Pharmacia and Upjohn merge

Latest move in global shake-up creates pounds 4.5bn drugs group

NIGEL COPE

The consolidation of the world's pharmaceuticals industry took another leap forward yesterday when Pharmacia of Sweden and Upjohn of the United States announced they were to merge.

The combined group, which will be known as Pharmacia and Upjohn, will become one of the world's largest pharmaceuticals companies, with a turnover of about SKr50bn (pounds 4.5bn).

Shares in both companies had risen sharply in New York and Stockholm on Friday amid increasing speculation that a deal was imminent.

Announcing the merger at a news conference in Stockholm yesterday afternoon, the two companies seemed to signal further acquisitions when they said the merged group would be one of the most debt-free companies in the industry and therefore able to take advantage of further growth opportunities.

The combined corporate headquarters will be based in London and will have listings on the Stock Exchange in London, New York and Stockholm. The merger, which is on a 50-50 basis, is expected to be completed by November.

The announcement comes just two days after Rhone-Poulenc Rorer, the US drugs subsidiary of the French chemicals group Rhone-Poulenc, launched a pounds 1.7bn hostile bid for Fisons, the UK pharmaceuticals group. Fisons has rejected the offer and will this week step up the search for a rescue bidder. So far the list of potential white knights includes Glaxo-Wellcome, Zeneca, Astra of Sweden and Schering-Plough of the United States.

A spokesman for Fisons said yesterday that "several parties have already been on the phone", but that no discussions about possible rescue bids were yet scheduled to take place.

The Pharmacia-Upjohn merger brings together two powerful groups of roughly equal size. Pharmacia is a niche drugs group specialising in drugs for growth hormones, cataract surgery and smoking. It made profits of SKr5.32bn (pounds 475m) last year on sales of SKr26.5bn (pounds 2.4bn). It was privatised last year and has said it was keen to enhance its position in the US.

Upjohn's portfolio include Halcion sleeping tablets, Rogaine baldness treatment and a new anti-impotence drug called Caverject.

However, profits fell to $489m (pounds 326m) last year on sales which were down to $3.3bn (pounds 2.2bn) after the loss of important drugs patents. Four of its top drugs, generating sales of $1bn (pounds 666m) between them, have lost US patent protection in the last three years.

Rogaine was refused a licence by the American Food and Drug Administration, and Freedox, which is a treatment to help stroke and head injury victims recover, had its trials halted after safety problems.

These delays left Upjohn with a large hole in its development pipeline which may have prompted the Upjohn family, which still holds a significant stake in the company, to seek a merger.

Pharmacia said that its two main shareholders, Volvo, the car manufacturer, and the Swedish state, have both given the go ahead for the merger. Volvo has been keen to sell its stake in Pharmacia as part of a disposal programme of non-core businesses.

Volvo will exchange its 27.5 per cent stake in Pharmacia for a 13.8 per scent holding in the enlarged group. Shareholders in Upjohn will receive 1.45 new shares for every existing share.

There will also be significant scope for cost-cutting. The two companies estimate that the merger could save Skr3.5bn (pounds 312m) in costs. However, expenditure on research and development would still exceed SKr7bn (pounds 636m).

The deal is the latest in a flurry of take-overs and mergers in the world's pharmaceuticals market, which is still seen as a fragmented industry. Rhone Poulenc's pounds 1.7bn bid for Fisons may go through if no rescue bidder can be found.

Glaxo absorbed Wellcome in a pounds 9bn deal in January that created the world's largest drugs company. Zeneca, the UK drugs group, has been cited as both a potential bidder and bid target.

PROMOTED VIDEO
Arts and Entertainment
From Mean Girls to Mamet: Lindsay Lohan
theatre
Sport
Nathaniel Clyne (No 2) drives home his side's second goal past Arsenal’s David Ospina at the Emirates
footballArsenal 1 Southampton 2: Arsène Wenger pays the price for picking reserve side in Capital One Cup
News
Mike Tyson has led an appalling and sad life, but are we not a country that gives second chances?
peopleFormer boxer 'watched over' crash victim until ambulance arrived
Arts and Entertainment
Geena Davis, founder and chair of the Geena Davis Institute on Gender in Media
tv
News
i100
Travel
travelGallery And yes, it is indoors
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
tech
Arts and Entertainment
The Tiger Who Came To Tea
booksJudith Kerr on what inspired her latest animal intruder - 'The Crocodile Under the Bed'
News
i100
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
film
News
Alan Bennett criticised the lack of fairness in British society encapsulated by the private school system
peopleBut he does like Stewart Lee
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

IT Project manager - Web E-commerce

£65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Syria air strikes: ‘Peace President’ Obama had to take stronger action against Isis after beheadings

Robert Fisk on Syria air strikes

‘Peace President’ Obama had to take stronger action against Isis after beheadings
Will Lindsay Lohan's West End debut be a turnaround moment for her career?

Lindsay Lohan's West End debut

Will this be a turnaround moment for her career?
'The Crocodile Under the Bed': Judith Kerr's follow-up to 'The Tiger Who Came to Tea'

The follow-up to 'The Tiger Who Came to Tea'

Judith Kerr on what inspired her latest animal intruder - 'The Crocodile Under the Bed' - which has taken 46 years to get into print
BBC Television Centre: A nostalgic wander through the sets, studios and ghosts of programmes past

BBC Television Centre

A nostalgic wander through the sets, studios and ghosts of programmes past
Lonesome George: Custody battle in Galapagos over tortoise remains

My George!

Custody battle in Galapagos over tortoise remains
10 best rucksacks for backpackers

Pack up your troubles: 10 best rucksacks for backpackers

Off on an intrepid trip? Experts from student trip specialists Real Gap and Quest Overseas recommend luggage for travellers on the move
Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world