NEWS OF THE WEEK
DRUG INDUSTRY MERGERS Upjohn Pharmacia set, Fisons rebuffs bid
T
he world pharmaceutical industry continues to consolidate. But two multi-billion-dollar deals just announced involving so-called second-tier drug firms are diametrically opposed in nature. On the one hand, the boards of directors of the U.S.'s Upjohn and Sweden's Pharmacia unanimously approved a friendly merger. On the other hand, a $2.6 billion cash offer by Rhône-Poulenc Rorer to buy the U.K.'s Fisons was soundly rebuffed by Fisons. Rhône-Poulenc Rorer is 68% owned by French chemical maker Rhône-Poulenc. Unlike the previous Glaxo-Wellcome and American Home Products-American Cyanamid deals—which each yielded a company with more than $12 billion in annual sales—the new deals would create companies only half as big. In the first deal, a tax-free exchange of shares between Kalamazoo, Mich.based Upjohn and Stockholm-based Pharmacia will form a company—to be named Pharmacia & Upjohn Inc.— with combined 1994 sales of $7 billion. Based on prevailing exchange rates and closing stock values on Aug. 18, the merged firm would have an estimated market capitalization of more than $13 billion. The new firm would rank in the top five pharmaceutical companies in sales in Europe, and in the top 15 in North America.
Pharmacia & Upjohn Inc. at a glance Sales: $7 billion in 1994 igs: $1.4 billion in 1994 Headquarters: London (main); Kalamazoo, Mich.; Stockholm; Milan 34,500 worldwide Prescription and nonprescription drugs, animal pharmaceuticals, specialty chemicals
6
AUGUST 28,1995 C&EN
Zabriskie: uniting R&D strengths Automobile producer Volvo and the Swedish government, owners of 27.5% and 14.1% of Pharmacia's stock, respectively, have already okayed the merger. But the deal also requires approval by a majority of Upjohn shareholders and 90% of Pharmacia shareholders. The companies expect the merger to be complete by late November. "The new company will be able to take full advantage of uniquely complementary geographic reach, product portfolio, pipeline, and R&D strengths/' says John L. Zabriskie, Upjohn's chairman and chief executive officer and the proposed president and CEO of Pharmacia & Upjohn. "Uniting the respective R&D strengths of Pharmacia and Upjohn in molecular biology, chemistry, pharmacology, and other key disciplines will create a powerful engine for innovation and new product development." Under terms of the merger, each company will contribute an equal number of members to the board of directors and senior management. Jan Ekberg, president and CEO of Pharmacia, is the pro-
posed chairman of the combined firm. Goran Ando, Pharmacia's deputy CEO, and Robert C. Salisbury, chief financial officer at Upjohn, are proposed as executive vice presidents. The new company will be based in London, with operational headquarters in Stockholm, Kalamazoo, and Milan. The two partners expect the merger to reduce costs by $500 million, mainly by trimming more than 4,000 employees from their combined staffs of 34,500 worldwide. The cutbacks will affect both companies equally, cross all operations, and be completed within two years. The new firm will spend $1.1 billion on R&D in 1996 and more than $3 billion through 1998. In contrast to such harmony between merger partners, Fisons' management has advised its shareholders not to accept Rhône-Poulenc Rorer's hostile takeover bid. "Although we have recognized that a bid for Fisons could be made at any time . . . the bid from RPR is not welcome, and the price offered will not command the board's support," says Stuart Wallis, Fisons' chief executive. In July, merger talks broke off between Fisons and Medeva, another U.K.-based drug firm.
Rhône-Poulenc Rorer and Fisons at a glance Sales: $4.2 billion and $1.9 billion, respectively $485 million and $83 million, respectively Headquarters: Collegeville, Pa., and London, respectively 22,500 worldwide and 11,569 worldwide, respectively Prescription drugs for Rhône-Poulenc Rorer; prescription drugs, scientific instruments (sale pending), lab supplies, horticulture for Fisons
Fisons says Rhône-Poulenc's $3.71 per-share price "seriously undervalues" the shares. Investors would seem to agree: After announcement of the bid on Aug. 18, they sent Fisons shares up 27% from the previous day's close, to $4.08 on the London stock exchange. However, contends Michel de Rosen, president and CEO of parent RhônePoulenc, "We believe that the offer represents a significant opportunity for Fisons shareholders to realize full value today for their investment in a company with a very uncertain future." Indeed, he stresses, "Fisons' strategy as an independent marketing entity with no research capability will not produce sustainable growth." Rhône-Poulenc Rorer seems to particularly covet Fisons' asthma/allergy drug line—which had $511 million in sales in 1994, according to Rhône-Poulenc Rorer.
