Dow Jones | December 19, 1999 | By Robert Langreth, Staff Reporter of The Wall Street Journal
In his 2 1/2 years as chief executive officer of Pharmacia & Upjohn Inc., Fred Hassan has become known for his quick turnaround of a company that was in disarray. And while Pharmacia isn't one of the drug industry's highfliers, Mr. Hassan has made something of a silk purse from a sow's ear: the midsized firm has a respectable portfolio of prescription drugs, though none are blockbusters.
Wall Street has looked kindly on Pharmacia in recent years. Its stock has risen 40% in the past two years compared with 31.43% for the Dow Jones pharmaceuticals index. Sales, which were declining when Mr. Hassan took over, are on track to rise into the low doubledigits in 1999. In the first nine months of this year, net income rose about 15%.
Mr. Hassan's bold decision to merge with Monsanto Co. - and gain access to its blockbuster arthritis drug Celebrex, among other things - is the latest in a series of aggressive moves aimed at vaulting Pharmacia into the top ranks of the drug industry. And provided things go well, a combined Monsanto-Pharmacia could, in a year or two, be in a strong position to negotiate additional deals.
The 54-year-old Mr. Hassan has gained a reputation as a strong leader who inspires loyalty by encouraging new ideas and listening to his troops. At the same time, though, he can be brutally honest with employees who haven't done their homework, according to people who work with him. He will likely need this combination of openness and toughness if he is to swiftly blend Monsanto and Pharmacia into a coherent, effective company in an increasingly cutthroat business.
"This is going to work because Fred will make it a success," said Robert Shapiro, Monsanto's chief executive, about the new deal. "This gives Fred a much bigger canvas to paint on."
Mr. Hassan's skills at uniting disparate factions were immediately on display in 1997 when he left a high-ranking position at American Home Products Corp. to take the reins of Pharmacia & Upjohn. The company, which was formed by the 1995 merger of Upjohn Co. and Sweden's Pharmacia, was in bad shape. Sales were declining. Officials at its London headquarters lacked adequate control over the company's far-flung bases of operation, in Michigan, Sweden and Italy.
Mr. Hassan quickly convinced the board to move Pharmacia's headquarters to the U.S., the most profitable prescription-drug market; the firm settled in New Jersey, the center of activity for the drug industry. He quietly moved out or reassigned executives who weren't team players, and lured several stars away from other companies. His biggest coup was recruiting a former American Home colleague, Carrie Smith Cox, to handle marketing.
Soon after taking over, Mr. Hassan asked for a list of experimental drugs in development, and he cut several projects that didn't look as if they would offer a marketing edge over existing products.
But he was favorably impressed by the impassioned presentations of research officials about a new type of antibiotic that had been languishing in development since the merger. Mr. Hassan felt it represented a potential breakthrough, and designated it as a top priority. The drug, Zyvox, is expected to be approved next year as the first in a new class of antibiotics to fight diseases that are resistant to standard drugs. Whether it actually becomes a hot seller is another matter. Doctors may use it for only the toughest infections.
In a bid to strengthen the company's cancer-drug pipeline, Mr. Hassan engineered the acquisition of Sugen Inc. earlier this year, after asking top research managers to identify the most innovative biotech companies. Sugen is developing an array of promising gene-based cancer drugs.
Mr. Hassan, a native of Pakistan, has an undergraduate degree in chemical engineering, plus an M.B.A. from Harvard. A consummate marketer, he has worked hard to cement Pharmacia's brands and boost the size, and morale, of its sales force; the effort has paid off with several fast-growing drugs - in particular Xalatan for glaucoma, which has become the company's top-selling drug. He is also betting that Detrol, an incontinence medicine, will be a winner.
Still, making a Monsanto-Pharmacia merger work will be a formidable challenge. The company will have research facilities scattered across the globe, and a disparate array of prescription drugs to sell. The firms' portfolios have little overlap.
Michael Waldholz contributed to this article.
Copyright 1999 Dow Jones & Co., Inc. All rights reserved.
