Five Giralda Farms
Our Mission: We bring to the world pharmaceutical and health care products that improve lives and deliver outstanding value to our customers and shareholders. Our Vision: Our vision is to lead the way to a healthier world. By carrying out this vision at every level of our organization, we will be recognized by our employees, customers and shareholders as the best pharmaceutical company in the world, resulting in value for all.
Wyeth is a global pharmaceutical research and manufacturing company. It develops and markets traditional pharmaceuticals, vaccines, and biotechnology products that serve both human and animal health care. It has strong product lines in both prescription medications and in consumer health products, including over-the-counter (OTC) medications and nutritional supplements. Wyeth markets its products in more than 140 countries, and has manufacturing facilities on five continents. During the 1990s, Wyeth--which at the time was called American Home Products (AHP)--began selling off the wide-ranging businesses it had acquired over the years, retaining a focus on medicine and pharmaceuticals. In 2002, the company changed its name from American Home Products to Wyeth.
1926-1965: Birth and Development of a Conglomerate
Incorporated in 1926 as American Home Products (AHP), the company came to be known as "Anonymous Home Products" or the "withdrawn corporate giant." Though the company marketed such popular products as Black Flag insecticides, Easy-Off oven cleaner, Woolite, and Chef Boyardee, as well as the familiar pharmaceuticals Anacin, Advil, Dristan, Robitussin, and Dimetapp, the corporate name has never appeared on its products' labels. Public relations was considered such a low priority that switchboard operators answered the phone with the company phone number instead of the company name. And although executives at AHP had made few efforts to influence Wall Street analysts, the company's many consecutive years of increased sales and earnings made AHP shares a very popular investment.
AHP's unusual combination of anonymity and financial success stems from its history of competent management, product diversification through acquisition, and closefisted expenditures on virtually everything except advertising. AHP has been able to strike a balance between the aggressive advertising of its consumer package goods and maintaining a reputable name within the medical community.
AHP's strict management policy allowed for a minimal margin of error. If a product did not show promise before money was spent on promotion, it was dropped. If a division did not increase sales and earnings by 10 percent annually, a division president could be out of a job. Until the 1990s, AHP found little reason to invest in research, preferring to wait for competitors to release innovative products, and then launch its own improved line. Or it would simply buy the competitor.
Expenditures are so closely monitored at AHP that, in 1983, employees at the Whitehall division paid $20 each to attend their own Christmas party. A journalist from Business Week, researching a rumor in 1970 that then-AHP Chairman and President William F. LaPorte had reduced the size of the toilet paper in the executive washrooms to save money, discovered that, in fact, the paper was 9/16-inch narrower than typical size. As late as 1980, LaPorte was personally approving any expenditures more than $500, including anything from the purchase of a typewriter to a secretarial pay raise.
AHP's knack for acquiring little-known products and companies at a reduced price and turning them into money-makers dates back to AHP's earliest years. In 1926, a group of executives associated with Sterling Products Inc. and Household Products Inc. consolidated several independent nostrum makers into a holding company. Its subsidiaries sold such medicinal products as Hill's Cascara Quinine, St. Jacob's Oil, Wyeth's Sage and Sulphur, Kolynos dental cream, and Old English No Rubbing Floor Polish.
W.H. Kirn was named chairman of the new company in 1930 and served until 1935, when Alvin G. Brush, a salesman of Dr. Lyon's toothpaste, took over as president and chief executive officer, a position he held for the next 30 years. Brush's penchant for expansion through acquisition, while maintaining a sizable amount of cash in reserve, set the pattern for AHP's operating style. In his first eight years as president, Brush acquired 34 food and drug companies for a total of $25.6 million in cash and stock. One of AHP's earliest prizes was the acquisition of a sunburn oil in 1935 that the company transformed into Preparation H, which became one of the world's best-selling hemorrhoid treatments.
Other purchases included the 3-in-One Oil Company and Affiliated Products Inc., which made cosmetics and toiletries under such names as Outdoor Girl, Kissproof, and Neet. In 1938, AHP acquired Eff Laboratories, a manufacturer of commercial vitamin products, and S.M.A. Corporation, a producer of infant foods and vitamins. In 1939, the Black Flag Company came under the AHP umbrella, followed in 1943 by the G. Washington Coffee Refining Company, a manufacturer of grocery specialties. In 1946, another grocery specialties firm, Chef-Boy-Ar-Dee Quality Foods Inc., came aboard.
