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Pfizer, Inc.
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Pharmacia Corporation
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For Immediate Release Contact: Andy McCormick
July 15, 2002 Pfizer Inc
212-573-1226
Paul Fitzhenry
Pharmacia Corp.
908-901-8770
PFIZER TO ACQUIRE PHARMACIA CORPORATION FOR $60 BILLION IN STOCK,
STRATEGICALLY POSITIONING COMPANY FOR LONG-TERM LEADERSHIP IN
RAPIDLY CHANGING PHARMACEUTICAL INDUSTRY
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FAST-GROWING COMPANIES HAVE PARTNERED SINCE 1998 TO MAKE
ARTHRITIS MEDICINE CELEBREX THE MOST SUCCESSFUL NEW
PHARMACEUTICAL LAUNCH EVER; COMBINED COMPANY EXPECTED TO HAVE AS
MANY AS 12 PRODUCTS WITH ANNUAL REVENUES GREATER THAN $1 BILLION
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COMBINED R&D PIPELINE WILL HAVE NEARLY 120 NEW CHEMICAL ENTITIES
IN DEVELOPMENT AND OVER 80 IN-LINE PRODUCT ENHANCEMENT PROGRAMS;
PFIZER THERAPEUTIC PORTFOLIO TO BE ENHANCED BY PHARMACIA'S
STRENGTH IN ONCOLOGY, OPHTHALMOLOGY AND ENDOCRINOLOGY
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TRANSACTION EXPECTED TO BE NON-DILUTIVE TO ADJUSTED DILUTED
EARNINGS PER SHARE IN 2003 AND ACCRETIVE THEREAFTER; PEAK YEAR
SYNERGIES OF $2.5 BILLION TO BE ACHIEVED BY 2005
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PFIZER TO EXPAND EXISTING SHARE PURCHASE PROGRAM TO $16 BILLION;
PHARMACIA TRANSACTION IS MAJOR REDEPLOYMENT OF
PFIZER ASSETS INTO CORE PHARMACEUTICALS BUSINESS
NEW YORK, N.Y. AND PEAPACK, N.J., JULY 15 -- Pfizer Inc (NYSE:PFE) and Pharmacia
Corporation (NYSE: PHA) jointly announced today that they have signed a
definitive agreement providing for Pfizer to acquire Pharmacia in a stock-for-
stock transaction valued at $60 billion, expanding the company's core strengths
in pharmaceuticals and health care.
Pharmacia also announced that its Board of Directors intends to proceed with its
previously announced spin-off of its remaining 84% ownership of Monsanto (NYSE:
MON) to its current
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shareholders. After the Monsanto spin-off, Pfizer will exchange 1.4 shares of
Pfizer common stock for each outstanding share of Pharmacia stock in a tax-free
transaction valued at $45.08 per Pharmacia share, based on Pfizer's July 12
closing stock price of $32.20. This transaction represents a 44% premium based
on the average closing prices of the two stocks over the last 30 days, adjusted
for the Monsanto spin-off.
"This is an extraordinary opportunity to combine two of the fastest-growing and
most innovative pharmaceutical companies and to position Pfizer for sustained
long-term leadership of the global pharmaceutical industry," said Hank
McKinnell, chairman and chief executive officer of Pfizer. "By combining with
Pharmacia, we are ensuring that our core capabilities in the discovery,
development and commercialization of new medicines are strong around the world.
"Our industry is changing rapidly. Remarkable advances in the scientific
understanding of the origins of disease will sharply increase drug discovery
targets and will create major opportunities for Pfizer. But it is increasingly
costly to fund the high-risk and long-term research required to develop
pharmaceutical products. At the same time, payers and providers want high value
and affordable medicines.
"We intend to meet these challenges head on. Our new company will be positioned
to deliver a stream of innovative new products and cost-effective health care
solutions. With Pharmacia, we will have the products, pipeline, scale, and
financial flexibility to extend our leadership."
"Combining Pfizer with Pharmacia is a strategic opportunity that immediately
creates a global pharmaceutical company with unsurpassed resources and
capabilities," said Fred Hassan, chairman and chief executive officer of
Pharmacia Corporation.
