<PAGE> 1
Filed Pursuant to Rule 424(b)(1)
Registration No. 333-70107
31,101,116 SHARES
PHARMACIA &
UPJOHN
COMMON STOCK
LOGO
-------------------------
All of the shares of Common Stock in the offering are being sold by the selling
stockholder identified in this prospectus. The Company will not receive any of
the proceeds from the sale of the shares. The Company has agreed to repurchase
from the selling stockholder 1,769,912 shares of the 31,101,116 shares of Common
Stock offered hereby at a price per share described herein.
The Common Stock is listed on the New York Stock Exchange under the symbol
"PNU". The last reported sale price of the Common Stock on the New York Stock
Exchange on January 14, 1999 was $55.1875 per share. Swedish Depositary Shares,
each representing one share of Common Stock, are traded on the Stockholm Stock
Exchange under the symbol "PHU".
See "Risk Factors" beginning on page 5 to read about certain factors you should
consider before buying shares of the Common Stock.
-------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR
ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
-------------------------
<TABLE>
<CAPTION>
PER SHARE(1) TOTAL(1)
------------ --------
<S> <C> <C>
Initial public offering price............................... $55.00 $1,710,561,380
Underwriting discount....................................... $ 1.10 $ 32,264,324
Proceeds, before expenses, to the selling stockholder....... $53.90 $1,676,350,152
</TABLE>
- ---------------
(1) The Company has agreed to purchase 1,769,912 shares of the 31,101,116 shares
being sold by the selling stockholder at a price per share equal to the
initial public offering price, less the underwriting discount. See "Share
Repurchase from the Selling Stockholder" and "Underwriting".
-------------------------
The underwriters may, under certain circumstances, purchase up to an additional
4,665,166 shares from the selling stockholder at the initial public offering
price less the underwriting discount.
-------------------------
The underwriters are severally underwriting the shares being offered. The
underwriters expect to deliver the shares against payment in New York, New York
on January 21, 1999.
Joint Bookrunners and Joint Lead Managers
J.P. MORGAN & CO. GOLDMAN, SACHS & CO.
-------------------------
PROSPECTUS DATED JANUARY 14, 1999
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, THE STOCKHOLM STOCK
EXCHANGE, IN THE OVER-THE-COUNTER MARKETS OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the U.S. Securities and Exchange Commission
(the "Commission") by the Company (File No. 1-11557) pursuant to the Securities
Exchange Act of 1934 (the "Exchange Act") are incorporated by reference in this
Prospectus:
1. The Company's Annual Report on Form 10-K for the year ended December 31,
1997 (the "1997 10-K");
2. The Company's Quarterly Reports on Form 10-Q for the periods ended March
31, 1998, June 30, 1998 and September 30, 1998;
3. The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed on October 24, 1995; and
4. The description of the Rights to purchase Participating Preferred Stock
of the Company contained in the Company's Registration Statement on Form
8-A filed on March 5, 1997.
All documents and reports filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the date of the termination of the offering shall be deemed to be incorporated
by reference in this Prospectus and thereby deemed to be part of this Prospectus
from the date of filing of such documents or reports. Any statement contained in
a document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified shall not
be deemed to constitute a part of the Prospectus except as so modified and any
statement so superseded shall not be deemed to constitute a part of this
Prospectus.
COPIES OF ANY DOCUMENTS INCORPORATED BY REFERENCE IN THIS PROSPECTUS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS) MAY BE OBTAINED WITHOUT CHARGE BY ANY PERSON
(INCLUDING ANY BENEFICIAL OWNER) TO WHOM A PROSPECTUS IS DELIVERED BY CONTACTING
THE COMPANY AT 95 CORPORATE DRIVE, BRIDGEWATER, NEW JERSEY 08807, TELEPHONE:
(908) 306-4400, ATTENTION: INVESTOR RELATIONS.
-------------------------
FORWARD-LOOKING STATEMENTS
In addition to historical information, this Prospectus contains (or incorporates
by reference) certain "forward-looking statements", such as statements
concerning the Company's anticipated financial or product performance, its
ability to pay dividends, and other non-historical facts. 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: sales and earnings projections;
the effectiveness of and expense estimates related to future projects including
1
<PAGE> 3
restructuring plans, the Year 2000 date recognition problem and conversion to
the euro; management's ability to make further progress under the Company's
global turnaround program; 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 rollouts may be achieved;
fluctuations in currency exchange rates; the effects of the Company's accounting
policies and general changes in generally accepted accounting practices; the
Company's exposure to product liability lawsuits and contingencies related to
actual or alleged environmental contamination; the Company's exposure to
antitrust lawsuits; 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 this Prospectus and the Company's other Exchange Act filings which
are incorporated by reference herein.
