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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported)
July 30, 1999
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Pharmacia & Upjohn, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
1-11557 98-0155411
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Commission File Number (IRS Employer Identification No.)
95 Corporate Drive
Bridgewater, New Jersey 08807
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(Address of Principal Executive Offices) (Zip Code)
(888) 768-5501
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(Registrant's Telephone Number, Including Area Code)
N/A
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
On July 28, 1999, Pharmacia & Upjohn, Inc., a Delaware corporation,
issued a press release regarding its sales and earnings for the second quarter
of 1999. This press release is attached hereto as Exhibit 99.1.
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereto duly authorized.
PHARMACIA & UPJOHN, INC.
By: /s/ Don W. Schmitz
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Name: Don W. Schmitz
Title: Vice President and Secretary
Date: July 30, 1999
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INDEX OF EXHIBITS
Exhibit No. Exhibit
- ----------- -------
99.1 Press Release, dated as of July 28, 1999.
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[PHARMACIA & UPJOHN LETTERHEAD]
EMBARGOED FOR RELEASE AT
7:00 AM EDT, JULY 28, 1999
PHARMACIA & UPJOHN REPORTS
SECOND-QUARTER SALES AND EARNINGS
- - WORLDWIDE SALES FROM ONGOING OPERATIONS INCREASE 11%, DRIVEN BY A 15% INCREASE
IN PRESCRIPTION SALES
- - KEY PRODUCTS CONTINUE TO DRIVE TOP-LINE GROWTH
-- XALATAN GROWS TO $111 MILLION (+64%)
-- CAMPTOSAR SALES GROW TO $66 MILLION (+50%)
-- DETROL/DETRUSITOL RECORDS SALES OF $86 MILLION (+301%)
-- GENOTROPIN SALES REACH $112 MILLION (+18%)
-- NICORETTE SALES INCREASE TO $62 MILLION (+31%)
- - STRONG TURNAROUND DRIVING GROWTH IN JAPAN
- - FRAGMIN RECEIVES U.S. FDA APPROVAL FOR ADDITIONAL INDICATION IN UNSTABLE
ANGINA
- - AGREEMENT TO MERGE WITH SUGEN, INC. STRENGTHENS R&D PLATFORM
- - COMPANY ACQUIRES RIGHTS TO NEW TREATMENT FOR ACROMEGALY FROM SENSUS
POST-QUARTER EVENT
- - COMPANY NAMES U.S. PROMOTION PARTNER FOR NEW ANTIDEPRESSANT, VESTRA
<TABLE>
<CAPTION>
SECOND QUARTER SIX MONTHS
------------------------------------------ -----------------------------------------
% %
FINANCIAL SUMMARY % CHG EXCL % CHG EXCL
($ MILLIONS) 1999 1998 CHG CURR* 1999 1998 CHG CURR*
---- ---- --- ----- ---- ---- --- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SALES
(ongoing operations) $1,741 $1,564 11% 12% $3,485 $3,061 14% 14%
NET EARNINGS
(before unusual 1998 item) $216 $187 15% 10% $437 $376 16% 14%
DILUTED EARNINGS PER SHARE
(before unusual 1998 item)
$0.41 $0.36 14% $0.83 $0.72 15%
</TABLE>
*Percentage change excluding the impact of currency exchange
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BRIDGEWATER, NJ (JULY 28, 1999) -- Pharmacia & Upjohn, Inc. (NYSE:PNU) today
reported net sales for the second quarter 1999 of $1.7 billion, an increase of
11% over the same period in 1998, adjusted for the 1998 divestment of the
company's Nutrition business. Net sales for the first half of 1999 were $3.5
billion, a 14% increase over the first half of 1998. On a reported basis, sales
increased 6% over the second quarter of 1998 and 9% over the first half of the
prior year.
Net earnings for the quarter were $216 million (41 cents per share) compared to
$187 million (36 cents per share) in the second quarter of 1998, an increase of
15%, excluding an unusual 1998 item. For the first half of 1999, net earnings
were $437 million (83 cents per share) an increase of 16% over the prior-year
period. On a reported basis, net earnings rose 47% in the second quarter and 30%
for the first half.