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"Our companies are already highly effective partners as shown by the
extraordinary success of the COX-2 products. A strategic combination with the
industry leader, Pfizer, will now give us the opportunity to maximize the
potential of both our current products and our pipeline.
"We are proud of our Pharmacia people, whose world-class capabilities have
enabled us to deliver outstanding performance and value. We are also pleased
that our shareholders will receive not only an immediate premium for their
shares, but also the opportunity to participate in Pfizer's long-term growth
with its truly outstanding product line and exciting pipeline."
Upon closing of the transaction, Mr. Hassan will become Vice Chairman of Pfizer,
assisting with integration and corporate strategy, and a member of the Pfizer
Board of Directors.
Dr. McKinnell cited other key attributes of the combined company:
o A product portfolio unequalled in depth and breadth.
---------------------------------------------------
- The companies' combined product portfolios are highly complementary.
- By combining with Pharmacia, Pfizer will have the opportunity to
support as many as 12 products with annual revenues greater than $1
billion.
- Category leadership includes key products in cardiovascular,
endocrinology, neuroscience, arthritis and inflammation, infectious
diseases, urology, ophthalmology and oncology.
- The combined portfolio will have a strong patent position.
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o A stronger pipeline and expanded R&D program.
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- The combined company will have an R&D pipeline containing nearly 120
new chemical entities in development and over 80 additional projects
for product enhancements.
- The companies' combined R&D budget for 2002 exceeds $7 billion, making
it by far the largest privately funded biomedical research
organization in the world.
- With Pharmacia, Pfizer plans to file 20 new drug applications with
global regulatory authorities over the next five years.
- Pfizer's late-stage pipeline will be enhanced by major Pharmacia
products that include eplerenone, a new category of treatment for
cardiovascular diseases; parecoxib, the first injectable selective
COX-2 inhibitor; and CDP-870 for rheumatoid arthritis.
o Enhanced scale and financial flexibility.
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- Pfizer and Pharmacia will have combined annual revenues for 2002 of
approximately $48 billion, including $39 billion in prescription
sales.
- Already the leading pharmaceutical company in the United States and
Canada, Pfizer with Pharmacia will move from fourth to first in
Europe; from third to first in Japan; and from fifth to first in Latin
America in pharmaceutical sales.
- Synergies will be phased in, starting at $1.4 billion in 2003 and
increasing to $2.2 billion in 2004 and $2.5 billion in 2005.
"By combining Pfizer with Pharmacia, we will have the financial and human
resources to bring new product opportunities to the market and to fund them to
their full potential. We met or
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exceeded all of our targets in the integration of Warner-Lambert, and we
anticipate another successful integration given that our two organizations have
worked so successfully on Celebrex and Bextra," Dr. McKinnell said.
KEY PRODUCT HIGHLIGHTS
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Karen Katen, executive vice president of Pfizer and president of Pfizer's global
pharmaceutical business, said: "The combination of Pharmacia's portfolio with
Pfizer's brand-name franchises represents a superb opportunity to strengthen our
relationships with prescribing physicians and continue patient education and
outreach focused on helping people live longer and healthier lives. With
Pharmacia, we are ensuring that millions of patients around the world will
continue to benefit from our skill in developing therapies for cancer,
cardiovascular disease, mental health, respiratory and infectious diseases, eye
disease, and many other areas of medical need. Our medical mission has never
been more important, and as we look ahead with excitement and anticipation, I am
especially proud of Pfizer people and their dedication to the needs of
patients."
Ms. Katen reviewed the key new products that will be added to Pfizer's portfolio
of major products:
o In 1999, Pfizer and Pharmacia jointly introduced the anti-inflammatory
Celebrex, the first-in-class selective COX-2 inhibitor. It was the most
successful new product launch ever in the industry. This medicine has
become the number one branded treatment for arthritis in the world, and
it has been prescribed to more than 35 million patients worldwide. With
its recent approval in the U.S. for acute pain and for dysmenorrhea,
Celebrex has the most complete
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range of approved indications among selective COX-2 inhibitors on the
market today.
o Pfizer and Pharmacia sales representatives began promoting a second
selective COX-2 inhibitor, Bextra, in April, 2002. Together, Celebrex and
Bextra now account for over 23% of new NSAID prescriptions. In addition,
launches of Bextra and parecoxib (branded Dynastat in Europe) are in
progress in a number of international markets. Pharmacia is currently
conducting studies to support the NDA filing for parecoxib in the U.S.
o Pharmacia's Xalatan (latanoprost ophthalmic solution) lowers eye pressure
in patients with open-angle glaucoma not controlled by other medications.
