The Upjohn Company History

Address:
7000 Portage Road
Kalamazoo, Michigan 49001
U.S.A.

Telephone: (616) 323-4000
Fax: (616) 323-6654

Public Company
Incorporated: 1958
Employees: 18,960
Sales: $3.64 billion
Stock Exchanges: New York
SICs: 2834 Pharmaceutical Preparations; 2833 Medicinals and Botanicals; 2830 Drugs; 0181 Ornamental Nursery Products; 2048 Prepared Feed, Nec

Company History:

Upjohn is one of the largest ethical drug manufacturers in the United States. Recognized as a world leader in developing medicines for the treatment of central nervous system diseases, disorders, and injuries, the company also manufactures an extensive line of prescription drugs used in the treatment of conditions including heart disease, cancer, and arthritis. In the last decades of the twentieth century, the company expanded into animal pharmaceuticals and vegetable and agronomic seeds. The company has research, manufacturing, sales, and distribution facilities in more than 200 locations worldwide.

Upjohn's Victorian beginnings coincided with the origin of modern pharmaceuticals. In the nineteenth century, physicians who wanted to prescribe medication for their patients were limited to two unsatisfactory choices: fluid extracts of unstable and varying potency, or drugs in pill form. Although pills were of relatively standard potency, they were so hard that they could be hammered into a board without doing damage to their coating (as one of Upjohn's early advertising gimmicks showed); often such pills did not dissolve in the stomach and were passed by the patient. In 1885 Dr. William Upjohn solved these problems and revolutionized the drug industry when he patented a tedious process for the making of a "friable" pill capable of crumbling under the pressure of an individual's thumb.

The image of Dr. Upjohn's thumb crushing a pill eventually became a trademark of the Upjohn Pill and Granule Co., founded in Kalamazoo in 1886 by Upjohn and his brother Henry. A talent for promoting its products ensured the company's steady growth through the turn of the century. By 1893 Upjohn could be seen at the Chicago World's Fair distributing souvenirs of its exhibit--an enormous bottle filled with colored pills. In 1903 the company shortened its name to The Upjohn Company. Quinine pills and "Phenolax Wafers" (the first candy laxative) were two of the early and successful products made by Upjohn. By 1924 the extremely popular wafers were bringing in $795,000 a year, or 21 percent of Upjohn's sales revenue.

From the very beginning Upjohn emphasized research and development. In 1913 the company hired its first research scientist, Dr. Frederick W. Heyl. Dr. Heyl proved to be a sound investment for Upjohn. One of his developments, Citro-carbonate, an effervescent antacid, reached sales of $1 million in 1926. Heyl was also responsible for patenting a digitalis tablet called Digitora, which is used in the treatment of heart disease, and which is still sold by Upjohn today.

William Upjohn, who was largely responsible for the firm's early research orientation as well as its entrepreneurial spirit, was an extraordinary man whose interests extended well beyond the bottom line of his company's profit sheet. An avid gardener, he grew 1,000 varieties of peonies (and even wrote a book on them) in addition to the medicinal herbs and flowers he cultivated at his country home in Augusta, Michigan. His interest in horticulture led him to donate a 17-acre park to the city of Kalamazoo and to shorten the workday at Upjohn to seven hours during the summer in order to enable employees to go home and water their lawns.

Dr. Upjohn was also dedicated to improving working conditions for his employees. In 1911 he initiated a soup lunch program; in 1915 he instituted a group life insurance and benefit program. At the time of his death he was working on the development of his farm properties in an attempt to create a type of employment insurance for the people of Kalamazoo, most of whom worked for the Upjohn Company. He served as Kalamazoo's first mayor under a commission-city manager style of government, which he had played a critical role in establishing.

The Upjohn Company's attachment to Kalamazoo has been strengthened by the fact that the company has remained largely a family affair. When William Upjohn, eulogized as "Kalamazoo's First Citizen," died in 1932, the job of running the company fell to his nephew, Dr. Lawrence N. Upjohn. In 1944 Lawrence Upjohn retired and Donald S. Gilmore became president. Gilmore, whose family owned Gilmore Brothers', a huge midwestern department store, was both the step-son and the son-in-law of William Upjohn. Ray T. Parfet, who was president of the company from 1961 until the late 1980s, also married into the family. The company has been so tightly held that until 1968 no one who was not a family member or employee of Upjohn was permitted to sit on its board of directors.

During the 1930s and 1940s, under the guidance of Lawrence Upjohn and later under Gilmore, the company expanded its research and manufacturing facilities and added twelve more research scientists. This expansion paid off when Upjohn became the first to market an adreno-cortical hormone product in 1935. During World War II Upjohn, like many other drug companies, developed a broad line of antibiotics, including penicillin and streptomycin. Upjohn was fortunate enough to be selected by the armed forces to process human serum albumin and penicillin. By 1958 Upjohn was the sixth largest manufacturer of antibiotics, with antibiotic sales of $22.6 million. Two important drugs in the antibiotic field that are produced by the company today are Lincocin, an antibiotic useful for patients who are allergic to certain other antibiotics, and Cleocin Phosphate, an injectable form of clindamycin used in the treatment of life-threatening anaerobic infections. The company also markets tetracycline, erythromycin, and erythromycin ethylsuccinate, under the names Panmycin, E-Mycin, and E-Mycin E. Another antibiotic produced by Upjohn, Trobicin, has proven useful as an alternative to penicillin in the treatment of gonorrhea.

