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Pfizer, Inc.
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Pharmacia Corporation
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The following article is a communication to employees.
McKinnell Says "This Combination Makes Compelling Strategic Sense"
Caption: Pfizer CEO speaks at Pharmacia global town hall meeting.
PEAPACK, New Jersey - To say that interest in Pfizer is running high among
Pharmacia colleagues may be the understatement of the summer. On the day the
acquisition was announced, for example, Pharmacia experienced a five-fold
increase in traffic to its Intranet -- a surge that actually crashed many of
its servers -- as colleagues rushed to find more information. But
opportunities to hear directly from Pfizer executives -- much less to
actually see them -- have been limited.
All that changed last Friday, when 800 colleagues at Pharmacia headquarters
in Peapack, New Jersey, and approximately 15,000 more tuning in from 75
countries around the world, were given the opportunity to see and hear from
Pfizer's leadership team.
The town hall meeting began with Pharmacia Chairman and CEO Fred Hassan
thanking his colleagues for "continuing to do a good job under stressful
circumstances. . . All of our engines are firing. . . You are showing us
what you're made of." Commenting on the transition, he said, "We are making
a lot of progress. But we also know that different parts of a complex
transition move at different speeds. . . We need to be realistic and accept
that this kind of process always involves some ambiguity."
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Hassan then introduced Hank McKinnell, saying, "Hank is someone who has
earned great respect through his successful leadership of Pfizer."
McKinnell thanked Hassan for his leadership of Pharmacia, which he called
"one of the world's great companies." After introducing the Pfizer
Leadership Team, McKinnell wasted little time in getting to the heart of the
concerns that many Pharmacia colleagues have about the acquisition.
"I realize that if you are a long-time Pharmacia colleague, this may not be
welcome news," he said. "All of you take tremendous pride in your work, and
that passion for performance is one of the reasons why Pfizer was attracted
to Pharmacia in the first place. Some of you may now feel frustrated and
angry. . . feeling jeopardized by a loss of your position or corporate
identity. Even if you feel pretty good about this combination, you probably
have a funny feeling in the pit of your stomach. All of these feelings are
legitimate and understandable. Change -- even positive change -- is
difficult."
McKinnell acknowledged that Pfizer did not yet have answers to many of the
most pressing questions on colleagues' minds -- about job loss and site
closures, for example. But he pledged to work toward getting those answers
as soon as possible. "I have a simple, but inflexible rule," he said,
"Analysis first, then decision, then approval, then announcement. Everybody
seems to want to start at the other end, but we can't do that."
Like Hassan, McKinnell said that transition planning is off to a great
start. "Both Pfizer and Pharmacia have learned that in situations like this
that time may be our greatest enemy," he stated. "Making decisions both
carefully and quickly will bring down the anxiety levels in both
organizations, clarify roles and responsibilities, and get the new
organization up and running as a unified company on Day One."
The Three 'Tell-Me's'
McKinnell then spoke about the acquisition from the perspective of Pharmacia
colleagues, addressing what he referred to as the three "tell me's":
1. Tell me why Pfizer is joining Pharmacia.
McKinnell said that both companies can progress much further and much faster
together than alone, adding "therapeutic area by therapeutic area, region by
region, this combination makes compelling strategic sense." For example,
McKinnell said that Pharmacia would fill a "huge gap" for Pfizer in cancer,
giving the company instant access to an established franchise in this
important therapeutic area that we were planning to build from the ground
up. "By coming together," McKinnell said, "we can shave years off our plans
to move toward very specific leadership targets," such as becoming number
one in treating cancer, in every major pharmaceutical market worldwide, and
in the animal health business.
McKinnell said the acquisition will also help Pfizer better manage the "huge
and growing" risks facing pharmaceutical companies today. These risks
include skyrocketing drug development costs fast approaching $1 billion per
compound, as it becomes harder and harder to win regulatory approval for new
medicines -- even those considered sure things. The industry is also facing
an increasingly hostile political climate, even in places like New Jersey
and Michigan where Pfizer and Pharmacia employ thousands of people. The
Pharmacia deal will improve our ability to "get our story heard," helping us
to better serve "those who depend on us, work with us, and invest in us."
McKinnell summed up this "tell me" by saying, "Greater, faster progress;
better risk management -- that's what this combination is about in one
sentence."
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2. Tell me why Pfizer is a great place to work.
McKinnell said that Pfizer's culture "is a lot like Pharmacia's. Our values
are nearly identical. Our commitment to integrity and quality is the same.
How we expect leaders to act is just about a perfect match." He went on to
describe recent efforts at Pfizer "to create a more inclusive environment,
to stimulate more open, candid discussion, to do more to develop people, and
to build the leadership qualities of everyone in the Pfizer organization."
Pfizer's culture will continue to evolve, he said, as the best aspects of
both companies' cultures emerge in the combined company.
"We will continue to press for continuous improvement in Pfizer's culture,"
he said, "to move away from the outmoded thinking that leaders only reside
at the top of the organization. Everyone at Pfizer can 'find a way to lead.'
And in the expanded Pfizer, the opportunities for leadership will be
amazing."
3. Tell me what all this means for me.
McKinnell acknowledged that not everyone from Pharmacia has a long-term
future with Pfizer. "That's painful, I understand that," he said, adding, "I
am challenging our leadership throughout the company to find ways to place
as many Pharmacia people in the new organization as we logically can."
For the many Pharmacia colleagues that will continue at Pfizer, McKinnell
said, "You will join the world's largest and fastest-growing major
pharmaceutical company. Together, we will build a company that truly moves
beyond number one."