This revolutionary treatment for glaucoma is now the leading ophthalmic
prescription medicine in the world.
o Pharmacia's Genotropin, the world's top-selling recombinant growth
hormone, is indicated for the treatment of children and adults with
growth hormone deficiency.
o Pharmacia also has world-class oncology products, which include Camptosar
for treatment of metastatic colorectal cancer as well as therapies for
breast cancer.
Most major Pfizer products are patent protected through this decade. For
example, U.S. patents for Lipitor expire in 2010, and for Viagra in 2011.
Pharmacia's most significant U.S. patents expire in the next decade (Celebrex in
2013, Bextra in 2015).
R&D HIGHLIGHTS
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Peter B. Corr, Ph.D., senior vice president science and technology for Pfizer,
said: "We will sharpen the focus of our R&D efforts to concentrate on compounds
that can be differentiated as truly innovative in an increasingly competitive
marketplace, deliver our joint late-stage programs to
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registration and build our discovery and exploratory human development programs
for the future. The practical impact of combining with Pharmacia is very simple:
we will have many more candidates, more financial flexibility and human
resources to support them, and the best chance to find the maximum number of
innovative medicines. We will also expand our presence into new therapeutic
categories, including the addition of strong oncology and ophthalmology products
to Pfizer's existing R&D programs in these areas. With our expanded global
scientific and medical resources, I am very confident that we will deliver more
and more medical breakthroughs to patients who look to us for new treatments and
cures for a host of serious diseases."
Pharmacia's pipeline includes treatments for cardiovascular disease, CNS
disorders, ophthalmic conditions, infectious diseases, urology, endocrinology,
oncology and arthritis/inflammation. Pharmacia has four compounds undergoing
regulatory review and five Phase III candidates.
FINANCIAL INFORMATION
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David Shedlarz, executive vice president and chief financial officer of Pfizer,
said: "This acquisition underscores our commitment to redeploying our
substantial financial resources to fund growth opportunities in our core
pharmaceuticals business. Our combination with Pharmacia will greatly strengthen
our global pharmaceuticals business and through it we will gain valuable
efficiencies and productivity improvements."
Mr. Shedlarz cited the following other factors:
o Pfizer's shareholders will own approximately 77% of the combined company,
and Pharmacia's shareholders will own approximately 23%. The transaction
is expected to close by year-end 2002, subject to the approval by
shareholders of
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both companies, necessary governmental and regulatory approvals and other
usual and customary closing conditions.
o Excluding the effects of purchase accounting and merger-related expenses,
the transaction is expected to be non-dilutive to Pfizer's 2003 adjusted
diluted earnings per share and $0.06 accretive in 2004. (Adjusted
earnings is defined in Appendix A.)
o In a second-quarter earnings report released this morning, Pfizer
reaffirmed its guidance of double-digit revenue growth in 2002. The
company refined its guidance for 2002 diluted EPS, excluding the
cumulative effect of an accounting change, certain significant items and
merger-related costs, to $1.58, or 21% growth, which is within the range
of earlier guidance. Pharmacia released a statement this morning that
expresses comfort with consensus estimates for the second quarter 2002,
and reaffirms guidance of $1.52-1.57 EPS for the full year 2002.
o From 2002 to 2004 on a stand-alone basis, Pfizer expects compounded
annual revenue growth of 11%, growth in net income of 14%, and growth in
diluted EPS of 16%, excluding the cumulative effect of the change in
accounting principle, certain significant items and merger-related costs.
o On a pro forma basis, the combined entity will have $11.9 billion in
adjusted earnings and $47.9 billion in revenues in 2002. It is forecast
to have a compounded annual growth from 2002 to 2004 of 10% for revenues
and 19% for adjusted earnings. Pro forma revenue of the entity is
forecast to increase to $57.8 billion, and adjusted earnings to $16.7
billion ($2.18 per share), by 2004. Adjusted diluted earnings per share
of $2.18 in 2004 are $0.06 higher than Pfizer's stand-alone estimate of
$2.12. (See Appendix B.)
o Indicative of the exceptional financial strength of the company, Pfizer
said that it would expand its previously
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announced share repurchase program from $10 billion to $16 billion via
open market purchases, as circumstances and prices warrant, as well as
accelerate the buyback period with the anticipation of completing it in
2003.
