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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Pfizer Acquires Pharmacia Contd...

However, despite the synergies between Pharmacia and Upjohn, the merger did not yield the expected results. This was mainly due to the cultural differences between the companies.

The merged entity reported poor earnings and this was attributed to the confusion created in the company by the merger. To begin with, Pharmacia and Upjohn could not reach an agreement on where the corporate headquarters should be located.

Besides, there were differences between the top executives of both companies, which led to a lack of cooperation between them.

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The company's efforts were not directed at achieving the synergies and financial goals of the merger, and this resulted in the exodus of several talented employees. This had an adverse affect on sales and the company issued profit warnings for four quarters in a row in 1997. The merger costs exceeded the budget by more than US$ 500 million.

Between 1996 and 1997, Pharmacia and Upjohn's combined sales dropped by 8% to US$ 6.6 billion. The earnings went down by 53% from US$ 550 million to US$ 258 million.

It was in such a scenario that Fred Hassan (Hassan), Executive Vice-President, American Home Products5 (later Wyeth), joined Pharmacia & Upjohn as CEO in May 1997. Hassan was largely responsible for turning the company around. By the third quarter of 1998, the company was back on track and had begun showing a growth in profits. The net income reached US$ 799 million by 1999, growing by 14% over the previous year.

With the 1999 merger with Monsanto, the Pharmacia Corporation was formed. The growth continued and by mid-2002, the company was acquired by Pfizer (Refer to Exhibit I and Exhibit II for the financial details of Pharmacia & Upjohn and Pharmacia Corporation)...

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5] US-based Wyeth, a Fortune 500 company (2005 Rank: 343), is one of the largest pharmaceutical companies in the world. Some of the popular drugs from the company are Advil, Robitussin, Premarin, and Effexor. In 2005, the company recorded revenues of US$ 18755.8 million and profit of US$ 3656.3 million.


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