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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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): February 10, 2000
PHARMACIA & UPJOHN, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 1-11557 98-0155411
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(State or Other Jurisdiction of (Commission File Number) (IRS Employer
Incorporation or Organization) Identification No.)
100 Route 206 North
Peapack, New Jersey 07977
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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 February 10, 2000, Pharmacia & Upjohn, Inc., a Delaware corporation
("P&U"), announced its 1999 fourth quarter sales and earnings.
A copy of the press release issued by P&U on February 10, 2000 is attached
hereto as Exhibit 99 and is hereby incorporated by reference herein.
ITEM 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits
(99) Press release, dated February 10, 2000.
1
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: February 18, 2000
PHARMACIA & UPJOHN, INC.
By: /s/ Don W. Schmitz
-------------------------------------
Name: Don W. Schmitz
Title: Vice President, Associate
General Counsel and
Corporate Secretary
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EXHIBIT INDEX
Exhibit
No. Description
- ----------- -----------------------------------------------------------------
99 Press Release, dated February 10, 2000.
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[PHARMACIA & UPJOHN LOGO] EXHIBIT 99
PHARMACIA & UPJOHN REPORTS
FOURTH-QUARTER SALES AND EARNINGS
- - COMPANY ACHIEVES DOUBLE-DIGIT SALES AND EARNINGS INCREASES FOR FOURTH QUARTER
AND FULL YEAR 1999
- - SALES FROM ONGOING OPERATIONS INCREASE 10% IN FOURTH QUARTER, DRIVEN BY 18%
INCREASE IN U.S. PRESCRIPTION SALES
KEY PRODUCTS CONTINUE TO DRIVE TOP-LINE GROWTH:
- - SALES OF XALATAN INCREASE TO $160 MILLION (+53%) IN FOURTH QUARTER AND EXCEED
$500 MILLION FOR FULL YEAR;
DETROL/DETRUSITOL RECORDS SALES OF $93 MILLION (+33%) IN FOURTH QUARTER AND $329
MILLION FOR FULL YEAR;
SALES OF CAMPTOSAR GROW TO $83 MILLION (+43%) AND $293 MILLION FOR FULL YEAR
OTHER DEVELOPMENTS
- - U.S. FDA GRANTS PRIORITY REVIEW TO REGULATORY SUBMISSIONS FOR A NEW ANTIBIOTIC
ZYVOX; A FIXED COMBINATION PRODUCT OF XALATAN AND TIMOLOL FOR GLAUCOMA; AND
CAMPTOSAR, FOR FIRST-LINE USE IN METASTATIC COLORECTAL CANCER;
PROPOSED P&U MERGER WITH MONSANTO TO CREATE A FIRST-TIER PHARMACEUTICAL
COMPETITOR
<TABLE>
<CAPTION>
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FOURTH QUARTER FULL-YEAR
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FINANCIAL SUMMARY % %
($ MILLIONS) 1999 1998 CHG 1999 1998 CHG
---- ---- --- ---- ---- ---
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<S> <C> <C> <C> <C> <C> <C>
SALES $1,939 $1,767 10% $7,178 $6,415 12%
(ongoing operations - see Key
Product Sales)
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NET EARNINGS $ 261 $ 235 11% $ 944 $ 831 14%
(as adjusted - see Statement of
Consolidated Earnings)
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NET EARNINGS $ 214 $ 122 * $ 803 $ 631 *
(as reported)
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DILUTED EARNINGS PER SHARE $ .50 $ .45 11% $ 1.80 $ 1.58 14%
(as adjusted - see Statement of
Consolidated Earnings)
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DILUTED EARNINGS PER SHARE $ .40 $ .22 * $ 1.49 $ 1.17 *
(as reported)
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</TABLE>
*Year-to-year growth rates are affected by certain items that affect
comparability. See discussion in Results of Operations section.
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PEAPACK, NJ (FEBRUARY 10, 2000) -- Pharmacia & Upjohn, Inc. (NYSE: PNU) today
reported net sales for the fourth quarter 1999 of $1.9 billion, an increase of
10% over the same period in 1998, adjusted for the 1998 and 1999 divestments of
major portions of the company's nutrition business. Excluding the impact of
foreign exchange, sales growth was 12% in the fourth quarter. On a reported
basis, sales increased 5% over the fourth quarter of 1998.
Sales growth in the fourth quarter was driven by a 13% increase in prescription
pharmaceutical sales. Prescription sales increased 18% in the U.S. Excluding the
impact of currency exchange, sales increased 11% in Europe and 22% in Japan. P&U
was Japan's fastest-growing pharmaceutical company in 1999, driven by successful
new product launches, including the introduction of Xalatan.
For the full year, net sales from ongoing operations were $7.2 billion, an
increase of 12% over 1998. On a reported basis, sales increased 7% over 1998.