Commenting on the company's results, Pharmacia & Upjohn Chief Executive Officer
Fred Hassan said: "We continue to deliver on the promise we made when we began
our turnaround in 1997 of achieving annual double digit earnings growth. Our
results this quarter were again driven by strong growth in the U.S. where
prescription sales increased 28%. Our dramatic U.S. turnaround is being
supplemented by strong contributions from non-U.S. markets where we are
extending the penetration of our key products. In particular, our operations in
Japan are posting very strong results as key products such as Xalatan begin to
affect our top line."
Added Hassan: "We are now completing the turnaround phase for P&U. As we go
forward our strategic focus is on building the base for sustainable, long-term
growth."
The company noted that, as stated earlier this year, year-to-year comparative
sales growth during the second half of 1999 is expected to moderate due to
exceptionally high growth rates recorded in the third and fourth quarters of
1998. The expected completion of the SUGEN transaction, to be accounted for as a
pooling of interests, will result in a restatement of earnings later this year.
PERFORMANCE OF KEY PHARMACEUTICAL PRODUCTS
Sales of Xalatan, a novel therapy for glaucoma, continued to grow. Sales were
$111 million in the second quarter, an increase of 64% over prior year. Xalatan
continues to capture a market-leading share of total glaucoma prescriptions.
Sales outside the U.S. continue to increase, accounting for 46% of total product
sales. Xalatan, launched in Japan in May, is off to a strong start. Excellent
market penetration continues in key European countries such as France, Spain and
the United Kingdom.
Camptosar for metastatic colorectal cancer grew to $66 million, a 50% increase
over prior year. Camptosar continues to benefit from the full FDA approval
received in late 1998 based on improved survival data versus standard treatment
for colorectal cancer.
Detrol/Detrusitol, the leading therapy for overactive bladder with symptoms of
urinary urgency, frequency and urge incontinence, recorded sales of $86 million
in the second
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3
quarter. Sales in the quarter were partly impacted by increased trade purchasing
in the U.S. Market development remains the focus of the company's promotional
activities to maximize the potential of the overactive bladder market. Sales
outside the U.S. continue to exhibit a strong growth trend.
Genotropin, a growth hormone and the company's leading product, recorded sales
of $112 million during the second quarter, an 18% increase over the prior year.
Genotropin, the world's leading growth hormone, continues to increase market
share in the U.S. where it is now capturing more than one-third of new patient
starts.
The Nicorette line of products used to treat tobacco dependency recorded sales
of $62 million in the second quarter, an increase of 31%. The increase was due
in part to strong sales of a new mint-flavored version of Nicorette gum
introduced earlier this year.
Fragmin, the company's low molecular weight heparin for preventing the formation
of blood clots, had sales of $51 million during the second quarter, an increase
of 7% over the second quarter of 1998. During the quarter, the company
strengthened its U.S. label by obtaining FDA approval for a new indication in
unstable angina. Earlier this year, the company also received a new indication
in the U.S. in hip replacement surgery.
Sales of Mirapex/Mirapexin, a dopamine agonist for the treatment of Parkinson's
disease, were $20 million in the second quarter, a 52% increase over prior year.
Mirapex is the leading dopamine agonist in both new and total prescriptions in
the U.S.
RESULTS OF OPERATIONS
The company continues its focus on cost containment measures and investments to
drive top-line growth. Gross margin in the second quarter improved by four
percentage points vs. prior year, on a reported basis. This was due mainly to
improving product and business mix. In the first half of 1999, the gross margin
improvement was also four percentage points. The company's estimated annual
effective tax rate for 1999 is 30%. The effective tax rate for 1998 was 32%.
Selling, General & Administrative expenses remained relatively constant for the
quarter as a percentage of sales, excluding unusual items. In the first half,
SG&A rose one percentage point to 38% of sales, excluding an unusual 1998 item.
Research & development expenses increased modestly in the quarter from 17.9% to
18.4% of sales due to clinical development activity on products such as Zyvox.
In the first half, the R&D expense ratio was also 18.4%.
OTHER DEVELOPMENTS
During the second quarter, the company announced an agreement to merge with
SUGEN, Inc., a world leader in target-driven drug discovery and development. The
transaction subject to the approval of SUGEN shareholders, will strengthen
Pharmacia & Upjohn's R&D efforts and will also position P&U as a new challenger
for leadership in the field of oncology.