2
<PAGE> 4
THE COMPANY
Pharmacia & Upjohn, Inc. (the "Company") is a global pharmaceutical group that
researches, develops, manufactures, sells and markets a wide range of
prescription pharmaceutical products for humans. In addition, we manufacture and
sell non-prescription drugs, pharmaceutical chemicals and intermediate products
for use in our products and for sale to others. We also research, develop,
manufacture and market pharmaceutical products for animals, and we market
specialty products for hospital care and medical diagnostics. The Company was
formed in November 1995 through the combination (the "Combination") of Pharmacia
Aktiebolag ("Pharmacia") and The Upjohn Company ("Upjohn").
The Company's principal products include XALATAN(R), a novel therapy for
glaucoma; DETROL(R), an innovative therapy for overactive bladder;
GENOTROPIN(TM), a human growth hormone and the Company's leading product;
XANAX(R), a therapy for central nervous system disorders; CLEOCIN(R), an
antibiotic; MEDROL, a group of products to treat chronic inflammation disorders;
DEPO-PROVERA(TM), a contraceptive injection; NICORETTE(R), a line of nicotine
replacement products; CAMPTOSAR(R), a therapy for colorectal cancer; FRAGMIN(R),
a therapy for preventing blood clots; PHARMORUBICIN(R), a treatment for solid
tumors and leukemia; MIRAPEX/MIRAPEXIN(TM), a treatment for Parkinson's disease;
and ROGAINE(R), a non-prescription treatment for hair loss.
Through research and development and licensing agreements, the Company seeks to
develop innovative pharmaceuticals and other healthcare products that provide
high therapeutic benefits. The Company's research activities focus on four
medically important areas: infectious disease, metabolic disease, central
nervous system disorders and oncology. Our research is conducted primarily in
Kalamazoo, Michigan, Stockholm, Sweden and Milan, Italy.
CORPORATE STRATEGY
The Company is focused on the following strategic priorities:
Making the Merger Work. Since mid-1997, the Company has taken several steps to
enhance its operating performance, including making significant changes to its
senior management team and management structure, centralizing certain key
business functions at its new global headquarters in New Jersey, reducing
general and administrative expenses through the elimination of redundancies,
increasing organizational and operational efficiencies and fostering team spirit
throughout the organization.
Enhanced Top-Line Growth. The Company is developing its new and existing
product lines in order to improve revenue growth through increased sales force
support in key markets, including the United States, Germany and the United
Kingdom. In the third quarter of 1998, total consolidated sales, excluding
Biotech (which was contributed to a joint venture and is no longer
consolidated), grew 10%, principally as a result of a 14% volume increase. Sales
through September 30, 1998, excluding Biotech, grew 5%, principally as a result
of a 10% volume increase and a 28% growth in U.S. prescription pharmaceutical
sales. Since 1995, the percentage of sales from products introduced within the
last five years has increased from 4% to 21% of pharmaceutical sales, moving
closer to the Company's goal of 30% by the year 2000. The Company expects
limited revenue impact from patent expirations over the next five years.
Strengthened U.S. Presence. Because of the significance of the U.S. market to
the world-wide pharmaceutical industry, the Company is expanding its U.S.
prescription
3
<PAGE> 5
pharmaceutical sales force from 1,200 to 1,800 sales representatives, with a
greater percentage of the sales force calling on primary care physicians. The
Company expects its additional sales representatives to increase the market
awareness for recently launched products, such as DETROL(R) and XALATAN(R), as
well as products currently under development. Partly as a result of this
initiative, U.S. sales as a percentage of total consolidated sales, excluding
Biotech, increased to 37% for the first nine months of 1998, from 32% for the
same period in 1997.
Company-Wide Innovation. The Company relies upon innovation in discovery
research, product development, sales and marketing to enhance future
performance. Innovation in research and development is essential to the
introduction of successful new products. Examples of the Company's innovations
include the development of the oxazolidinones, the first new class of
antibiotics in over 30 years, and XALATAN(R), a breakthrough treatment for
glaucoma. To complement its internal product development pipeline, the Company
is actively seeking in-licensing opportunities and business partnerships. The
Company announced six new licensing agreements in 1998. Innovation in sales and
marketing has been particularly important for the success of products such as
DETROL(R), for which a staged roll-out through the sales force to physician
specialties was followed by direct-to-consumer advertising.
Focus on Essentials. The Company is increasing its focus on its key business
areas. To this end, the Company divested the majority of Biotech and its
nutrition business, allowing increased management attention to the faster
growing, higher margin pharmaceutical business. We installed new business
controls to more tightly manage the organization. We are emphasizing key growth
products in key markets when determining resource allocations. We continue to
adjust sales force productivity measures and incentives to align the activities
of field representatives with corporate goals. Finally, we are narrowing our
discovery research efforts to focus on infectious diseases, metabolic diseases,
central nervous system disorders and oncology.