Questions and Answers
The first question concerned the transition process and its current status.
Pfizer's Chief Financial Officer David Shedlarz, who is leading the process
for Pfizer, said that he and the now more than 600 colleagues from both
companies directly involved with the transition "well understand the awesome
responsibility that's been put on our shoulders to do the transition in a
definitive, respectful, and correct way." Shedlarz said that the transition
teams were spending a lot of time initially "simply getting to know each
other" and taking a close look at the issues and opportunities presented by
the combination. He added that the time between now and the close will be
used to "carefully analyze the opportunities on behalf of colleagues in both
companies."
McKinnell was asked about his business philosophy and what it takes to
succeed at Pfizer, prompting him to reflect upon the company's journey from
#14 in the industry at the beginning of the 1990s to #1 at the end of the
decade. The key, he said, was an adherence to a set of values codified in
the mid-1990s, but present in the company for many years before that.
McKinnell spoke about how past leaders of the company personified particular
values -- Jack Powers and integrity, for example, or Ed Pratt and community.
More recently, Pfizer has moved beyond values and established a set of
leader behaviors, which he described as "what we expect to see in people,
day in and day out." McKinnell said that people who succeed at Pfizer are
those who adhere to the company's values and leader behaviors, but also
those who understand "how important what we do is to millions and millions
of people."
Peter Corr, Pfizer's senior vice president for Science & Technology, was
asked to assess Pharmacia's pipeline. He cautioned that, because the two
companies remain independent competitors, he has had limited opportunity to
review Pharmacia's early stage pipeline, but stated that, based on public
information, he is excited about the prospects.
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"One of the things that strikes us," Corr said, "is how well it complements
the pipeline within Pfizer." For example, Corr talked about Pharmacia's
leadership in ophthalmology -- a category that Pfizer currently has no
presence in -- and expressed his belief that "there are agents from other
therapeutic areas which can be used in treating ophthalmological diseases."
Corr cited cancer compounds in our pipeline that inhibit angiogenisis, or
blood vessel growth to tumors -- the same basic mechanism underlying many
diseases of the eye, such as age-related macular degeneration.
Several questions concerned the magnitude of the job loss Pharmacia
colleagues are facing and how decisions about jobs will be made. McKinnell
stressed that, while jobs would be lost as a result of the combination,
"there is an enormous difference in consolidating two organizations that are
not growing versus consolidating organizations that are growing very
rapidly." Since Pfizer and Pharmacia are both high-growth companies,
McKinnell said, cost savings can come not only from eliminating positions,
but also from not hiring the people both companies would have been bringing
on board in order to meet their growth targets.
Rob Norton, senior vice president, Corporate Human Resources, emphasized
that the Pharmacia leadership team is heavily involved in the talent
planning process. He also said that Pfizer had frozen hiring to make way for
as many Pharmacia colleagues as possible. In a growing company the size of
Pfizer, Norton said, a hiring freeze in and of itself "generates a lot of
flexibility."
As to when the acquisition will be completed, McKinnell said that he hoped
it would be by the end of the year. Pfizer's General Counsel Jeff Kindler
said that good progress was being made with antitrust regulators in both the
United States and the European Commission. "There are issues that have
arisen, but none that we think are going to be material or problematic... We
see everything going well and staying on track."
McKinnell said that Pfizer would continue to support philanthropic
activities that were important to Pharmacia, and would support Pharmacia
colleagues who donate their time and money to community organizations. "We
were recently named the most generous company in the U.S.," he said. "We are
very proud of that."
The final question concerned Pfizer's values and leader behaviors and how
they match up with those of Pharmacia. Listing several of the Pfizer values,
McKinnell said, "This isn't foreign to you. This is how you live and work
every day." He closed by saying, "The idea of teamwork, the idea of open
discussion and debate, the idea of building a diverse organization -- to me,
those are the key ingredients that I can encourage to happen, not only in
the Pfizer organization, but, looking forward, in the combined
Pfizer-Pharmacia organization."
A town hall meeting for Pfizer colleagues has been scheduled for September
17.
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Many factors may cause or contribute to actual results or events being
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they may include the following: competition for our products; pharmaceutical
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changes in foreign currency exchange rates or in general economic or business
conditions including inflation and interest rates; acquisitions, divestitures,
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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 disclosures in
Pharmacia's various Securities and Exchange Commission ("SEC") filings,
including but not limited to Pharmacia's Annual Report on Form 10-K for the year
ended December 31, 2001, and 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. On August 14, 2002, Pfizer filed a registration
statement on Form S-4, containing a preliminary joint proxy statement/prospectus
for Pfizer and Pharmacia, with the SEC. Pfizer will file an amendment to the
registration statement, including a definitive joint proxy statement/prospectus
constituting a part thereof, and other documents with the SEC in connection with
the proposed merger. 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
securityholders will be able to receive the preliminary joint proxy
statement/prospectus constituting a part of Pfizer's registration statement on
Form S-4, the definitive versions of these materials (when they become
available) and other documents free of charge at the SEC's web site,
www.sec.gov. Investors and securityholders will also be able to receive the
definitive version of the joint proxy statement/prospectus constituting a part
of Pfizer's registration statement and other documents free of charge 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
is set forth in the preliminary joint proxy statement/prospectus constituting a
part of Pfizer's registration statement, filed on August 14, 2002, and will be
set forth in an amendment to the registration statement to be filed with the
SEC, including the definitive joint proxy statement/prospectus constituting a
part thereof, that will be sent to Pharmacia shareholders.