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Pharmacia & Upjohn also announced an equity investment in Sensus Drug
Development Corporation which is developing pegvisomant, a growth hormone
receptor antagonist in Phase III development for treatment of acromegaly, also
known as "gigantism". This product is an important addition to P&U's current
growth hormone business that includes Genotropin. Pending FDA approval of
pegvisomant, Pharmacia & Upjohn has the option to purchase Sensus.
Said Hassan: "The SUGEN and Sensus transactions reflect our commitment to
accessing external innovation as a key strategy in building a world-class
pipeline."
During the quarter, the company launched Pletal in the U.S. for the treatment of
intermittent claudication, a symptom of peripheral arterial disease that causes
poor circulation and pain in the lower extremeties. Pharmacia & Upjohn is
co-promoting Pletal with Otsuka America Pharmaceutical Inc.
On July 20, Pharmacia & Upjohn announced an agreement with Janssen
Pharmaceutica, a wholly owned subsidiary of Johnson & Johnson, to co-promote
Vestra (reboxetine mesylate tablets) in the U.S. Vestra, a new treatment for
depression, is under review by FDA. It is currently marketed as Edronax outside
the U.S.
Pharmacia & Upjohn, Inc., is a global, innovation-driven pharmaceutical and
health care company. Pharmacia & Upjohn's products, services, and employees
demonstrate its commitment to improve wellness and quality of life for people
around the world.
Certain statements contained in this release, such as statements concerning the
Company's anticipated financial results, current and new product performance,
currency impact and other non-historical facts are "forward-looking statements"
(as such term is defined in the Private Securities Litigation Reform Act of
1995). Since these statements are based on factors that involve risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. Such factors include, among others:
management's ability to implement the strategic initiatives; the Company's
ability to successfully market new and existing products in new and existing
domestic and international markets; the success of the Company's research and
development activities and the speed with which regulatory authorizations and
product roll-outs may be achieved; fluctuations in exchange rates; the effects
of the Company's accounting policies and general changes in generally accepted
accounting principles; the Company's exposure to product liability and other
lawsuits and contingencies related to actual or alleged environmental
contamination; domestic and foreign social, legal and political developments,
especially those relating to health care reform and product liabilities; general
economic and business conditions; the Company's ability to attract and retain
current management and other employees of the Company; and other risks and
factors detailed in the Company's Securities and Exchange Commission filings,
including its Proxy Statement and Annual Report on Form 10-K for the year ended
December 31, 1998.
<TABLE>
<S> <C>
Media Contact: Analyst Contacts:
Paul Fitzhenry Craig Tooman
(908) 306-5421 (908) 306-4450
</TABLE>
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PHARMACIA & UPJOHN, INC. REPORT FOR THE SECOND QUARTERS AND SIX MONTHS ENDED
JUNE 30, 1999 AND 1998 ($S IN MILLIONS)
KEY PRODUCT SALES (unaudited)
<TABLE>
<CAPTION>
Second Quarter Six Months
% Chg % Chg
1999 1998 Chg Excl. 1999 1998 Chg Excl.
$ $ % Curr.* $ $ % Curr.*
---- ---- --- ----- ---- ---- --- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Genotropin 112.3 95.1 18.1 16.3 217.4 171.8 26.5 23.3
Xalatan 110.5 67.5 63.7 64.7 212.2 137.2 54.7 55.1
Cleocin/Dalacin 76.6 74.6 2.7 4.4 167.7 146.0 14.9 15.8
Xanax 72.7 77.4 (6.1) (4.3) 161.0 153.1 5.2 6.2
Detrol/Detrusitol 85.5 21.3 301.4 305.0 150.4 23.7 534.6 536.9
Medrol 70.4 63.3 11.2 11.1 147.1 128.0 14.9 14.0
Camptosar 65.5 43.7 49.9 51.8 129.2 85.4 51.3 53.3
Depo-Provera 59.5 60.0 (0.8) 0.2 125.5 111.4 12.7 13.6
Fragmin 51.3 47.8 7.3 8.5 102.5 92.1 11.3 10.1
Nicorette 62.3 47.5 31.2 37.5 122.6 99.6 23.1 25.8
Other 974.1 965.4 0.9 1.3 1,949.4 1,912.3 1.9 2.0
------- ------- --- --- ------- ------- ----- -----
Total Sales (ongoing
operations) 1,740.7 1,563.6 11.3 12.4 3,485.0 3,060.6 13.9 13.9
Divested businesses 19.4 90.2 N/A N/A 49.1 179.5 N/A N/A
======= ======= ==== ==== ======= ======= ==== ====
Consolidated Net Sales 1,760.1 1,653.8 6.4 7.4 3,534.1 3,240.1 9.1 9.1
======= ======= ==== ==== ======= ======= ==== ====
</TABLE>
GEOGRAPHIC SALES (unaudited)
<TABLE>
<CAPTION>
Second Quarter Six Months
-------------- ----------
% Chg % Chg
1999 1998 Chg Excl. 1999 1998 Chg Excl.
