Merger Creates Ninth-Largest Drug Company Upjohn, Swedish Competitor Will Consolidate, Cut 4,000 Jobs
The Upjohn Co. is merging with a Swedish competitor in a $13 billion deal that will create the world’s ninth-largest drug company.
The merger announced Sunday between Upjohn and Pharmacia AB will create Pharmacia & Upjohn Inc., with 34,500 employees worldwide and headquarters in London. About 4,000 jobs are expected to be eliminated.
The merger comes amid growing consolidation in the drug industry, which is under pressure from insurers and governments to lower costs and must compete with generic drug-makers who match products as soon as patents expire.
While Upjohn has lagged in researching new drugs, the merged company will draw on Pharmacia’s efforts to develop anticancer drugs and products for anesthesia.
“If you look at this industry, the future is in research,” Upjohn Vice President Phillip Carra said.
“We’re going to have a $1 billion annual research and development operation.”
Upjohn had $3.3 billion in sales last year and Pharmacia had $3.6 billion.
“This really is a merger of equals, two companies about the same size strategically coming together with a very compelling business logic,” Upjohn chief executive John Zabriskie said.
Zabriskie would be CEO and president of the new company, and Pharmacia CEO Jan Ekberg would be chairman of its board.
Upjohn, based in Kalamazoo, Mich., makes a broad swathe of medicines well known to American consumers, including Kaopectate stomach medicine, the hairgrowth drug Rogaine and the sedative Halcion.
Pharmacia recently received U.S. approval for the use of the blood-thinning drug Fragmin. Its rights to market a popular growth-hormone drug worldwide expires at the end of this year.
The drug was developed by the U.S. company Genentech, which markets it in the United States.
The merger calls for Upjohn’s stockholders to get 1.45 shares in Pharmacia & Upjohn for each share in their old company.
Pharmacia shareholders would get one share for each of theirs. The stockholders must approve the merger.
The new company will save about $500 million a year by eliminating more than 4,000 jobs and getting rid of duplication, the companies said.
About 50 to 100 people will work at the London headquarters, with Kalamazoo, Stockholm and Milan, Italy, serving as centers for most of its operations.
Pharmacia, 27.5 percent owned by auto giant AB Volvo and 14.1 percent by the Swedish state, has been looking for a U.S.-based partner for some time.
Rumors of such a merger surfaced Friday, taking the price of Upjohn stock up $3.37-1/2, or 9 percent, to $39.62-1/2 on the New York Stock Exchange.