1965-1983: Expansion Through Advertising
AHP's marketing genius transformed its newly acquired products into household names. Preparation H is a good example. By 1981, Preparation H had captured 64 percent of the hemorrhoid treatment market, and its success was attributable exclusively to the company's aggressive advertising. In 1968, AHP spent more than $2 million on radio spots and $6 million on television advertising for Preparation H. These amounts may seem exorbitant for a single product; the figures become even more impressive when one realizes that the radio code standards only readmitted the controversial advertisements for hemorrhoid medications in 1965 and that the National Association of Broadcasters continued to debate approval for television. AHP advocated a broadened scope of code approval even as it appropriated more funds for advertising on noncode television stations.
The struggle for an expanded consumer audience was fought not only over advertising codes for personal products; AHP's aggressive marketing style also brought investigations of the company's advertising copy. In 1967, the Federal Trade Commission (FTC) ordered AHP and three other companies to refrain from making false claims with regard to the therapeutic value of their hemorrhoid treatments. Citing the advertisements' unsubstantiated claims, the FTC prohibited any future misrepresentation.
Company executives were not intimidated by the FTC ruling. AHP, deeming the commission's findings "capricious" and "arbitrary," asked for a review before a federal appeals court. The company continued to run advertisements in more than 1,100 newspapers, 700 radio stations, and 100 television stations. In response, the FTC temporarily enjoined AHP from continuing to run the advertisements. The court finally upheld most of the commission's findings, and the advertising copy for Preparation H had to be permanently modified.
Throughout this controversy AHP executives remained characteristically unavailable for comment. This combination of persistent product promotion (at the risk of damaging company reputation) and a united but anonymous executive front came to the fore in the promotion of another AHP product. In 1930, the company had purchased the rights to manufacture a little-known painkiller called Anacin, previously promoted through samples to dentists. AHP's Anacin grew in popularity and became the nation's leading over-the-counter analgesic. As with Preparation H, it took aggressive marketing to propel Anacin into this position.
By 1971, AHP had spent more money on the promotion of Anacin than had any other analgesic manufacturer on a comparable product. Total costs for radio advertising reached $1.5 million, and costs for television advertising surpassed $25 million. In 1972, the FTC charged that AHP and two other analgesic manufacturers were promoting their products through misleading and unsubstantiated claims. Because no reliable scientific evidence existed as to the superiority of one brand over another, or the ability of analgesics to relieve nervous tension, the FTC disputed therapeutic claims and advertisements that did not identify generic ingredients such as aspirin and caffeine.
AHP and the other manufacturers refused to negotiate consent agreements, and so the FTC issued formal complaints and ordered hearings before an FTC administrative judge. The case was finally settled in 1981 and permanent limits were placed on misleading claims in Anacin advertisements. In 1982, a federal appeals court upheld the FTC ruling after AHP attempted to have it overturned.
During the hearings on aspirin advertisements, Johnson & Johnson's Tylenol made its market appearance. To maintain their market share, AHP and other aspirin manufacturers launched a campaign to promote aspirin's anti-inflammatory action. After several suits and countersuits between AHP and Johnson & Johnson, a federal court judge in 1978 ordered the discontinuance of the advertising of Anacin's anti-inflammatory property as a claim of superiority over Tylenol.
Competition in the pain-reliever market was intensified by the introduction of ibuprofen. The drug is a non-steroidal anti-inflammatory agent that is as effective as aspirin and aspirin substitutes, but without the side effect of digestive tract irritation. AHP marketed its ibuprofen under the name Advil. Industry analysts suggested that ibuprofen could capture as much as 30 percent of the pain-reliever market.
The pattern of controversy and investigation established in the marketing for Preparation H and Anacin continued with several other AHP products. Easy-Off oven cleaner, Black Flag insecticide, Easy-On starch, and Aero Wax were all involved in an FTC investigation into deceptive advertising. Yet, for all of the controversy, no one can dispute AHP's success in capturing markets and acquiring products that have become household staples.
AHP's advertising budget for 1985 was estimated at more than $412 million. Despite or perhaps because of this great expenditure, AHP gained a notorious reputation among advertising agencies as a demanding and uncompromising client. Paying the lowest possible commission rates, the company will, nonetheless, demand the best price for prime-time spots on television and expect promotion to be effective on strict budgets. In 1967, Ted Bates & Company, the fifth largest advertising agency in the world at that time, resigned AHP's $20-million account because of "differences in business policy." This was not the first time an AHP account had been abandoned by an agency. Grey Advertising Inc. and J. Walter Thompson similarly dropped the demanding company's account. The Bates agency was replaced with an in-house agency called the John F. Murray Company. At the time of the replacement, industry-owned agencies were rare.
By 1983, AHP grudgingly began to change its attitude toward promotion. The company hired world-renowned photographer Richard Avedon and actress Catherine Deneuve to promote its line of Youth Garde cosmetics. But despite this willingness to "upscale" its advertising, AHP was voted as one of the ten worst clients of 1983 by Adweek.