$ $ % Curr.* $ $ % Curr.*
---- ---- --- ----- ---- ---- --- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
United States 691.1 571.9 20.8 20.8 1,407.7 1,129.3 24.7 24.7
Japan 176.3 136.7 29.0 15.1 328.8 261.7 25.6 13.3
Italy 113.1 111.0 1.9 5.1 221.1 212.5 4.0 3.9
Germany 87.0 89.2 (2.5) 0.7 177.9 174.3 2.1 1.5
United Kingdom 82.6 73.2 12.8 15.4 159.8 141.3 13.1 14.8
France 68.0 64.4 5.6 8.9 141.8 126.3 12.3 11.8
Sweden 62.4 65.5 (4.7) 2.9 129.2 129.8 (0.5) 3.2
Spain 41.3 39.4 4.8 8.2 84.4 75.7 11.5 11.2
Rest of world 418.9 412.3 1.6 6.1 834.3 809.7 3.0 6.7
------- ------- --- --- ------- ------- --- ---
Total Sales (ongoing
operations) 1,740.7 1,563.6 11.3 12.4 3,485.0 3,060.6 13.9 13.9
Divested Businesses 19.4 90.2 N/A N/A 49.1 179.5 N/A N/A
======= ======= === === ======= ======= === ===
Consolidated Net Sales 1,760.1 1,653.8 6.4 7.4 3,534.1 3,240.1 9.1 9.1
======= ======= === === ======= ======= === ===
</TABLE>
- - Percentage change excluding the impact of currency exchange
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PHARMACIA & UPJOHN, INC. REPORT FOR THE SECOND QUARTERS AND SIX MONTHS ENDED
JUNE 30, 1999 AND 1998 ($S IN MILLIONS, EXCEPT DILUTED PER-SHARE DATA):
CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
<TABLE>
<CAPTION>
Second Quarter Six Months Y-T-D
1999 1998 % Chg 1999 1998 % Chg
---- ---- ----- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Net sales $1,760 $1,654 6.4 $3,534 $3,240 9.1
Cost of products sold 447 493 (9.3) 940 979 (4.0)
Research & development 324 295 9.5 651 573 13.5
Selling, general & administrative 677 700 (3.2) 1,345 1,266 6.3
(1)
Interest income, net (9) (16) (45.9) (20) (34) (40.2)
All other, net (2) 13 (34) N/A (6) (37) (83.6)
Earnings before income taxes 308 216 42.9 624 493 26.7
Provision for income taxes (3) 92 70 33.9 187 158 18.8
Net earnings $216 $146 47.1 $437 $335 30.4
Earnings per common share:
Diluted - net earnings $0.41 $0.28 46.4 $0.83 $0.64 29.7
Total shares - diluted (in 523 522 523 522
millions)
</TABLE>
Depreciation and amortization are $104 for 2Q99 and $208 for 1H99.
(1) 2Q98 and 1H98 include an unusual item of $61 million ($41 million net
of tax, or $0.08 per share) for the second-quarter settlement of a
lawsuit with U.S. retail pharmacies.
(2) "All other, net" includes licensing and marketing alliance revenue
previously called "Other revenue," amortization of goodwill, the
company's share of earnings from Biotech, and other miscellaneous
operating and nonoperating items.
(3) The estimated annual effective tax rate for 1999 is 30%. The effective
tax rate for 1998 was 32%.
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