SHARE REPURCHASE FROM THE SELLING STOCKHOLDER
The Company and the Selling Stockholder have entered into an agreement, dated as
of January 12, 1999 (the "Share Repurchase Agreement"), pursuant to which the
Company has agreed to purchase 1,769,912 shares of Common Stock from the Selling
Stockholder (the "Share Repurchase"), at a price per share equal to the initial
public offering price, less the underwriting discount. The Company will effect
the Share Repurchase by purchasing 1,769,912 shares of the 31,101,116 shares
being sold by the Selling Stockholder pursuant to this Prospectus. The Share
Repurchase is conditioned upon the completion of this offering. See
"Underwriting". The Share Repurchase is part of the Company's previously
announced plan to repurchase up to $1 billion of the outstanding shares of its
Common Stock.
4
<PAGE> 6
RISK FACTORS
Prior to making an investment decision, prospective investors should carefully
consider all of the information set forth in this Prospectus, including the
information incorporated by reference herein and the following risk factors.
COMPETITION
The pharmaceutical industry is highly competitive and rapidly changing. The
Company's principal competitors are major international corporations with
substantial resources for research and development, production and marketing.
Our products that are under patent protection face intense competition from
competitors' proprietary products. This competition may increase as new products
enter the market. We also face increasing competition from lower cost generic
products after patents on our products expire.
As new products enter the market, the Company's products may become obsolete or
our competitors' products may be more effective or more effectively marketed and
sold than our products.
A failure by the Company to maintain its competitive position could have a
material adverse effect on our business and results of operations.
PRICING
In addition to normal price competition in the marketplace, the prices of our
products are restricted by price controls imposed by governments and health care
providers in most countries where we sell products. Price controls operate
differently in different countries and can cause wide differences in prices
between markets. Currency fluctuations can aggravate these differences. The
existence of price controls can limit the revenues earned by the Company on its
products and may have an adverse effect on our business and results of
operations.
RESEARCH AND DEVELOPMENT
In order to remain competitive, the Company must commit substantial resources
each year to research and development. In the first nine months of 1998, the
Company spent approximately $838 million on research and development, and it
spent approximately $1,217 million on research and development in 1997.
The research and development process takes from 10 to 15 years from discovery to
commercial product launch. This process is conducted in various stages, and
during each stage there is a substantial risk that the Company will not achieve
its goals and have to abandon a product in which it has invested substantial
amounts. There can be no assurance that the Company will continue to succeed in
its research and development efforts. If the Company fails to continue
developing commercially successful products, or if competitors develop more
effective products or a greater number of successful new products, this could
have a material adverse effect on the Company's business and results of
operations.
PRODUCT REGULATION
The Company and its competitors are subject to strict government controls on the
development, manufacture, labeling, distribution and marketing of their
products. The Company must obtain and maintain regulatory approval for a
pharmaceutical product from a country's national regulatory agency before the
product may be sold in a particular country.
The submission of an application to a regulatory authority does not guarantee
that it will grant a license to market the product. Each authority may impose
its
5
<PAGE> 7
own requirements and delay or refuse to grant approval, even though a product
has been approved in another country.
In the Company's principal markets, the approval process for a new product is
complex and lengthy. The time taken to obtain approval varies by country but
generally takes from six months to four years from the date of application. This
increases the cost to the Company of developing new products and increases the
risk that it will not succeed in selling them successfully.
PRODUCT LIABILITY
Product liability is a significant commercial risk for the Company. Substantial
damage awards have been made in certain jurisdictions against pharmaceutical
companies based upon claims for injuries allegedly caused by the use of their
products.
The Company is involved in a substantial number of product liability cases
claiming damages as a result of the use of the Company's products, including a
number of cases involving the drug HALCION(R). The Company believes that any
potentially unaccrued costs and liabilities associated with such matters will
not have a material adverse effect on the Company's consolidated financial
position, results of operations or liquidity. There can, however, be no
assurance that a future product liability claim or series of claims brought
against us would not have an adverse effect on our business or results of
operations.
ENVIRONMENTAL RISKS
We use hazardous materials, chemicals, viruses and compounds in our product
development programs and manufacturing processes. Although we believe that our
handling and disposing of these materials comply with applicable laws and
regulations, the risk of accidental contamination or injury still exists. If
such an accident occurred, we could be held liable for any damages or fines,
which could have an adverse effect on our business and results of operations.
The Company has made provision for various environmental liabilities, including
exposures related to several industrial and disposal sites and its closed
chemical plant in North Haven, Connecticut. The Company's estimates of the total
cost it will incur in connection with environmental situations could change
because of uncertainties at many sites regarding cleanup remedies, the estimated
cost of cleanup and the Company's share of the site's cleanup cost.
