basis in the due diligence process to (i) its respective financial advisors and (ii) the other party and its respective financial advisors. The summaries of such financial projections in this document are presented solely to provide you with access to certain non-public information that was made available to each party, their respective boards of directors and advisors in connection with the parties’ respective evaluations of the Combination. Such information may not be appropriate for other purposes, and is not intended to influence any shareholder to make any investment decision with respect to the transactions or for any other purpose.

 

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In connection with the Mylan Board’s consideration of the transactions and Mylan’s ongoing strategic review, Mylan management prepared certain non-public, unaudited financial forecasts for Mylan on a standalone basis for fiscal years 2020 through 2023 regarding Mylan’s revenue and adjusted EBITDA (collectively, the “Mylan Financial Forecasts”) as well as unlevered free cash flow for fiscal years 2020 through 2023 and such forecasts were extrapolated for fiscal year 2024 (such unlevered free cash flow for fiscal years 2020 through 2023 and forecasts for fiscal year 2024, together with the Mylan Financial Forecasts, the “Mylan Financial Projections”). In addition, in connection with the Mylan Board’s consideration of the transactions, the Mylan Board was provided by Mylan management with certain non-public, unaudited financial forecasts for the Upjohn Business on a standalone basis for fiscal years 2020 through 2024 regarding the Upjohn Business’s revenue, adjusted EBITDA and projected unlevered free cash flow (the “Upjohn Business Financial Projections” and, together with the Mylan Financial Projections, the “Financial Projections”). Management of Pfizer and the Upjohn Business prepared the Upjohn Business Financial Projections, with the exception of projected unlevered free cash flow.

Mylan management provided the Financial Projections to its financial advisors, Centerview and PJT Partners, for their use and reliance in connection with their respective financial analyses and opinions described above under “—Opinions of Mylan’s Financial Advisors”. The Mylan Financial Forecasts were also provided to Pfizer and its financial advisors in connection with the transactions. In addition, the Mylan Board and Mylan’s financial advisors were provided with an estimate of certain cost savings and operating synergies expected to result from the transactions projected by management of each of Mylan, Pfizer and Upjohn, of approximately $1 billion of annual cost synergies expected to be realized by 2023, none of which are reflected in the Financial Projections since the Financial Projections are unaudited financial forecasts for each of Mylan and the Upjohn Business on a standalone basis.

The Financial Projections were not prepared with a view toward public disclosure, nor were they prepared with a view toward compliance with published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants with respect to financial projections. The Financial Projections were, in general, prepared and adjusted solely for internal use and are subjective in many respects and thus subject to interpretation. Each of Mylan management and management of Pfizer and the Upjohn Business believes that the assumptions used as a basis for those Financial Projections prepared by them, as applicable, were reasonable based on the information available to Mylan management and management of Pfizer and the Upjohn Business, as applicable, at the time such projections were prepared. However, this information is not fact and should not be relied upon in any way as necessarily indicative of actual future results, and readers of this document are cautioned not to place undue reliance on any such information.

Neither Mylan’s independent auditors, Pfizer’s independent auditors, the independent auditors of the Upjohn Business, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the Financial Projections, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the Financial Projections.

The reports of Mylan’s independent registered public accounting firm incorporated by reference in this document relate to Mylan’s historical financial information. The reports of the Upjohn Business’s independent registered public accounting firm included in this document relate to Upjohn’s historical combined financial information. None of those reports extend to any of the Financial Projections and should not be read to do so. The summary of the Financial Projections is not being included in this document to influence the decision of any Mylan shareholders whether to approve any of the Proposals, but is being included because the information was among the factors considered by the Mylan Board in evaluating the transactions and was provided to Mylan’s financial advisors for their use and reliance in connection with their respective financial analyses and opinions.

While the Financial Projections were prepared in good faith by Mylan management and management of Pfizer and the Upjohn Business, as applicable, the Financial Projections were based on information available at

 

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the time that the Financial Projections were prepared as well as numerous variables and assumptions that are inherently uncertain, many of which are beyond the control of management of Mylan, Pfizer and the Upjohn Business and, upon consummation of the Combination, beyond the control of the combined business. Important factors that may affect actual results and cause the Financial Projections not to be achieved, or that may change the underlying variables and assumptions on which the Financial Projections were based and cause the Financial Projections to be different if prepared at a later date, include, but are not limited to, risks and uncertainties relating to the Mylan business and the Upjohn Business (including each of Mylan’s and Newco’s ability to achieve strategic goals, objectives and targets, including achievement of cost synergies, and the potential impacts of regulatory developments in the jurisdictions in which the businesses operate such as downward pricing pressures in China, including in connection with the implementation of volume-based tendering in a manner not reflected in the Financial Projections), industry performance, foreign exchange rates, the regulatory environment and general business and economic conditions, in each case that are different from those anticipated within the Financial Projections,