Dr. McKinnell concluded, "This is a major step toward fulfilling our mission of
becoming the most valued company to patients, customers, colleagues, investors,
business partners, and the communities where we work and live. As a major global
pharmaceutical company, we understand the responsibilities of leadership, and we
will continue to address affordability and access issues. Our continuing
outreach will include innovative policy solutions, as well as expanding
public/private partnerships that address global public health issues.
"By joining with Pharmacia, we will remain at the forefront of medical
innovation, working on behalf of patients to ensure they receive the benefits of
breakthrough medicines."
Pfizer invites investors and the general public to listen, at www.pfizer.com, to
a webcast of a conference call with investment analysts at 11:00 a.m. EDT today,
15 July.
Pfizer was advised by Lazard and Bear Stearns & Co. Inc. Pharmacia was advised
by Goldman, Sachs & Co.
Cadwalader, Wickersham and Taft provided legal counsel to Pfizer and Sullivan &
Cromwell provided legal counsel to Pharmacia.
DISCLOSURE NOTICE: THE INFORMATION CONTAINED IN THIS DOCUMENT IS AS OF JULY 15,
2002. THE COMPANY ASSUMES NO OBLIGATION TO UPDATE ANY FORWARD-LOOKING STATEMENTS
CONTAINED IN THIS DOCUMENT AS A RESULT OF NEW INFORMATION OR FUTURE EVENTS OR
DEVELOPMENTS.
This document and the attachments contain forward-looking information about the
Company's financial results and estimates,
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business prospects, and products in research that involve substantial risks and
uncertainties. You can identify these statements by the fact that they use words
such as "anticipate," "estimate," "expect," "project," "intend," "plan,"
"believe," and other words and terms of similar meaning in connection with any
discussion of future operating or financial performance. Among the factors that
could cause actual results to differ materially are the following: the success
of research and development activities and the speed with which regulatory
authorizations and product launches may be achieved; competitive developments
affecting our current growth products; the ability to successfully market both
new and existing products domestically and internationally; difficulties or
delays in manufacturing; trade buying patterns; ability to meet generic and
branded competition after the expiration of the Company's patents; trends toward
managed care and health-care cost containment; possible U.S. legislation
affecting pharmaceutical pricing and reimbursement or Medicare; exposure to
product liability and other types of lawsuits; contingencies related to actual
or alleged environmental contamination; the Company's ability to protect its
intellectual property both domestically and internationally; interest rate and
foreign currency exchange rate fluctuations; governmental laws and regulations
affecting domestic and foreign operations, including tax obligations; changes in
generally accepted accounting principles; any changes in business, political,
and economic conditions due to the threat of future terrorist activity in the
U.S. and other parts of the world, and related U.S. military action overseas;
growth in costs and expenses; changes in our product mix; and the impact of
acquisitions, divestitures, restructurings, product withdrawals, and other
unusual items, including our ability to obtain the anticipated results and
synergies from our announced proposed acquisition of Pharmacia and the increased
uncertainty created by the integration of the two businesses, as well as the
timing and success of the announced exploration of strategic options of the
Adams, Schick-Wilkinson Sword, and Tetra businesses. A further list and
description of these risks, uncertainties, and other matters can be found in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2001, and in its periodic reports on Forms 10-Q and 8-K (if any).
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APPENDIX A. ACCOUNTING INFORMATION - ADJUSTED EARNINGS
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GAAP NET INCOME
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+ Cumulative effect of change in accounting principle1
+ Certain significant items1
+ Effect of purchase price allocations on assets
o Write-off of in-process R&D
o Amortization of identifiable intangibles
o Effect of write-up of assets to fair market value
+ Merger-related costs
o Integration expenses
o Restructuring charges
= ADJUSTED EARNINGS
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1 See Pfizer Second Quarter Earnings Release.