The Company may soon be required to submit a corrective measures study report to
the United States Environmental Protection Agency regarding the closed North
Haven chemical facility. As the corrective action process progresses, the
Company may need to reevaluate the amount of reserves designated for remediation
of the North Haven site as a result of changing circumstances. It is reasonably
possible that the Company will be required to make a material increase in
accrued liabilities for the North Haven site, but it is not possible to
determine what, if any, additional exposure exists at this time.
YEAR 2000
The Company has established a global Year 2000 program to review our systems and
to develop plans to correct Year 2000 date recognition problems. The program
consists of assessment and remediation of our information technology ("IT")
systems and embedded systems, assessment of high level business risks and the
development of contingency plans to address these risks. The Company expects to
complete compliance measures for its IT and embedded systems by mid-1999 and to
test these systems in the second half of 1999. We also are working with key
external parties whose systems may affect ours, in order to determine what
remediation and contingency actions may be necessary. As of September 30, 1998,
the Company had
6
<PAGE> 8
spent approximately $100 million of its total projected costs of $150 million
for Year 2000-related compliance actions.
There can be no assurance that the Company's Year 2000 program will succeed.
Many factors outside our control could cause the Year 2000 problem to seriously
disrupt our operations. The more critical of these risks includes:
- Disruption in our supply of products due to internal Year 2000 failures,
and failures of raw material suppliers, third party manufacturers and
third party distributors;
- Infrastructure failures by utilities and communications providers;
- Internal failures in IT services and systems;
- Transportation industry failures that affect imports and exports;
- Interruption of the product regulatory filing process, such as a delay in
clinical trials or corruption of clinical trial data; and
- A major customer failure or interruption.
The Company expects to finalize its contingency plans to address these risks by
mid-1999. Management believes that our Year 2000 program will prevent the Year
2000 problem from having a material adverse effect on our business, financial
position, results of operations and liquidity. There can, however, be no
assurance that the Year 2000 problem will not have such an impact on the
Company.
CONVERSION TO THE EURO
On January 1, 1999, several European countries began operating with a new common
currency, the euro. The euro will completely replace these countries' national
currencies by January 1, 2002. The conversion to the euro will require the
Company to modify some of its systems and certain commercial arrangements. The
cost of this is not expected to be material. The conversion to the euro may have
competitive implications on pricing and marketing strategies, but any such
impact is not known at this time. The Company expects the conversion to have a
limited impact on its outstanding derivatives and other financial instruments,
and a limited impact on currency risk.
Management believes that the euro conversion will not have a significant impact
on the Company; however, it is uncertain what effects the new euro currency will
have on the marketplace. There can be no assurance that all problems will be
foreseen and corrected, or that there will not be a material disruption of our
business.
FOREIGN EXCHANGE FLUCTUATIONS
The Company records its transactions and prepares its financial statements in
U.S. dollars, but a significant portion of its earnings and expenditures are in
other currencies. Changes in exchange rates between the U.S. dollar and such
currencies can result in increases or decreases in the Company's costs and
earnings. Fluctuations in exchange rates between the U.S. dollar and other
currencies may also affect the book value of our assets outside the United
States and the amount of shareholders' equity. We seek to minimize our currency
exposure by engaging in hedging transactions, where we deem it appropriate.
7
<PAGE> 9
SUMMARY CONSOLIDATED FINANCIAL DATA
The summary consolidated financial data set forth below as of December 31, 1997,
1996 and 1995 and for each of the years in the three-year period ended December
31, 1997 have been derived from, and are qualified by reference to, the audited
consolidated financial statements of the Company for such periods, which are
incorporated by reference in this Prospectus from the Company's 1997 10-K (the
"Audited Consolidated Financial Statements"). The Audited Consolidated Financial
Statements have been audited by PricewaterhouseCoopers LLP, independent public
accountants. The summary consolidated financial data set forth below as of and
for the nine-month periods ended September 30, 1998 and September 30, 1997 have
been derived from, and are qualified by reference to, the unaudited interim
consolidated financial statements of the Company for such periods, including
information as of and for the nine-month period ended September 30, 1998 which
has been incorporated by reference in this Prospectus from the Company's
Quarterly Report on Form 10-Q for the period ended September 30, 1998 (the
"Interim Consolidated Financial Statements"). In the opinion of management, the
Interim Consolidated Financial Statements reflect all adjustments of a normal
recurring nature necessary for a fair statement of the results for the interim
periods presented. The results of the nine-month period ended September 30, 1998
are not necessarily indicative of the results that ultimately may be achieved
for the full year. The following data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", the financial statements, the notes thereto and the other financial
information incorporated by reference in this Prospectus.