In addition to antibiotics, Upjohn also developed a product called Gelfoam during the period of World War II. A substance made from beef bone gelatin, Gelfoam is a porous, sponge-like material which, when used during surgery, absorbs many times its volume in fluid and is itself absorbed by body tissues. Besides being valuable in surgery, Gelfoam is also useful in the treatment of hemophilia. Manufactured in a powder form that can be swallowed, Gelfoam is used to stop hemorrhaging that occurs in the digestive tract.

In 1957 the Upjohn Company introduced the first oral anti-diabetes agent, called Orinase. Many physicians and patients considered Orinase to be the greatest advancement in the treatment of adult-onset diabetes since insulin. Studies conducted in the 1970s, however, linked the drug with heart disease, and its use was subsequently discouraged by the National Institute of Health. Upjohn produced a line of oral anti-diabetes agents that included Tolinase and the more potent Micronase. In 1992 the company brought out a reformulated version of Micronase called Glynase PresTab. The oral treatment featured a patented design that patients could easily snap in two for a more precise dosage.

During the 1950s Upjohn expanded internationally, allowing it to compete with other large drug manufacturers in foreign markets and fostering further advances in research. In 1949 and 1950, Upjohn joined S. B. Penick & Co. on an expedition to Africa in search of a plant that could provide a less expensive source of cortisone than that used by Merck, who had introduced the drug. While this venture was unsuccessful, the company discovered by accident a type of mold that was capable of fermenting progesterone, the basic building block for cortisone, out of diosgenin. Upjohn was able to capitalize on its discovery by forming a partnership with a Mexican firm, Syntex, who isolated diosgenin from yams. A number of new hormones now available, including the injectable contraceptive Depo-Provera, were made possible by Upjohn's international initiatives.

Depo-Provera, which provides protection against pregnancy for about 90 days, has been marketed in over 80 foreign countries through subsidiaries around the world. Depo-Provera was also approved for the treatment of advanced uterine cancer, and a 1975 study revealed that doctors had prescribed the drug as a contraceptive for some 10,000 women in that year alone. Upjohn encountered difficulty in obtaining FDA approval for the sale of Depo-Provera as a contraceptive in the United States, largely because studies linked it to serious side effects, including cancer. Depo-Provera Contraceptive Injection was finally approved for contraceptive use by the USFDA in 1992.

During the 1980s Upjohn continued to expand internationally, forming a new Japanese subsidiary in 1985 while selling its worldwide polymer chemical business to Dow Chemical Co. for $232 million. In 1985 foreign markets accounted for 30 percent of Upjohn's total sales. By the early 1990s, that figure had reached $1.27 billion, or over 33 percent of sales.

The 1980s also witnessed a major challenge in the market for its most lucrative drug, Motrin, which as of 1984 accounted for 40 percent of its earnings. Motrin, an anti-inflammatory agent widely prescribed in the treatment of arthritis and menstrual cramps, was introduced into the United States in 1974 when Boots Pharmaceutical Co. of Britain licensed Upjohn to sell ibuprofen (Motrin's active ingredient). In 1977, however, Boots entered the U.S. market itself, even while continuing to license Upjohn, and in 1981 began a price war by selling the drug at 20 to 30 percent less than Upjohn. By 1984 the companies had extended their battle by producing over-the-counter ibuprofen pills Nuprin and Advil. As a result of this competition, Upjohn's dominant market position eroded: by mid-1984 Boots had gained 25 percent of the market share of prescriptions for ibuprofen.

Despite these setbacks, Upjohn's financial situation during the 1980s was good, with retained earnings and dividends increasing steadily between 1979 and 1985. An important factor in Upjohn's prosperity was the success of its anti-anxiety agent, Xanax, whose sales increased 85 percent in 1985 from $82.2 million to $152.4 million. The drug had brought in over $400 million by the end of the decade, when its sales peaked. Sales revived somewhat in the early 1990s, when the FDA approved Xanax's use in the treatment of panic disorders.

Minoxidil, or Rogaine (as the drug was eventually branded) brought Upjohn much publicity in the late 1980s and early 1990s. Discovered in the mid-1960s and originally intended for the treatment of heart disease, Rogaine was found to produce unwanted hair growth in patients for whom it was prescribed. Upjohn began clinical testing for the drug's effectiveness against baldness in 1977. Although huge demand for this treatment was demonstrated even before its approval, Rogaine did not register the high sales that company executives and industry analysts predicted. When the product was introduced in 1986 patients discovered that Rogaine worked best for men whose hair was just beginning to thin. Even the successful cases, about 10 to 20 percent of the total, faced a life of two-a-day applications. In 1989, after three years of disappointing sales, Upjohn began to sidestep traditional pharmaceutical marketing strategies and go directly to the consumer with an information campaign. That year, the company became one of the world's top three pharmaceutical advertisers, primarily on the $50 million Rogaine push.