1932-1994: Development of a Pharmaceutical Business
The success of AHP's proprietary goods has overshadowed the company's position as a leading manufacturer of ethical drugs. In 1932, AHP acquired Wyeth Chemical Company (now Wyeth Laboratories), a pharmaceutical manufacturer with a long history, under unusual circumstances. Wyeth was run by family descendants until the death of Stuart Wyeth, a bachelor. He bequeathed the laboratory to Harvard, his alma mater, and the university in turn sold the company to AHP at a generous price. In the early 1940s, AHP also acquired two other pharmaceutical laboratories, Ives and Ayerst.
AHP's prescription drugs and medical supplies accounted for 47 percent of sales and 62 percent of profits in 1983. Among the ethical drugs AHP produces are Ovral, a low-dosage oral contraceptive, and Inderal, a drug that reduces blood pressure and slows the heartbeat. Inderal was introduced in 1968, and by 1983 supplied more than half of the U.S. market for beta-blocker drugs. The company was also busy developing new pharmaceuticals: AHP filed 21 new drug applications with the Food and Drug Administration (FDA) in 1985 alone.
In 1981, company President John W. Culligan was promoted to chairman and chief executive officer. LaPorte, who had been chairman since 1965, continued as chairman of the executive committee. Culligan, 64 years old at the time of the promotion, had been with the company since 1937. John R. Stafford, a lawyer recruited from Hoffmann-LaRoche in 1970 as general counsel, was named company president on December 1, 1986. Some observers predicted that AHP's management changes would herald a modernization of LaPorte's highly centralized style of management and financial control, which contradicted contemporary theories of corporate management.
Nevertheless, this anachronistic approach guaranteed shareholders a handsome return on investment. In 1982, Fortune magazine's directory of the 500 largest U.S. industrial corporations ranked AHP 76th in sales and 24th in profits. The company had no long-term debt, and it paid out 60 percent of earnings in dividends. Despite a chronically low stock price in the late 1980s and early 1990s, AHP saw higher earnings and increased dividends every year from 1951 to 1993.
In 1983, AHP spent $425 million to buy the Sherwood Medical Group. A manufacturer of medical supplies, Sherwood placed AHP in a competitive position to capture the lion's share of the growing medical-device market. That subsidiary was supplemented with the 1992 acquisition of Symbiosis Corp., a developer and manufacturer of disposable instruments for minimally invasive laparoscopic and endoscopic surgery.
Under Stafford's guidance in the late 1980s and early 1990s, AHP worked to transform itself into a health care company through acquisitions and divestments. In 1989, the firm divested its Boyle-Midway division and purchased A.H. Robins Co., an over-the-counter drug manufacturer that complimented the Whitehall laboratories subsidiary. In response to criticism of its low research and development expenditures, AHP spent a record 11 percent of sales on R&D in 1990. The firm invested in Genetics Institute, Inc., a biotechnology firm specializing in blood cell regulation, bone repair, and immune system modulation, in 1992.
AHP's marketing of infant formula came under intense scrutiny and criticism in the late 1980s and early 1990s. Prior to 1988, infant formula was marketed strictly as a pharmaceutical product. Given historical product loyalty, formula makers offered their products free to pediatricians and hospitals in the hopes that the first formula a mother used would be the one she continued to purchase. According to a 1990 Business Week article, many doctors began to allege that hospitals promoted infant formula over breast-feeding--despite the inherent advantages of breast-feeding--because of the money and services received from manufacturers. And when the federal government directed the states to purchase all their formula from one manufacturer to garner lower prices, formula manufacturers were forced to compete directly for Women, Infants and Children (WIC) contracts, which constituted about 35 percent of state formula purchases. In June of 1993, Advertising Age reported that the FTC had charged the top three formula marketers--divisions of Abbott Laboratories, Bristol-Myers Squibb Co., and AHP Corp.--with price-fixing in government nutrition programs.
Although food products received less attention in the 1990s, AHP did augment its Chef-Boy-ar-dee line with the 1992 purchase of Ro*Tel, the leading brand of canned tomatoes and green chilies in the Mexican food category. In 1993, the company added M. Polaner Inc., a jam maker, to the food products segment.
Into the 21st Century: Becoming a Leading Pharmaceutical and Biotechnology Firm
By 1993, over 60 percent of AHP's global revenues came from pharmaceuticals. The company was not yet a strong pharmaceutical manufacturer, though. In 1994, it reported only four products with patents extending beyond 1997; its two lengthiest patents lasted until 2007. In an industry such as the brand name pharmaceutical industry, which depended on the profits derived from monopolies conferred by patent protections, AHP was not in a good competitive position.
