Upjohn Inc. 2020 First-Quarter Form 10-Q Summary
Business context and reporting period
The filing is for Upjohn Inc., the newly formed Pfizer subsidiary intended to combine Pfizer’s global established-medicines business with Mylan in an all-stock Reverse Morris Trust transaction. Upon closing, Upjohn was expected to be renamed Viatris. The report covers the three months ended March 29, 2020, compared with the period from February 14, 2019, the incorporation date, through March 31, 2019.
Upjohn had not commenced operations and conducted no material activities other than those related to its formation and the planned transaction. Accordingly, the reported financial statements do not represent the operating results of the future Viatris business.
Financial metrics and liquidity
| Metric | March 29, 2020 | Comparable period or date |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $0 | $0 |
| Net income | $0 | $0 |
| Cash flow from operating activities | $0 | $0 |
| Cash flow from investing activities | $0 | $0 |
| Cash flow from financing activities | $0 | $0 |
| Total assets | $0 | $0 at December 31, 2019 |
| Total liabilities | $0 | $0 at December 31, 2019 |
| Cash and cash equivalents | $0 | $0 at March 31, 2019 |
The company had 100 shares outstanding, all held by Pfizer. Common stock was recorded at $1, with a $1 receivable due from Pfizer. No meaningful margins, debt outstanding, liquidity balance, or operating capital requirements were reported for the period.
Upjohn obtained financing commitments permitting borrowings of up to $12 billion. The planned debt was to be incurred in connection with the separation from Pfizer, with proceeds used to make a $12 billion cash payment to Pfizer for the Upjohn Business. The filing does not report that this debt had been issued as of March 29, 2020.
Material changes versus the prior comparable period
- No material operating changes were reported because the company remained inactive in both periods.
- The SEC declared the registration statement effective on February 13, 2020, advancing preparations for the planned transaction.
- The company’s capitalization and reported assets, liabilities, revenue, expenses, income, and cash flows remained immaterial or zero.
Guidance, outlook, risks, contingencies, and unusual items
- The transaction was generally expected to close in the second half of 2020, subject to Mylan shareholder approval, regulatory approvals, and other customary closing conditions.
- Following completion, Pfizer stockholders were expected to own 57% and former Mylan shareholders 43% of the combined company on a fully diluted basis.
- COVID-19 could delay regulatory approvals and affect the Upjohn Business through manufacturing and supply-chain interruptions, lower demand, regulatory delays, workforce restrictions, and additional costs. Management stated that impacts were expected primarily in the second quarter of 2020, but the extent and duration were uncertain.
- The filing reports no legal proceedings, defaults, or significant market-risk exposure for Upjohn during the period.
- Disclosure controls and procedures were assessed as effective, and no material change in internal control over financial reporting was reported.
- The interim financial statements were reviewed by KPMG and were not audited; KPMG reported that it was not aware of material modifications needed for conformity with U.S. GAAP.
Investor verification checklist
- Verify completion timing and all closing conditions for the Upjohn-Mylan transaction.
- Confirm whether the planned $12 billion financing was issued, its interest rate, maturity, covenants, and refinancing requirements.
- Review the post-closing financial statements of Viatris for the actual contributed assets, liabilities, revenue, earnings, cash flow, and leverage.
- Assess the COVID-19 effects on product demand, manufacturing capacity, supply chains, regulatory approvals, and transaction timing.
- Review the registration statement’s risk factors and transaction agreements for obligations, contingencies, separation costs, and potential transaction termination provisions.