8
<PAGE> 10
<TABLE>
<CAPTION>
NINE MONTHS
ENDED AND AT
SEPTEMBER 30, YEAR ENDED AND AT DECEMBER 31,
----------------- --------------------------------
1998 1997 1997 1996 1995
------- ------ -------- -------- --------
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Net sales......................... $ 4,909 $4,889 $ 6,586 $ 7,176 $ 6,949
Other revenue..................... 101 98 124 110 146
------- ------ ------- ------- -------
Total operating revenue......... 5,010 4,987 6,710 7,286 7,095
------- ------ ------- ------- -------
Cost of products sold............. 1,493 1,529 2,049 2,116 1,967
Research and development.......... 838 832 1,217 1,266 1,254
Marketing, administrative and
other........................... 1,952 1,839 2,665 2,642 2,617
Biotech(1)........................ (33) 31 73 -- --
Restructuring charges............. -- 125 316 518 104
Merger costs...................... -- -- -- 67 138
------- ------ ------- ------- -------
Total operating costs and
expenses..................... 4,250 4,356 6,320 6,609 6,080
------- ------ ------- ------- -------
Operating income.................. 760 631 390 677 1,015
Net financial income(2)........... 55 53 78 161 121
------- ------ ------- ------- -------
Earnings before income taxes...... 815 684 468 838 1,136
------- ------ ------- ------- -------
Net earnings...................... 554 451 323 562 739
Net earnings per common share:
Basic........................... $ 1.07 $ 0.87 $ 0.61 $ 1.08 $ 1.44
Diluted......................... 1.05 0.86 0.61 1.07 1.41
BALANCE SHEET DATA:
Cash and cash equivalents......... $ 1,005 $ 926 $ 775 $ 641 $ 841
Short-term investments............ 182 381 539 696 974
Total assets...................... 10,267 10,487 10,380 11,173 11,461
Short-term debt(3)................ 437 267 401 235 524
Long-term debt and ESOP debt(4)... 558 794 634 823 870
Total shareholders' equity........ 5,651 5,943 5,538 6,241 6,387
Total liabilities and
shareholders' equity............ 10,267 10,487 10,380 11,173 11,461
</TABLE>
- -------------------------
(1) In August 1997, the Company merged its biotechnology supply business,
Pharmacia Biotech, with Amersham Life Science, a division of Amersham,
International plc, in a noncash transaction that did not result in the
recognition of a gain or loss. The merger created a new company, Amersham
Pharmacia Biotech Ltd. The Company owns 45% of the new company which is
accounted for using the equity method. Biotech represents the Company's
share of Amersham Pharmacia Biotech Ltd.'s pretax earnings and, in 1997,
includes the costs associated with the merger.
(2) Net financial income includes interest income, interest expense, currency
exchange gains (losses) and all other, net.
(3) Including current maturities of long-term debt.
(4) See Note 11 to the Audited Consolidated Financial Statements incorporated by
reference herein.
9
<PAGE> 11
CAPITALIZATION
The following table summarizes the consolidated capital structure of the Company
at September 30, 1998.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
---------------------
(UNAUDITED)
(DOLLARS IN MILLIONS)
<S> <C>
Long-term debt(1):
Medium-Term Notes......................................... $ 35
5.875% Notes due 2000..................................... 200
Other long-term debt(2)................................... 323
-------
Total long-term debt.............................. 558
-------
Shareholders' equity:
Preferred stock, one cent par value; at stated value;
authorized 100,000,000 shares; issued 6,889 shares..... 278
Common stock, one cent par value; authorized 1,500,000,000
shares; issued 508,648,707 shares...................... 5
Capital in excess of par value............................ 1,385
Retained earnings......................................... 5,497
ESOP-related accounts..................................... (246)
Treasury stock (421,346 shares)........................... (17)
Accumulated other comprehensive income.................... (1,251)
-------
Total shareholders' equity........................ 5,651
-------
Total capitalization........................................ $ 6,209
=======
</TABLE>
- -------------------------
(1) Excludes current maturities of long-term debt.
(2) Includes guarantee of ESOP debt of approximately $218 million.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the shares.
10
<PAGE> 12
MARKET PRICE INFORMATION
As of December 31, 1998, there were 507,908,744 shares of Common Stock issued
and outstanding. The Common Stock is traded on the New York Stock Exchange (the
"NYSE"), and Swedish Depositary Shares, each representing one share of Common
Stock, are traded on the Stockholm Stock Exchange (the "SSE"). The table below
sets forth, for the calendar quarters indicated, the high and low sale prices of
the Common Stock as reported on the NYSE Composite Tape and the Swedish
Depositary Shares as reported on the SSE.