Net earnings for the fourth quarter, adjusted for certain items that affect
comparability (see Results of Operations section), were $261 million (50 cents
per share) compared to $235 million (45 cents per share) in the fourth quarter
of 1998, an increase of 11%. For the full year, net earnings, as adjusted, were
$944 million ($1.80 per share), an increase of 14% over 1998.
On a reported basis, net earnings for the fourth quarter were $214 million (40
cents per share), a 76% increase over 1998, when net earnings were $122 million
(22 cents per share). Reported results for the fourth quarter and full year
reflect the acquisition of SUGEN, Inc. and its results of operations. Results
also include Pharmacia & Upjohn's equity investment in Sensus Drug Development
Corporation in the third quarter of 1999. As previously reported, these
transactions resulted in merger and restructuring charges and certain other
costs that affect comparability.
Commenting on the company's results, Pharmacia & Upjohn Chief Executive Officer
Fred Hassan said: "We are extremely pleased with our results for the fourth
quarter and the full year as we continue to deliver on our promise of consistent
double-digit earnings growth. We are particularly pleased that we have delivered
beyond the original sales growth targets we set for the year."
Hassan added: "We are now looking forward to the successful completion of our
merger with Monsanto and the opportunity to become a first-tier pharmaceutical
competitor with robust revenue and earnings growth."
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PERFORMANCE OF KEY PHARMACEUTICAL PRODUCTS
Sales of Xalatan, a novel therapy for glaucoma, continued to grow. Sales were
$160 million in the fourth quarter, an increase of 53% over prior year. For the
full year, Xalatan sales reached $507 million, a 53% increase over 1998. Xalatan
has become the top product within the P&U portfolio and the world's top-selling
brand of glaucoma medication. In the fourth quarter, the company submitted a New
Drug Application (NDA) in the U.S. for a fixed-combination of Xalatan and
timolol, a convenient new treatment for glaucoma with once-daily dosing. FDA has
designated the application for priority review. A separate European filing for
the fixed-combination occurred last month.
Detrol/Detrusitol, an innovative therapy for overactive bladder with symptoms of
urinary urgency, frequency and urge incontinence, recorded sales of $93 million
in the fourth quarter and $329 million for 1999. The company has taken a number
of strategic steps to reinforce the leadership position of Detrol in the
overactive bladder market, including the submission of a supplemental NDA in the
U.S. consisting of new efficacy and tolerability data. In January 2000, the
company also entered into a co-promotion agreement with Searle, the
pharmaceutical subsidiary of Monsanto Company, to expand the U.S. sales force
for Detrol to 1,800 representatives. Later this month, the company plans to
submit regulatory applications in the U.S. and Europe for a once-daily
formulation, Detrol XL.
Genotropin, the world's leading growth hormone, recorded sales of $135 million
during the fourth quarter, a 13% increase over the prior year. For the full
year, sales of Genotropin were $461 million, a 17% increase over 1998.
Genotropin continues to make strong inroads in the U.S. market where sales
increased 64% for the full year and the product is capturing more than one-third
of new patient starts. The U.S. launch of Genotropin MiniQuick in January 2000
expands the product's market potential in the U.S.
Sales of Camptosar, for metastatic colorectal cancer, were $83 million in the
fourth quarter, a 43% increase over prior-year levels. Full-year sales were $293
million, a 52% increase over 1998. Camptosar is under priority review by the FDA
as a component of first-line therapy in metastatic colorectal cancer based on
its survival benefit. It is currently approved as second-line therapy.
Fragmin, the company's low molecular weight heparin for preventing the formation
of blood clots, had sales of $60 million during the fourth quarter, an increase
of 21% over the fourth quarter of 1998. For the full year, sales were $213
million, an 18% increase over 1998. Fragmin posted sales growth of 60% in the
U.S. in the fourth quarter bolstered by the approval of new indications,
additional sales force support and new formulary approvals.
The Nicorette line of products to treat tobacco dependency recorded sales of $61
million in the fourth quarter, a decrease of 7% mainly due to strong fourth
quarter 1998 sales in conjunction
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with trade inventory stocking associated with the U.S. launch of a mint-flavored
version Nicorette gum.
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RESULTS OF OPERATIONS
Gross margin in the fourth quarter improved 4.7 percentage points vs. prior year
from 71% to 75.7%. This improvement was driven by an improving product and
business mix and the company's cost reduction initiatives.
Net earnings and diluted earnings per share as reported are affected by certain
items which impact comparability. Results of operations for the fourth quarter
include merger and restructuring charges related to the third-quarter merger
with SUGEN totaling $38 million on a pre-tax basis. For the full year, pre-tax
merger and restructuring charges of $70 million were recognized primarily
comprised of employee separation costs and transaction costs for the SUGEN
merger. Other significant pre-tax items that affect comparability for the year
and fourth quarter include R&D charges and termination of certain R&D projects
($29 million for the year and $0 for the fourth quarter) as well as SUGEN
operating results and Sensus R&D funding ($103 million for the year and $32
million for the fourth quarter).