The company initiated a series of acquisitions and divestitures aimed at transforming itself into a major pharmaceutical company in 1994. In that year, AHP spent about $9.7 billion to acquire American Cyanamid. This purchase expanded its product line to vaccines, cancer agents, and antibiotics. AHP also got a majority interest in Immunex Corp., a biotechnology firm. A major agricultural chemical business also came with the acquisition. Immunex rejected its 1995 attempt to purchase the remainder of the company. In 1996, AHP bought the remainder of Genetics Institute. In 1997, it purchased an animal health products company, and in 1998, a vitamin and nutritional supplement manufacturer.
To help pay for these purchases and to narrow its focus to human and animal pharmaceuticals, AHP sold many of its traditional product lines during these same years. It disposed of its oral-care products in 1995, of its ophthalmic business in 1997, of its medical-device business in 1998, of its agricultural chemicals business in 2000, and of its branded generic injectable products in 2002. Between 1996 and 1998, AHP also sold all of its food product business. In 2001, AHP sold its interest in Immunex to Amgen and acquired a ten percent interest in that biotechnology company.
AHP's restructuring efforts encountered several challenges. During the 1990s, the pharmaceutical industry was undergoing a major consolidation through mergers and acquisitions. AHP tried unsuccessfully to join the trend. In 1998, AHP initiated separate merger negotiations with SmithKline Beecham and with Monsanto. Both of these proposed mergers failed. AHP followed this with an attempt to merge with Warner-Lambert in 1999. Although Pfizer eventually won Warner, AHP collected a $1.8-billion breakup fee in the transaction. Despite continued rumors that AHP was a suitor or target of takeover attempts, management denied such ambitions.
The company also confronted major legal problems. In 1996, studies implicated two of the company's weight-loss drugs, Redux and fenfluramine (Pondimin), in damage to users' heart valves, damage that might be fatal and sometimes required surgical replacement of the valve. At the FDA's request, AHP withdrew the drugs in 1997. Since 1992, millions of overweight Americans had used Pondimin in combination with phentermine, a combination known as fen/phen, to help them lose weight. Later, AHP introduced Redux for the same purpose.
The 1996 findings unleashed a wave of product liability lawsuits. Eventually AHP spent over $13 billion defending itself and paid as much as $3.75 billion in settlements. As late as 2002, the company was not entirely sure of its total eventual liabilities. This uncertainty about its liability costs contributed greatly to AHP's inability to reach merger agreements during the 1990s.
Despite these problems, AHP, which changed its name to Wyeth in 2002, entered the 21st century with a strong pharmaceutical franchise. With strengths in vaccines, biotechnology, and traditional pharmaceuticals, Wyeth's products spanned a wide range of treatment areas, and, on average, its pharmaceuticals had one of the longest remaining patent lives in the industry. It had about 60 potential products in its research pipeline. It had a powerful presence in the consumer health market. Through its Fort Dodge division, Wyeth also maintained a significant presence in the animal health market.
Principal Subsidiaries:Ayerst-Wyeth Pharmaceuticals Incorporated (100%); Cyanamid International Corporation Limited (100%); MDP Holdings, Inc. (100%); Route 24 Holdings, Inc. (100%); American Cyanamid Company (100%); Wyeth-Ayerst International Inc. (100%); Wyeth-Ayerst Pharmaceuticals, Inc. (100%); Wyeth-Ayerst Lederle, Inc. (100%); Wyeth-Whitehall Pharmaceuticals, Inc. (100%); Berdan Insurance Company (100%); Laboratorios Wyeth-Whitehall Ltda. (100%); Wyeth-Ayerst Canada Inc. (100%); John Wyeth & Brother Limited (100%); Wyeth-Lederle (100%); Wyeth-Pharma GmbH (100%); AHP Finance Ireland Limited (100%); Wyeth Lederle S.p.A. (100%); Wyeth Lederle Japan, Ltd. (100%); Wyeth S.A. de C.V. (100%); AHP Manufacturing B.V. (100%); Wyeth Philippines, Inc. (100%); Wyeth Nutritionals (Singapore) Pte. Ltd. (100%); Wyeth Pharmaceuticals (Singapore) Pte. Ltd. (100%); Wyeth Farma S.A. (100%); Wyeth Lederle Nordiska A.B. (100%); Dimminaco AG (100%); Cyanamid Taiwan Corporation (100%).
Principal Competitors:Aventis; Merck; Novartis; Pfizer; Bristol-Meyers Squibb; Johnson & Johnson; GlaxoSmithKline; Abbott Laboratories; Eli Lilly; AstraZeneca; Hoffmann-La Roche; Schering-Plough.