<TABLE>
<CAPTION>
NYSE SSE
------------------ --------------------
HIGH LOW HIGH LOW
------- ------- -------- --------
(SEK PER SWEDISH
($ PER SHARE) DEPOSITARY SHARE)(1)
<S> <C> <C> <C> <C>
1996
First Quarter.......................... $44.375 $35.875 305.0 234.0
Second Quarter......................... $44.375 $36.625 292.0 249.0
Third Quarter.......................... $44.625 $38.625 302.0 260.0
Fourth Quarter......................... $42.750 $34.125 281.0 225.0
1997
First Quarter.......................... $41.125 $35.750 307.0 262.5
Second Quarter......................... $36.875 $27.500 284.0 214.5
Third Quarter.......................... $38.625 $33.938 310.0 264.0
Fourth Quarter......................... $37.500 $28.875 294.0 215.0
1998
First Quarter.......................... $45.875 $33.750 356.0 270.0
Second Quarter......................... $46.688 $38.250 369.0 297.0
Third Quarter.......................... $51.688 $40.438 405.0 323.0
Fourth Quarter (through December 31,
1998)................................ $57.250 $44.875 460.0 340.0
</TABLE>
- ---------------
(1) On December 31, 1998, the noon buying rate in New York City for cable
transfers in Swedish kronor as certified for customers purposes by the
Federal Reserve Bank of New York was US$1.00 = SEK 8.1.
11
<PAGE> 13
DIVIDENDS
The Company declared a quarterly dividend of $0.27 per share of Common Stock for
each quarter during the years ended December 31, 1996 and 1997, and for each
quarter of the nine-month period ended September 30, 1998.
It is the long-term objective of the Company's Board of Directors that the
aggregate dividends declared on the shares of Common Stock in each year will
range between 40% and 50% of the consolidated net income of the Company in such
year. However, the declaration and payment of future dividends will be dependent
on the Company's income, financial condition and capital and cash requirements,
restrictions on dividends under applicable laws governing the Company, as well
as other factors affecting the Company. Accordingly, there can be no assurance
that dividends will be paid in the future nor any assurance as to the amount
thereof.
SELLING STOCKHOLDER
Forvaltningsaktiebolaget Stattum (the "Selling Stockholder") is a limited
liability company organized under the laws of the Kingdom of Sweden. The Selling
Stockholder is wholly owned by the Kingdom of Sweden.
Prior to the offering, the Selling Stockholder owned 35,766,282 shares, or
approximately 7.0% of the Common Stock then outstanding. The Selling Stockholder
intends to sell all of its shares in connection with the offering. Following the
offering, the Selling Stockholder will own no shares of the Common Stock if the
underwriters exercise their option to purchase additional shares, and 4,665,166
shares if the underwriters do not exercise any part of this option. See
"Underwriting".
In connection with the Combination, the Selling Stockholder, the Company, Upjohn
and Pharmacia entered into a Registration Rights Agreement (the "Registration
Rights Agreement"), pursuant to which the Selling Stockholder has the right,
among other things, to require the Company to register for resale under the U.S.
Securities Act of 1933, as amended (the "Securities Act"), all or any part of
the shares of Common Stock acquired by the Selling Stockholder as a result of
the Combination. The Registration Rights Agreement provides that the Company
will pay certain costs and expenses incurred in connection with any such
registration, including, without limitation, all registration and filing fees,
exchange listing fees, printing expenses and fees and disbursements of counsel
and accountants for the Company. In accordance with the Registration Rights
Agreement, the Selling Stockholder has agreed to pay certain expenses in
connection with the offering. See "Underwriting".
Pursuant to the Registration Rights Agreement, the Company filed the
Registration Statement (as defined below) of which this Prospectus forms a part
and has undertaken certain obligations in connection with such Registration
Statement, including the obligation to use its reasonable best efforts to keep
such Registration Statement effective for at least 180 days and to indemnify the
Selling Stockholder and the Underwriters against certain liabilities, including
liabilities under the Securities Act. In accordance with the Registration Rights
Agreement, the Selling Stockholder has agreed to indemnify the Company for
certain liabilities, including liabilities under the Securities Act.
12
<PAGE> 14
UNDERWRITING
The Selling Stockholder, the Company and the underwriters for the offering (the
"Underwriters") named below have entered into an underwriting agreement with
respect to the shares being offered. Subject to certain conditions, each
Underwriter has severally agreed to purchase the number of shares indicated on
the following table.
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
- ------------ ----------------
<S> <C>
J.P. Morgan Securities Inc. ................................ 14,773,030
Goldman, Sachs & Co. ....................................... 14,773,030
Enskilda Securities AB, a subsidiary of SEB................. 1,555,056
----------
Total............................................. 31,101,116(1)
==========
</TABLE>
- ---------------
(1) Pursuant to the Share Repurchase Agreement, the Company will purchase
1,769,912 of the shares purchased by the Underwriters from the Selling
Stockholder at the same price per share at which the Underwriters will
purchase the shares from the Selling Stockholder. See "Share Repurchase from
the Selling Stockholder".