Selling, General & Administrative (SG&A) expenses, excluding the impact of
SUGEN, were 40.1% of sales for the quarter and 38.4% of sales for the full year.
These percentages are higher than in the prior year periods due in part to
pre-marketing expenses for anticipated product launches, sales force expansions
and product launch costs. R&D expenses, excluding the impact of SUGEN and
Sensus, were 18.4% of sales in the fourth quarter, and 18.3% for the full year.
OTHER DEVELOPMENTS
During the fourth quarter, the company submitted regulatory applications in the
U.S. and Europe for its new antibiotic, Zyvox/Zyvoxa (linezolid). Zyvox, a
member of the first new class of antibiotics to be developed in more than 30
years. In the U.S., FDA has designated the product for priority review.
The company has strengthened its oncology business with the introduction of two
new breast cancer treatments in the U.S. Ellence (epirubicin hydrochloride
injection) was introduced in the fourth quarter as a component of adjuvant
therapy in the treatment of primary breast cancer. In January 2000, the company
launched its second new breast cancer treatment, Aromasin (exemestane tablets),
for advanced breast cancer in post-menopausal women.
In addition to the U.S. launches of Ellence and Aromasin, Pharmacia & Upjohn
also has launched a third product, Pletal (cilostazol), through a co-promotion
agreement with Otsuka America Pharmaceutical Inc. Pletal is indicated for the
reduction of symptoms associated with intermittent claudication.
In late 1999 the company submitted an NDA for Axert (almotriptan), a new
treatment for acute migraine.
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Pharmacia & Upjohn announced on December 19, 1999 that it has entered into a
definitive merger agreement with Monsanto Company to create a dynamic and
powerful new competitor in the global pharmaceutical industry. The merger
agreement is subject to approval by both companies' shareholders and is expected
to close during the first half of 2000.
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.
This news release contains certain forward-looking statements, including, among
other things, statements regarding the company's results of operations,
regulatory actions, and expected closing date of the merger. These
forward-looking statements are based on current expectations, but actual results
may differ materially from anticipated future events or results. Certain factors
which could cause the company's results to differ materially from expected and
historical results are described in the company's periodic reports filed with
the Securities and Exchange Commission, including the company's 1998 annual
report on Forms 10-K and Exhibits 99 thereto.
The company has filed a preliminary joint proxy statement and prospectus with
the United States Securities and Exchange Commission (the "SEC"), and will be
filing a definitive joint proxy statement/prospectus and other relevant
information and documents concerning the merger with the SEC. WE URGE INVESTORS
TO READ THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT
DOCUMENTS TO BE FILED WITH THE SEC, BECAUSE THEY CONTAIN IMPORTANT INFORMATION.
Investors will be able to obtain the documents free of charge at the SEC's
website, www.sec.gov. In addition, documents filed with the SEC by Pharmacia &
Upjohn will be available free of charge from the Corporate Secretary of
Pharmacia & Upjohn, 100 Route 206 North, Peapack, NJ 07977, Telephone (888)
768-5501. READ THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS CAREFULLY BEFORE
MAKING A DECISION CONCERNING THE MERGER.
Pharmacia & Upjohn, its directors, executive officers and certain other members
of management and employees may be soliciting proxies from Pharmacia & Upjohn
stockholders in favor of the merger. Information concerning the participants in
the solicitation is included in filings under Rule 425 made by Pharmacia &
Upjohn with the SEC on January 27, 2000
<TABLE>
<CAPTION>
Media Contact: Analyst Contact:
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<S> <C>
Paul Fitzhenry Craig Tooman
(908) 901-8770 (908) 901-8853
</TABLE>
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PHARMACIA & UPJOHN, INC. REPORT FOR THE FOURTH QUARTERS AND YEARS ENDED DECEMBER
31, 1999 AND 1998 (US $ IN MILLIONS)
KEY PRODUCT SALES (US$ in millions, unaudited)
<TABLE>
<CAPTION>
============================================================================================================
Fourth Quarter Full Year
% Chg % Chg
1999 1998 Chg Excl. FX 1999 1998 Chg Excl.
