Corporate Turnaround of Pharmacia & Upjohn

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Case Details:

Case Code : BSTR255
Case Length : 17 Pages
Period : 1995-2006
Pub Date : 2007
Teaching Note :Not Available
Organization : Pharmacia & Upjohn
Industry : Pharma
Countries : US / Sweden

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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About Upjohn

Upjohn was founded by William Erastus Upjohn (William Erastus), a doctor, and his brothers as The Upjohn Pill and Granule Company in the year 1885. In 1886, the company employed 12 people and manufactured more than 180 medical formulas using botanicals and chemicals. In the first year of its inception, the company's sales were at US$ 50,000, mainly due to 'friable pills ' that crumbled and dissolved easily. The friable pill was the first of its kind and could be crushed with the press of the thumb. The illustration of this property became the company's trademark (Refer to Exhibit III for a visual of Upjohn's Friable pills). In 1890, the sales of the company stood at US$ 132,500...

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About Pharmacia

Pharmacia was founded in 1911 in Stockholm, Sweden, by CM deKunwald. The company's first product was phospho-energon energy pills made from animal products and in the first year, the company's turnover was Skr 20,000 . The drug became the mainstay of the company, accounting for over 30% of the sales for several years. Phospho-energon was also sold in several countries.

Not relying on a single product, Pharmacia came up with several new products like Cedrolinol, produced from Cedar wood, for treating rheumatic complaints in 1912. In 1913, Pharmacia brought out Sodamint to treat stomach complaints and Paraform containing formaldehyde for treating throat infections...

Rationale for the Merger

Pharmacia and Upjohn had comparable market values and the merger was touted as a merger of equals. Before the merger, Upjohn had been the world's 19th largest pharmaceutical company and Pharmacia the 18th largest.

At the time of the merger, Upjohn was weak in terms of R&D compared to its competitors in the industry. Its patents on several drugs like Xanax had expired. With no profitable drugs in the pipeline, the company was seeking a European partner.

Zabriskie was of the view that a friendly merger would give the company more markets for its products and help it enhance its growth. Pharmacia's Genotropin, a growth hormone, was facing problems due to severe price competition. The company was also looking for a new distribution and marketing network to distribute its products in the US...

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