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Pharmacia Corporation
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TALKING ABOUT OUR BUSINESS -- TRANSFORMING FOR THE FUTURE
- 2002 July 15
To All Pharmacia Corporation People Worldwide
Dear Colleagues,
In 1985, Searle was acquired by Monsanto. In 1995, Pharmacia & Upjohn merged. In
2000, Monsanto merged with Pharmacia & Upjohn to become the new Pharmacia. Also,
in 2000 we did a partial IPO of our ag business. All these were among the bigger
transforming decisions to prepare for the future.
Today we are announcing another transformational decision for our company. This
decision will help prepare for the new future facing the whole pharmaceutical
industry. We plan to combine with Pfizer. This will create the largest and
strongest pharmaceutical company in all major regions of the world. This
combined company will be better able to handle the growing R&D risks and the
pressures on our industry.
You will find the press release announcing this action on the corporate home
page at: [insert link here].
In this merger transaction, Pharmacia Corporation is expected to be acquired by
Pfizer, following the spin-off of Monsanto. The price will be 1.4 shares of
Pfizer stock for each share of Pharmacia. This represents a 52 percent premium
on Pharmacia's pharmaceutical stock price as of the close of business on Friday,
July 12, and a 44 percent premium on a 30-day basis. This large premium -- at a
time when there is a downward spiral in the overall stock market -- reflects
Pfizer's confidence in the quality of Pharmacia as a company.
The deal still needs to be approved by various regulatory authorities, and also
by a vote of shareholders of both companies. In the current environment, no deal
can be regarded as certain until it is finalized. Our best estimate is that the
transaction will be completed four to six months from now. We expect to complete
the Monsanto spin-off before this transaction occurs.
You will have many, many, questions about this action and what it will mean. At
this time, we simply do not know the answers to many of these questions. This is
almost always the case in big and complex integrations.
So in this message I will tell you about the rationale for going ahead with this
decision. I will outline some of the implications of the integration process
that we do know at this stage. And I will tell you how we will want to operate
as we go forward -- as well as what we will ask of you over the coming months.
THE RATIONALE FOR OUR DECISION
Let me begin with the rationale for our agreement with Pfizer.
Since the dramatic turnaround of Pharmacia & Upjohn in 1998 and the merger with
Monsanto in 2000, we succeeded in creating a bold new business model in our
industry.
At Pharmacia, we have uniquely molded an amalgam of diverse smaller and weaker
companies into an aligned, high-performance global competitor. Our company is
now characterized by strong central research and marketing, a powerful U.S.
operation and growing strength in global markets. We have achieved fast
earnings-per-share growth since our merger.
We have transformed former niche medicines such as Detrol, Xalatan and Camptosar
into growth engines that are on their way to becoming billion dollar
blockbusters. We have created and brought
to market Zyvox, the first in a new class of antibiotics in over 30 years. We
have succeeded in our previously announced Monsanto merger goal of recharging
our coxib franchise -- and in the face of many skeptics, we have decisively
pulled ahead of Merck as the global leader in this fiercely contested COX-2
arena. We are achieving hundreds of other successes in every area of our
business. We are doing all this through a powerful new company culture based on
collaborative behaviors and core values; a culture that focuses our work
intently on our customers and patients.
So we can all take great pride in what we are achieving. We are building a
world-class global team. Together, we have significantly improved health and
wellness around the world. We have written a new chapter in business history.
However, recent growing pressures in our industry have caused all large
companies to re-think their business models. In the past, we had rejected
informal approaches from various companies. When Pfizer recently approached us
with an offer that we viewed as compelling for our shareowners, we concluded
that we should accept it.
With this transaction, the large and complex COX-2 alliance will be simplified
and run by a single management team. Pfizer will gain operational access to a
key market of the future -- cancer. Pfizer will also gain access to key
specialty businesses such as ophthalmology (through Xalatan) and endocrinology
(though Genotropin and Somavert). Pharmacia will be able to maximize the value
of its key primary care products, such as eplerenone. Thanks to the excellent
global infrastructure of the combined company, there are many, many other
examples where one plus one will equal more than two.
In recent months, we have seen a flood of examples of bad corporate governance
and the harm it has inflicted on millions of shareowners. Both Pharmacia and
Pfizer pride themselves in having high governance standards, with Boards who are
aware of their primary duty to maximize shareholder value. By agreeing to this
transaction, our Board is convinced that we are doing the right thing for our
owners -- owners who include tens of thousands of small investors and retirement
and savings funds representing millions of retirees and working people,
including Pharmacia employees.
I should also be frank about some alternative scenarios that we could
contemplate in the current environment. A merger of equals, or a takeover of
another company by ourselves, simply would not be realistic today: The costs and
value erosion would be more than shareowners would accept. Such moves could also
not rule out a hostile bid for our company -- a scenario that probably would not
be good for our stakeholders.