$ $ % Curr.* $ $ % Curr.*
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
Xalatan 159.5 104.4 52.8 53.9 507.3 332.0 52.8 53.4
Genotropin 135.4 120.0 12.8 12.3 460.8 395.1 16.6 14.0
Cleocin/Dalacin 90.0 86.0 4.7 6.0 342.9 314.0 9.2 10.0
Detrol/Detrusitol 93.2 69.9 33.3 35.2 328.9 125.3 162.5 164.6
Xanax 72.5 85.0 (14.7) (10.4) 320.2 320.8 (0.2) 2.1
Medrol 77.1 73.8 4.5 5.4 297.3 263.9 12.7 12.2
Camptosar 83.0 58.0 43.1 45.0 293.4 193.6 51.5 53.6
Depo-Provera 64.5 52.9 21.9 22.7 252.0 226.6 11.2 12.0
Nicorette 61.1 65.8 (7.1) (2.7) 233.6 213.1 9.6 12.9
Fragmin 59.8 49.4 21.1 23.7 213.2 180.8 17.9 17.4
All Other 1042.6 1001.5 4.1 6.5 3928.0 3849.6 2.0 2.7
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Total Sales (ongoing operations) 1938.7 1766.7 9.7 11.8 7177.6 6414.8 11.9 12.5
Divested businesses 4.3 83.2 N/A N/A 75.0 343.6 N/A N/A
============================================================================================================
Consolidated Net Sales 1943.0 1849.9 5.0 7.1 7252.6 6758.4 7.3 7.9
============================================================================================================
</TABLE>
GEOGRAPHIC SALES (US$ in millions, unaudited)
<TABLE>
<CAPTION>
============================================================================================================
Fourth Quarter YTD
% Chg % Chg
1999 1998 Chg Excl. 1999 1998 Chg Excl.
$ $ % Curr.* $ $ % Curr.*
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
United States 769.0 696.2 10.5 10.5 2915.3 2475.5 17.8 17.8
Japan 231.3 167.7 37.9 20.0 737.6 562.0 31.2 14.1
Italy 113.5 123.7 (8.2) 1.9 429.8 434.1 (1.0) 3.2
Germany 93.0 99.7 (6.7) 3.7 356.7 364.0 (2.0) 2.0
United Kingdom 89.9 84.1 6.9 8.9 328.2 295.6 11.0 13.2
France 70.0 68.3 2.5 13.6 273.4 255.9 6.8 10.9
Sweden 70.2 67.7 3.7 7.8 256.6 259.7 (1.2) 2.5
Spain 45.9 44.6 2.9 13.9 170.1 155.9 9.1 13.7
Rest of world 455.9 414.7 9.9 16.4 1709.9 1612.1 6.1 10.4
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Total Sales (ongoing operations) 1,938.7 1,766.7 9.7 11.8 7177.6 6414.8 11.9 12.5
Divested Businesses 4.3 83.2 N/A N/A 75.0 343.6 N/A N/A
============================================================================================================
Consolidated Net Sales 1943.0 1849.9 5.0 7.1 7252.6 6758.4 7.3 7.9
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</TABLE>
*Percentage change excluding the impact of currency exchange.
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PHARMACIA & UPJOHN, INC. REPORT FOR THE FOURTH QUARTERS AND YEARS ENDED DECEMBER
31, 1999 AND 1998 ($U.S. IN MILLIONS, EXCEPT DILUTED PER-SHARE DATA):
CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
<TABLE>
<CAPTION>
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Fourth Quarter Year Ended Dec 31
1999 1998 % Chg 1999 1998 % Chg
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<S> <C> <C> <C> <C> <C> <C>
Net sales $1,943 $1,849 5.0 $7,253 $6,758 7.3
Cost of products sold 472 536 (12.1) 1,893 2,031 (6.8)
Research & development (1) 384 365 5.4 1,434 1,234 16.3
Selling, general & administrative (2) 781 683 14.2 2,800 2,552 9.7
Merger & restructuring 38 92 (58.5) 70 92 (23.6)
Interest income, net (4) (16) (73.7) (17) (66) (73.9)
All other, net (3) (31) (3) N/A (74) (62) 20.9
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Earnings before income taxes 303 192 58.4 1,147 977 17.5
Provision for income taxes (4) 89 70 28.0 344 346 (0.3)
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Net earnings $214 $122 75.8 $803 $631 27.3
==========================================================
Earnings per common share:
Diluted - net earnings $0.40 $0.22 81.8 $1.49 $1.17 27.4
==========================================================
===================================================================================================
Total shares - diluted (in millions) 535 536 534 534
===================================================================================================
</TABLE>
Depreciation and amortization are $103 million for 4Q99 and $401 million for
1999.
(1) For 1999, SUGEN R&D costs, the Sensus acquisition and termination of
certain other projects results in charges of $104 million ($75 million
after tax, or $0.14 per share). This represents a $72 million increase over
1998 SUGEN R&D costs ($47 million after tax, or $0.09 per share).
(2) 1998 numbers include $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.
(3) The 1998 amounts were depressed in the fourth quarter by the loss
recognized on the sale of the majority of the Nutrition business ($52
million before tax or $39 million after tax - $0.07 per share).
(4) The estimated annual effective tax rate for 1999 is 30%. The effective tax
rate for 1998 was 35%.
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