-------------------------
If the Underwriters sell more shares than the total number set forth in the
table above, the Underwriters have an option to buy up to an additional
4,665,166 shares from the Selling Stockholder to cover such sales. They may
exercise that option for 30 days. If any shares are purchased pursuant to this
option, the Underwriters will severally purchase shares in approximately the
same proportion as set forth in the table above.
The following table shows the per share and total underwriting discounts and
commissions to be paid to the Underwriters by the Selling Stockholder. Such
amounts are shown assuming both no exercise and full exercise of the
Underwriters' option to purchase 4,665,166 additional shares.
<TABLE>
<CAPTION>
PAID BY THE SELLING STOCKHOLDER
--------------------------------
NO EXERCISE FULL EXERCISE
-------------- --------------
<S> <C> <C>
Per Share............ $ 1.10 $ 1.10
Total(1)............. $32,264,324 $37,396,007
</TABLE>
- ---------------
(1) The total underwriting discounts and commissions to be paid to the
Underwriters by the Selling Stockholder do not include any discounts or
commissions in respect of the 1,769,912 shares to be purchased by the
Company in the Share Repurchase. The Company will purchase such shares from
the Underwriters at the same price per share at which the Underwriters will
purchase the shares from the Selling Stockholder.
Shares sold by the Underwriters to the public will initially be offered at the
initial public offering price set forth on the cover of this Prospectus. The
Underwriters may sell shares outside the United States through their
international selling agents. Any shares sold by the Underwriters to securities
dealers may be sold at a discount of up to $0.66 per share from the initial
public offering price. Any such securities dealers may resell any shares
purchased from the Underwriters to certain other brokers or dealers at a
discount of up to $0.10 per share from the initial public offering price. If all
the shares are not sold at the initial offering price, the Underwriters may
change the offering price and the other selling terms.
In connection with the offering, certain purchasers outside the United States
may elect to take delivery of shares in the form of Swedish Depositary Shares.
Such Swedish Depositary Shares would be paid for in kronor at a price per
Swedish Depositary Share of SEK 429.275.
13
<PAGE> 15
In the event that the Underwriters' overallotment option is not exercised in
full, the Selling Stockholder has agreed not to offer, sell, contract to sell or
otherwise dispose of any shares of Common Stock or other securities of the
Company that are substantially similar to the shares of Common Stock, including
but not limited to any securities that are convertible into or exchangeable for,
or that represent the right to receive, shares of Common Stock or any such
substantially similar securities, for a period of 90 days after the date of this
Prospectus without the prior written consent of the Underwriters.
The Company has agreed not to issue, offer, sell, contract to sell or otherwise
dispose of any shares of Common Stock or other securities of the Company that
are substantially similar to the shares of Common Stock, including but not
limited to any securities that are convertible into or exchangeable for, or that
represent the right to receive, shares of Common Stock or any such substantially
similar securities, for a period of 90 days after the date of this Prospectus
without the prior written consent of the Underwriters; provided, that this
restriction will not apply to issuances or sales of shares in connection with
(i) employee stock option, savings or compensation plans or dividend
reinvestment plans or the conversion of convertible securities outstanding on
the date of this Prospectus or (ii) a merger or other combination with, or
exchange offer for shares of, another entity.
Each Underwriter has also agreed that (a) it has not offered or sold and prior
to the date six months after the date of this Prospectus will not offer or sell
any shares of Common Stock to persons in the United Kingdom except to persons
whose ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances which have not resulted and will not
result in an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995, (b) it has complied, and will
comply, with all applicable provisions of the Financial Services Act of 1986 of
Great Britain with respect to anything done by it in relation to the shares of
Common Stock in, from or otherwise involving the United Kingdom, and (c) it has
only issued or passed on and will only issue or pass on in the United Kingdom
any document received by it in connection with the issuance of the shares of
Common Stock to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1988 (Investment Advertisements) (Exemptions) Order 1996
of Great Britain or is a person to whom the document may otherwise lawfully be
issued or passed on.
Buyers of shares of Common Stock offered hereby may be required to pay stamp
taxes and other charges in accordance with the laws and practices of the country
of purchase in addition to the initial public offering price.
In connection with the offering, the Underwriters may purchase and sell shares
of Common Stock in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the Underwriters of a greater number of
shares than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the Common Stock while
the offering is in progress.
The Underwriters also may impose a penalty bid. This occurs when a particular
Underwriter repays to the Underwriters a portion of the underwriting discount
received by it because the Underwriters have repurchased shares sold by or for
the account of such Underwriter in stabilizing or short covering transactions.
14
<PAGE> 16
These activities by the Underwriters may stabilize, maintain or otherwise affect
the market price of the Common Stock. As a result, the price of the Common Stock
may be higher than the price that otherwise might exist in the open market. If
these activities are commenced, they may be discontinued by the Underwriters at
any time. These transactions may be effected on the NYSE, the SSE, in the
over-the-counter market or otherwise.