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APPENDIX B. FINANCIAL INFORMATION
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2002-2004
2002 2003 2004 CAGR
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PFIZER
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Total Revenues $35.1 $39.0 $42.9 11%
Net Income(1) $ 9.8 $11.3 $12.7 14%
Diluted EPS(1) $1.58 $1.84 $2.12 16%
COMBINED ENTITY
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Total Revenues $47.9(2)(+) $52.8(2) $57.8(2) 10%(2)
Adjusted Earnings(3) $11.9(+) $14.4 $16.7 19%
Adjusted Diluted EPS(3) --- $1.84 $2.18
1 Excludes the cumulative effect of change in accounting principle, certain
significant items and merger-related costs.
2 Adjusted to reflect the elimination of the impact of the COX-2 co-promotion
agreement.
3 As defined in Appendix A.
+ Pro forma shown for comparison purposes only; closing anticipated by year-end
2002.
FORWARD-LOOKING INFORMATION
Certain statements contained in this document are "forward-looking statements"
provided under the "safe harbor" protection of the Private Securities Litigation
Reform Act of 1995. These statements are made to enable a better understanding
of the Company's business, but because these forward-looking statements are
subject to many risks, uncertainties, future developments and changes over time,
actual results may differ materially from those expressed or implied by such
forward-looking statements. Examples of forward-looking statements are
statements about anticipated financial or operating results, financial
projections, business prospects, future product performance, future research and
development results, anticipated regulatory filings and approvals, and other
matters that are not historical facts. Such statements often include words such
as: "believes", "expects", "anticipates", "intends", "plans", "estimates", or
similar expressions.
These forward-looking statements are based on the information that was currently
available to the Company, and the expectations and assumptions that were deemed
reasonable by the Company, at the time when the statements were made. The
Company does not undertake any obligation to update any forward-looking
statements in this Report or in any other communications of the Company, whether
as a result of new information, future events, changed assumptions or otherwise,
and all such forward-looking statements should be read as of the time when the
statements were made, and with the recognition that these forward-looking
statements may not be complete or accurate at a later date.
Many factors may cause or contribute to actual results or events being
materially different from those expressed or implied by such forward-looking
statements. Although it is not possible to predict or identify all such factors,
they may include the following: competition for our products; pharmaceutical
pricing, price constraints and other restrictions on the marketing of products
imposed by governmental agencies or by managed care groups, institutions and
other purchasing agencies; product discovery and approval; product recalls or
withdrawals; manufacturing quality issues with respect to our products;
compliance with Current Good Manufacturing Practices and other applicable
regulations and quality assurance guidelines; the company's ability to secure
and defend its intellectual property rights; product liability claims, antitrust
litigation, environmental concerns, and commercial disputes; social, legal,
political and governmental developments; changes in foreign currency exchange
rates or in general economic or business conditions including inflation and
interest rates; acquisitions, divestitures, mergers, restructurings or strategic
initiatives that change the Company's structure; business combinations among the
Company's competitors and major customers; changes to accounting standards or
GAAP.
Readers are also urged to carefully review and consider the various disclosures
in Pharmacia's various SEC filings, including but not limited to Pharmacia's
Annual Report on Form 10-K for the year ended December 31, 2001, and Pharmacia's
Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2002.
This release may be deemed to be solicitation material in respect of Pfizer's
proposed merger with Pharmacia. Pfizer will be filing a registration statement
on Form S-4, containing a joint proxy statement/prospectus for Pfizer and
Pharmacia, and other documents with the Securities and Exchange Commission
("SEC"). INVESTORS AND SECURITYHOLDERS ARE URGED TO READ THE REGISTRATION
STATEMENT CONTAINING THE JOINT PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT
DOCUMENTS FILED OR THAT WILL BE FILED WITH THE SEC WHEN THEY BECOME AVAILABLE
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Investors and security holders
will be able to receive the registration statement containing the joint proxy
statement/prospectus and other documents free of charge at the SEC's web site,
www.sec.gov or from Pharmacia Investor Relations at 100 Route 206 North,
Peapack, New Jersey 07977. Pharmacia and its directors and executive officers
and other members of management and employees may be deemed to be participants
in the solicitation of proxies in respect of the proposed transaction.
Information regarding the interests of Pharmacia's directors and executive
officers in the proposed merger will be included in the final joint proxy
statement/prospectus.