The direct campaign brought success for Rogaine (sales increased by more than one-third from 1989 to 1990), but criticism from the FDA, which disapproved of Upjohn's promotional leapfrog over physicians. In 1990 Upjohn began to market a non-prescription-strength version through barbers and hairstylists, and raised ad spending by 17.5 percent. And in 1991 the company began to invite inquiries directly from prospective clients, who would then be referred to a dermatologist or other specialist.

Upjohn's problems with Rogaine were exacerbated by a spate of adverse publicity surrounding the sleep-inducing agent Halcion. The drug was linked in the media and over 100 lawsuits to memory lapses and addiction, and its registration was suspended in 13 countries. Upjohn defended the drug, which was reinstated in two countries by 1992, and the FDA concluded that the drug was safe and effective when used within the context of its labeling. Unfortunately, the drug was scheduled to lose its United States patent in October 1993.

The patent for Micronase also expired in 1992, and three other major Upjohn products were scheduled to lose patent protection in 1993 and 1994, including Xanax and Cleocin, a cholesterol-reducing drug. In order to maintain a measure of the sales that Upjohn expected to lose to generic competitors, the company signed agreements with Geneva Pharmaceuticals, Inc., for the smaller company to market generic versions of the drugs.

Upjohn also worked to speed up its research and development process in the 1990s in order to replace the products it would lose to the generic market. The company received FDA approval of eight New Drug Applications in 1992, and its promising new drug Freedox entered Phase III trials in the United States, Canada, Europe, Australia, and Israel. The drug was among a group of steroids called lazaroids indicated for the treatment of head and spinal cord injuries. Upjohn had an Acquired Immune Deficiency Syndrome (AIDS) treatment in the works at that time as well. The company also tried to increase its presence in over-the-counter medicines with the introduction of Maximum Strength Cortaid, on the heels of FDA approval of 1 percent strength hydrocortisones for non-prescription sale. The approval was expected to increase the hydrocortisone business by at least one-fourth.

In the face of an outcry by the public and the U.S. Congress against large increases in drug prices and record-setting profits for drug companies, Upjohn guaranteed in 1992 to freeze the price of its blood pressure drug, Altace, until the turn of the twenty-first century. The company also voluntarily offered a flat rebate to Medicaid programs.

Consolidation in the ethical pharmaceutical industry in the 1990s brought speculation that Upjohn was too small to compete with its larger rivals. But Upjohn responded to the challenges of the changing global market with sizeable investments in facilities, the divestment of peripheral interests and unprofitable assets, and a small-scale restructuring.

Principal Subsidiaries: Upjohn Inter-American Corp.; Asgrow International Corp.; Asgrow Seed Company; California Health Care Services Inc.; Homemakers Licensing Corp.; Cobb, Incorporated; Centennial Collection Corp.; Asgrow Florida Co.; O's Gold Seed Co. Upjohn also has subsidiaries in the following countries: Argentina, Australia, Brazil, Belgium, Canada, Chile, Columbia, England, France, Greece, Guatemala, Indonesia, Italy, Japan, Korea, Mexico, Netherlands Antilles, Panama, Philippines, Portugal, South Africa, Spain, Sweden, Taiwan, Thailand, Venezuela, and West Germany.

Further Reading:

  • Begley, Ronald, "Pricing Pressure from Congress," Chemical Week, v. 151, August 12, 1992, 26-28.
  • Benoit, Ellen, "Upjohn: Rip Tide," Financial World, v. 158, September 5, 1989, 26-28.
  • Eaton, Leslie, "The Bald Truth: There's More to Upjohn Than Just Rogaine," Barron's, v. 69, January 16, 1989, 13, 26-27.
  • Hoke, Henry R., "Upjohn's Database Fuels Sales Growth," Direct Marketing, v. 54, April 1992, 28-30.
  • "Pharmacy--A Sharp Decline in Ad Pages," Medical Marketing & Media, v. 24, September 20, 1989.
  • Quickel, Stephen W., "Bald Spot: Upjohn's Hair-Raising Experience with Minoxidil," Business Month, v. 134, November 1989, 36-43.
  • Rosendahl, Iris, "First Aid Is a First-Rate Category in Drugstores," Drug Topics, v. 134, August 20, 1990, 77-78.
  • ----, "Topical Hydrocortisones Get 1% Lift from FDA; Promoting First Aid: Cash in on Health-Care Image," Drug Topics, v. 136, February 17, 1992, 68-69.
  • Woodruff, David, "For Rogaine, No Miracle Cure--Yet," Business Week, June 4, 1990, 100.

Source: International Directory of Company Histories, Vol. 8. St. James Press, 1994.

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