The Selling Stockholder has agreed in the Registration Rights Agreement to bear
the underwriting discount and certain other expenses in connection with the
offering of the shares of Common Stock. Certain costs and expenses incident to
the sale of the Common Stock offered, including registration and filing fees,
printing expenses, and fees and disbursements of counsel and accountants for the
Company, but excluding the fees and disbursements of counsel to the Selling
Stockholder, will be borne by the Company.
The Company and the Selling Stockholder have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act.
VALIDITY
The validity of the shares of Common Stock offered by this Prospectus will be
passed upon for the Company by Sullivan & Cromwell, New York, New York, and for
the Underwriters by Shearman & Sterling, New York, New York.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated balance sheets of the Company as of December 31, 1997 and 1996,
and the consolidated statements of earnings, shareholders' equity and cash flows
for each of the three years in the period ended December 31, 1997, which have
been incorporated by reference in this Prospectus, have been included and
incorporated by reference herein in reliance on the report of
PricewaterhouseCoopers LLP, independent public accountants, given on the
authority of that firm as experts in auditing and accounting. With respect to
the unaudited interim financial information for the three-month periods ended
March 31, 1998 and 1997, the six-month periods ended June 30, 1998 and 1997 and
the nine-month periods ended September 30, 1998 and 1997, incorporated by
reference in this prospectus, the independent public accountants have reported
that they have applied limited procedures in accordance with professional
standards for a review of such information. However, their separate review
reports included in the Company's quarterly reports on Form 10-Q for the
quarters ended March 31, 1998 and 1997, June 30, 1998 and 1997 and September 30,
1998 and 1997, and incorporated by reference herein, state that they did not
audit and they do not express opinions on that interim financial information.
Accordingly, the degree of reliance on their review reports on such information
should be restricted in light of the limited nature of the review procedures
applied. The accountants are not subject to the liability provisions of Section
11 of the Securities Act of 1933 for their reports on the unaudited interim
financial information because those reports are not a "report" or a "part" of
the registration statement prepared or certified by the accountants within the
meaning of Sections 7 and 11 of the Securities Act.
15
<PAGE> 17
AVAILABLE INFORMATION
The Company has filed with the Commission in Washington D.C. a registration
statement on Form S-3 (together with all amendments, exhibits and schedules
thereto, the "Registration Statement") under the Securities Act with respect to
the shares of Common Stock offered hereby. This Prospectus, which is part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information with
respect to the Company and the shares of Common Stock, reference is hereby made
to the Registration Statement. Statements contained in this Prospectus as to the
contents of any contract or other document referred to herein are not
necessarily complete and, in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each statement being qualified in all respects by such reference.
The Company is subject to the informational reporting requirements of the
Exchange Act and, in accordance therewith, files reports, proxy statements and
other information with the Commission. Such reports, proxy statements and other
information can be inspected and copies made at the public reference facilities
of the Commission, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and
at the Commission's regional offices at Suite 1400, Citicorp Center, 500 West
Madison Street, Chicago, Illinois 60661 and Thirteenth Floor, Seven World Trade
Center, New York, New York 10048, and copies of such materials can be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Information regarding the
Commission's public reference facilities may be obtained by calling the
Commission at 1-800-SEC-0330. The Commission also maintains an Internet site
that contains reports, proxy and information statements and other information
filed with the Commission by the Company at http://www.sec.gov.
The Common Stock is listed on the NYSE, and the periodic reports, proxy
statements and other information filed by the Company with the Commission are
available for inspection at the offices of the NYSE at 20 Broad Street, New
York, New York 10005.
16
<PAGE> 18
- ------------------------------------------------------
- ------------------------------------------------------
No dealer, salesperson or other person is authorized to give any information or
to represent anything not contained in this prospectus. You must not rely on any
unauthorized information or representations. This prospectus is an offer to sell
only the shares offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.
-------------------------
Table of Contents
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Documents by
Reference.......................... 1
Forward-Looking Statements........... 1
The Company.......................... 3
Corporate Strategy................... 3
Share Repurchase from the Selling
Stockholder........................ 4
Risk Factors......................... 5
Summary Consolidated Financial Data.. 8
Capitalization....................... 10
Use of Proceeds...................... 10
Market Price Information............. 11
Dividends............................ 12
Selling Stockholder.................. 12
Underwriting......................... 13
Validity............................. 15
Independent Public Accountants....... 15
Available Information................ 16
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
31,101,116 SHARES
PHARMACIA &
UPJOHN
COMMON STOCK
-------------------------
LOGO
-------------------------
J.P. MORGAN & CO.
GOLDMAN, SACHS & CO.
- ------------------------------------------------------
- ------------------------------------------------------
