October 24, 2017
Ten years ago this month, Mylan completed its acquisition of Merck KGaA’s generics business. Through this watershed event we essentially transformed ourselves overnight into one of the world’s leading specialty and generic pharmaceuticals companies.
Mylan already was an American success story, having helped establish generic drugs by the end of the 20th century as the backbone of the U.S. healthcare system. But the industry was changing. Our customers were consolidating, lower-cost imported drugs were flooding into the country and brand pharma companies had become far more aggressive in their attempts to impede competition.
We saw opportunity in the making and committed to a strategy of building massive global scale – scale in manufacturing, scale in active pharmaceutical ingredients, scale in R&D, scale in product portfolio, scale in geographic territory and scale in sheer size. We knew we could do for the world what we’d already done in the U.S.: provide people access to the quality medicines they deserve.
Our first step was to integrate vertically so that we could strategically produce many of our own active pharmaceutical ingredients for our products. We achieved this in January 2007 by acquiring a majority stake in Matrix Laboratories, of India.
The next step was to integrate horizontally so that we could offer a much broader range of products to a much larger commercial footprint. Merck KGaA’s generics business looked to be the perfect fit: It could bring us more than 400 products and customers in 90 countries, with the greatest presence being in Europe, Japan, Australia, New Zealand and Canada.
Although the business was 2.5 times larger than Mylan, we proceeded to bid for it, auction style. Our final bidding opponent was 10 times our size. But against all mathematical odds – remember, auctions typically favor the highest bidder, Mylan won.
The reason: Robert J. Coury, Mylan’s vice chairman and CEO at the time, convinced Merck that we truly wanted to build on their legacy, not tear it down in a financial transaction. In other words, Mylan’s integrity proved mightier than the pocketbook. We signed the deal on May 11, 2007, and closed a few months later, on Oct. 2.
We promptly welcomed Merck Generics’ nearly 5,000 employees to our growing family and began the task of integrating our two organizations. It was a gargantuan undertaking because we had to “carve out” of Merck KGaA the business we’d acquired. We likened it to building an airplane while flying it.
The process included building a unified infrastructure to support a global business and regional operations, transitioning off of Merck KGaA’s systems within one year, introducing the Mylan brand to new markets on our journey build a powerful global brand, executing on our business priorities and achieving promised synergies. At the same time, we were expanding our operational capabilities, including building additional manufacturing capacity in India.
Complicating matters during this period was the collapse of the world’s financial system, which weakened economies and undermined confidence everywhere. Our shares, for instance, traded below $6 at one point. But that wasn’t all. To finance the acquisition, Mylan had raised more than $7 billion by issuing a combination of debt and equity. Previously, we had been debt-free. We now needed to work that much harder to generate the earnings and cash required to pay back the debt.
Most outsiders, including the media and our bidding opponents, looked at that mountain of debt and our lack of experience with complex integrations, and predicted Mylan’s failure. Then they sat back and waited.
In vain, it turns out, as their doubt was our motivation. Not only did team Mylan complete the integration ahead of schedule, we delivered more synergies than promised. Further, we continually deleveraged and were able to announce in late 2012 that Mylan had earned investment-grade credit ratings from Moody’s and S&P. We also demonstrated beyond a shadow of a doubt that our team is more than equal to any challenge.
But best of all, through the Matrix and Merck Generics transactions, we succeeded in putting in place Mylan’s one-of-a-kind global operating and commercial platform. It gave us the scale and diversity we needed. Further, we gained the confidence and conviction needed to continue building Mylan’s presence in markets outside of the U.S. through organic growth and other strategic acquisitions, such as Abbott EPD and Meda.
As a result, Mylan today has a robust set of assets across multiple channels and in multiple geographies, where we are excited to keep growing and serving customers and patients – something we call delivering better health for a better world.
Looking back at all we accomplished over the last decade, we can confidently say that today, “We are just getting started!”