"The [merged companies] would increase our competitive mass through a more comprehensive product portfolio in asthma/allergy and improved geographic presence," de Rosen notes. Rhône-Poulenc Rorer had sales of $4.2 billion in 1994. Fisons had sales of $1.9 billion--40% from its lab supply business, 38% from pharmaceuticals, and 21% from instruments. Beginning in early 1995, Fisons adopted a strategy of focusing on its pharmaceutical business. It offered for sale its scientific instruments, lab supply, and horticulture businesses. In March, it reached a still-pending agreement to sell its instruments business to Santa Fe, N.M.-based Thermo Instrument Systems for $325 million. And last March, Fisons sold its R&D operations for $320 million to Astra, a Swedish drug firm.
DuPont attorney Dow N. Kirkpatrick Π of Atlanta-based Alston & Bird coun tered that plaintiffs' lawyers also had soil samples but never submitted them for testing—instead relying on DuPont's results. And he defended Alta's soil analysis. "We were aware of the sus pected positives, but we were also told that confirmational analysis was re quired to make sure about these find ings. That took place, and the final re port was issued," indicating no sulfonyl urea contamination. Marc Reisch
Novel process yields dendritic polymers
Cornell University chemists have de vised a relatively simple method to make inexpensive new polymeric ma terials from commercially available monomers. The method, called self-condensing suits that have not yet gone to trial. But vinyl polymerization, offers a versatile observers say that if the ruling is upheld, approach to making dendritic poly it might provide a basis for plaintiffs to mers—polymers with highly branched reopen some 400 suits that have been architectures. Potential uses include adsettled out of court, are before appeals hesives, lubricants, coatings, catalysts, and drug delivery systems. courts, or are slated for retrial. "This opens the way for the prepara The $115 million fine relates to a $430 million suit brought by four commercial tion of totally new globular polymers plant growers that DuPont settled out of from simple monomers that are more court in 1993 during jury deliberations readily accessible and provide better for $4.25 million (C&EN, Aug. 23, 1993, properties than previous monomers page 4). Last March, the growers' attor- used in polycondensations," says chem neys asked Judge Elliott to consider new istry professor Jean M. J. Fréchet, who leads the Cornell team. Fréchet notes this evidence. Summing up the evidence at hear- is the first synthesis of a hyperbranched ings in May, plaintiffs' attorney Rich- dendritic structure by a vinyl polymerard Gill of Copeland, Franco, Screws & ization process. The work, funded by Gill in Montgomery, Ala., charged that the Office of Naval Research and the during the original trial DuPont delib- National Science Foundation through erately concealed raw test data of nurs- Cornell's Materials Science Center, was ery and farm soil. That data, he said, published in last week's Science [269, suggested that the crop damage was 1080 (1995)]. caused by Benlate contaminated with The method uses an external stimuDuPont's sulfonylurea herbicide, which lus such as a Lewis acid to create an acwas being made at the same DuPont fa- tivated (radical or ionic) vinyl monomer. cility as Benlate. Self-condensing polymerization is initiGill also alleged that Alta Analytical ated by reaction of the monomer at the Laboratory—an independent lab in El activated site with the double bond of Dorado Hills, Calif., working for Du- another monomer. The dimer formed Pont—manipulated results to show no has a double bond, an initiating center, sulfonylurea contamination. "They and a newly formed propagating cenchanged the test methodology. They ter. The dimer then reacts with other changed the solvents. They homoge- activated monomers, dimers, and, evennized the samples by mixing them with tually, larger oligomers to form high more dirt. And they came back and molecular weight polymers with hypersaid, 'Well, now . . . we don't find it.' " branched structures. George Peaff
CourtfinesDuPont for hiding Benlate data A federal judge in Columbus, Ga., has fined DuPont $115 million for allegedly concealing test data and misrepresenting test results in a trial that ended two years ago over claims of crop damage by its Benlate fungicide. But in a novel step, Judge J. Robert Elliott of the U.S. District Court for the Middle District of Georgia ruled DuPont can reduce the unusually large fine by $101 million if it runs full-page advertisements in major U.S. newspapers admitting its wrongdoing. DuPont responds that it never withheld evidence and that the judge misunderstands the nature of scientific evidence and chemical analysis. Company Chairman Edgar S. Woolard Jr. says: "No DuPont employees nor any of the company's attorneys ever concealed or withheld any data illegally or inappropriately. We will appeal this unreasonable decision." A company spokesman adds that DuPont will in part base its appeal—in the U.S. Court of Appeals for the 11th Circuit, in Atlanta—on charges that Judge Elliott has shown bias by ruling against DuPont on essentially every issue since pretrial hearings. DuPont already has spent about $1 billion on Benlate-related costs since problems with the fungicide surfaced in 1991. But the stakes could mount if the appeal goes against the company. The spokesman believes the judge's finding will not influence the 200 Benlate
AUGUST 28,1995 C&EN
7
