Pharmacia Corporation (US)

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Pharmacia was acquired by larger rival Pfizer in 2002, and the merger was completed in 2003. The key factor in the deal was blockbuster arthritis drug Celebrex, originally developed by a division of Pharmacia, but marketed by Pfizer. The larger company was keen to take full control of the product, as well as its smaller partner's pipeline of other new pharmaceuticals. Prior to the merger, Pharmacia was the world's 12th largest drug company, with operations in 60 countries worldwide. In 2001, its best-selling products were Celebrex, Ambien, Xatalan, Detrol, Camptosar and Genotropin. With the exception of Ambien, which was sold to Sanofi Synthelabo in 2002, these drugs remain members of Pfizer's portfolio. Pharmacia also managed a strong portfolio of OTC products including ultimate rights to the Nicorette family of smoking-cessation products. Originally launched by Pharmacia in Sweden in 1978, the company subsequently sold regional marketing rights to the product and its patch/inhaler stablemate Nicotrol to other manufacturers, including GlaxoSmithkline. Other OTC products included Rogain/Regaine, Nasalcrom, PediaCare, Dramamine, Colpermin and Luden's. Acquired by Pfizer, they were later sold off to Johnson & Johnson with the rest of the Pfizer OTC portfolio. Combined group sales for 2001 were $13.8bn.

Prior to its acquisition by Pfizer, Pharmacia Corporation was already the result of the combination of several different businesses with their roots all over the globe, most notably in Sweden and Italy, as well as the US. The Pharmacia drug company was founded in Sweden in 1911 to market energy pills, and later a gastric remedy called Sodamint. During the course of the century, the group gradually expanded by acquiring a number of other Swedish pharmaceutical and biotechnology businesses, of which the best known was Kabi Vitrum in 1990. However healthcare had become an increasingly international business during the 1990s, encouraging Pharmacia to look beyond its native Scandinavia. Because it lacked an international network, the company had already sold the valuable international rights to its smoking control product Nicorette to other manufacturers, including what is now GlaxoSmithkline in the US. Its first step towards a larger footprint came with the acquisition of Famitalia Carlo Erba, a sizeable Italian rival, in 1993. However, Pharmacia needed a significant presence in the US. In 1995, this problem was solved when Pharmacia agreed to merge with the American drug company Upjohn.

Upjohn had been founded as The Upjohn Pill & Granule Company in Kalamazoo, Michigan in 1886. Founder William Upjohn was himself a doctor and his initial goal was to develop a compact compressed pill which would dissolve easily in the stomach. The success of his pills led to a number of other medical products, including the laxative Phenolax. In 1936, the company introduced diarrhoea remedy Kaopectate with considerable success, and was among the many businesses which gave over their factories to the mass-production of penicillin in World War II. In 1958, The Upjohn Company went public, and its subsequent successes included the contraceptive Depo-Provera (launched 1959), Motrin (in 1974, the US version of ibuprofen, developed by Boots of the UK), Xanax (in 1982), and hair loss treatment Rogaine (in 1988). By the 1990s, as its drug pipeline began to dry up, Upjohn was also looking to the international market, primarily to resolve its shortage of new products.

The Pharmacia and Upjohn deal was initially billed as the merger of equals, so much so that the two companies decided to split the distance between their respective bases, establishing a new corporate HQ on neutral territory in London. However the merger did not go smoothly. As the two companies struggled to reconcile their corporate and national differences, sales stalled and the company issued two profit warnings as attempts to cut costs were met by political infighting between its American, Swedish and Italian factions. By late 1996 the merger was in danger of collapse.

In 1997 new CEO Fred Hassan was recruited from American Home Products to smooth over the differences. Forcibly restructuring his management team, Hassan pushed through a new cost-cutting programme, and results were apparent almost immediately, as sales and profits recovered during 1998. The company's best-selling product was now the growth hormone treatment Genotropin, developed by Pharmacia in 1987, supported by Xanax and Cleocin. It also scored notable success in Europe with its anti-smoking products smoking-cessation products Nicorette and Nicotrol. In 1998 the company spun off its biotech division into Amersham Pharmacia Biotech (later Amersham Biosciences), a joint venture with Nycomed, and sold other non-core operations. Perhaps most important of all, Hassan resolved the cultural differences between the group's various factions by abandoning the compromise location London, and relocating the group HQ to its its biggest market, the US.

Events moved rapidly in 1999. Newly reinstated in the US, Pharmacia & Upjohn now found itself on the receiving end of a takeover bid by fellow American business Monsanto, then enjoying the fruits of the huge success of Celebrex. Although its name later became identified most closely with crop protection products, Monsanto's fortunes had largely been created by synthetic plastics. The business was founded in 1901 by John Queeny to manufacture saccharine, and later caffeine and aspirin. (Monsanto was his wife's maiden name). During the 1920s the company acquired a smaller factory which manufactured plastics, and it began to experiment with other synthetics. In 1943, Monsanto began production of synthetic rubber tires for army vehicles. After the war, this former sideline became a substantial business. Monstanto developed Acrilan synthetic fibres in 1952, followed by the massively successful grass substitute AstroTurf, first used commercially in 1966 in the Houston Astrodome. At the end of that decade the company moved into herbicides, introducing Lasso in 1969 and market-leading Roundup in 1973.

Monsanto maintained its interest in pharmaceuticals, acquiring drug company GD Searle in 1985. But gradually crop control products became an ever-larger part of the overall business, and the company moved on into biotechnology and genetically modified foods, buying a number of genetics and seed businesses in the early 1990s. Meanwhile the company's pharmaceutical operations were also expanding. In 1998, looking for a marketing partner, the company discussed merger with American Home Products, but talks ended without agreement. Instead Pfizer was signed up to launch arthritis drug Celebrex in 1999. At the same time, public concerns over genetically modified crops began to increase dramatically. Monsanto quickly became one of the most conspicuous targets for protests and negative media coverage, hit by bans in the UK and other countries, and lawsuits in the US over inadequate testing. The company began to seek ways of protecting its increasingly lucrative drugs business from the backlash.

Pharmacia & Upjohn couldn't have relocated to the US at a better time. By the end of 1999, the two companies had agreed a deal whereby they would merge under the Pharmacia Corporation name as a focused pharmaceuticals group, while the Monsanto agribusiness would be spun off as a separate entity. The merger was completed in 2000, and an initial stake in Monsanto was floated. The latter's research business was spun off into Swedish biotech company Biovitrum, and Pharmacia's remaining shares in Monsanto were finally transferred to shareholders in August 2002. Meanwhile the group also completed a string of further deals in order to dispose of its non-pharma operations, selling its NutraSweet and Canderel sweeteners (originally part of Searle) to a private investment group, along with all its remaining food-related businesses, and its remaining stake in Amersham Biosciences.

The acquisition by Pfizer was unveiled in 2002. The larger company paid $60bn in stock to absorb Pharmacia. Chairman & CEO Fred Hassan left the company following the merger, moving to Schering-Plough until that too was acquired by Merck.

Last full revision 16th November 2017


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