ABOUT THE ACQUISITION AND INTEGRATION PROCESS
So we made the right decision, but it was not an easy one. It was not easy
because our acquisition by Pfizer means that we relinquish control of Pharmacia.
Change is always unsettling. It is especially stressful when the outcomes are
not clear, and when we do not call all the shots. However, change can present
new horizons and opportunities for renewal. Each of us will need to observe what
happens -- and then make our appropriate career decisions.
In my case, you should know that I have been requested to stay back after the
merger transaction for at least a year as the Vice Chairman for the merged
company followed by a consultancy. I have accepted this because I know I can
help the combined company achieve its very ambitious goals. The compensation for
this work has been presented to both Boards in my absence and approved as
reasonable and without conflict of interest. I will see my primary
responsibility within the combined company as assuring that the very special
assets of Pharmacia are recognized and maximized. This includes the exceptional
assets we have in our people.
However, it is important to acknowledge that Pfizer's current leadership team
will primarily be guiding the course of the combined company. I have enormous
respect for Hank McKinnell and his top
management team. Their consistent success record confirms that they are
competent, focused and committed. The combined company will benefit from the new
addition of talent from Pharmacia.
Many have already asked me how I feel. What I write or say cannot fully express
my emotions. I feel frustrated about not being able to fully complete the work
we had all started -- to become that very special company that we had
envisioned.
At 56, I would have liked to serve as your CEO for a longer period of time. It
has been an honor and privilege to lead you and you can all continue to expect
me to give my best through the completion of the merger transaction -- and
thereafter as Vice Chairman. I feel sad that many good people will get displaced
and will have to plan and execute their next career moves.
I do feel good that we did succeed in creating that special Pharmacia culture
that our people are justly proud of. It is also with personal satisfaction, that
I can tell you that our Board did the best it could in approving appropriate
employee benefit measures in order to provide the best options for our people
during a difficult and challenging time.
Given the situation, I also take comfort in knowing that Pharmacia is joining an
exceptionally high-quality company like Pfizer, and that the new company will
become not only the envy of our industry -- but also the most innovative
provider of health and wellness for millions around the world.
As we go forward in the four to six months prior to the anticipated transaction,
we will work with our Pfizer counterparts on integration plans. At this stage,
no plans have been finalized and no decisions have been made.
What can be expected is that most Pharmacia people will continue in their work.
Others however may change their roles, or there may not be a role for them at
all. At this time, it is important to know that all of the Pharmacia benefit
programs and employment agreements will be honored by the terms of the merger
agreement. We believe that the overall employee benefit measures we have acted
upon are much better than most other companies.
HOW WE WILL OPERATE GOING FORWARD -- AND WHAT WE ASK OF YOU
As we go forward over the next months until this planned transaction is
completed, we must continue to stay focused on our jobs, on our projects, on our
customers, and on our patients. Looking longer term, we also want to do the
right things to assure the success of the combined company. This is important
because doctors and patients will keep counting on us to deliver the quality
medicines they need. It is also important to ourselves. We all take pride in our
work, in our professionalism, in our executional excellence and in the
high-quality company we have created. It is a matter of pride and confidence to
continue.
Beginning today you will see and hear a lot of speculation about what will
happen after this deal is completed. There will be speculation about site
decisions, about project decisions, and about people decisions. We would ask you
to resist speculation and rumors. By focusing on facts and actual decisions, you
will reduce stress levels and make better decisions and choices yourself.
Over the next four to six months until we close the transaction, we ask you to
put your priority on these four specific agenda items:
1. Keep doing your job exquisitely well. Doctors and patients are counting on
you.
2. Continue to live by our best-managed behaviors and our company values (five
BmB's and the four C's).
3. Take extra care about the people around you. Your positive attitude and
empathy will make a real difference -- and it will be infectious. Remember,
success begins with attitude, attitude, attitude.
4. Avoid negative behavior and acquisition gridlock. Of course, you will want to
discuss the many aspects of this major company action with your colleagues. But
we should resist the temptation to turn discussion into complaining and other
energy-draining behavior. We should also resist gridlock in actions and
programs. It is important to ask for directions, rather than to assume someone
will give direction. It is also important to retain our cool competence and
professionalism even at times when we are stressed by uncertainty.
Earlier in this message, I said there are many things that are not yet decided
in this acquisition process. I do promise however that we will keep you as fully
informed as possible as decisions are made and actions are taken.
Finally, let me say a personal thank you. Each one of you has been part of
making Pharmacia the great company that we are today. You did so through
individual acts of passion, courage and tenacity. I am proud of you. I know that
you will not stop.
Sincerely,
Fred Hassan
Chairman and Chief Executive Officer
Contact Fred Hassan with your comments or questions at:
mailto:fredhassan.direct@pharmacia.com
The Agreement and Plan of Merger, dated as of July 13, 2002, between Pfizer
Inc., Pilsner Acquisition Sub. Corp. and Pharmacia Corporation will be filed on
a Form 8-K on July 15, 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.