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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"They (Pharmacia & Upjohn) came together because both were outliners in a consolidating industry, and they both had roughly comparable market values before the merger. So a merger of equals was the logical way to survive. On paper it all made a lot of sense. The issue was the execution of the merger afterwards."1

- Fred Hassan, Former President and CEO, Pharmacia Corporation, in 2001.

Pfizer Acquires Pharmacia

On July 15, 2002, Pfizer Inc. (Pfizer), one the world's leading pharmaceutical companies, announced the acquisition of Pharmacia Corporation for US$ 58 billion in stock2. The deal resulted in a company with annual revenues of over US$ 48 billion and an R&D budget of US$ 7 billion. According to Hank McKinnell, Chairman and CEO of Pfizer, "By combining with Pharmacia, we are ensuring that our core capabilities in the discovery, development, and commercialization of new medicines are strong around the world."3Pharmacia Corporation was a result of the merger between Pharmacia & Upjohn Inc. (Pharmacia & Upjohn) and the Monsanto Company4 in the year 1999.

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The merger resulted in a US$ 37 billion pharmaceutical group. In 1995, Sweden-based Pharmacia AB (Pharmacia) merged with US-based Upjohn Company (Upjohn), to form Pharmacia & Upjohn. At the time of the merger, industry analysts opined that the merger would create a major force in the global pharmaceutical market.

Through the merger, Pharmacia and Upjohn aimed to achieve a leadership position in the areas of infectious diseases, women's health, nutrition, etc. The merged entity was expected to reap the advantages of a complementary geographical presence, with Pharmacia gaining access to the marketing and distribution infrastructure of Upjohn in the US and Upjohn gaining similar support from Pharmacia in European countries.

The merged entity expected to sell its products in new international markets and aimed at becoming the fifth largest pharmaceutical company by the year 2000 (Refer to Table I for top five pharmaceutical companies in the world in 2000).

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1] "Making Culture a Strategic Asset,"Interview with Fred Hassan, President & Chief Executive Officer, Pharmacia Corporation, www.accenture.com, 2001.

2] As per the deal, the shareholders of Pharmacia received 1.4 shares of Pfizer for each share of Pharmacia.

3] "Pfizer Acquires Pharmacia,"The Hindu, July 16, 2002.

4] Monsanto Company was an agricultural biotechnology corporation, headquartered in St. Louis, Missouri, US.

 

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