1 Executive Drive
We operate in a rapidly growing and changing industry. As a leading provider of human generic pharmaceuticals, we stand to benefit as governments worldwide seek to curb skyrocketing health care costs. As a global supplier of animal pharmaceuticals that foster good health and robust growth, enhance reproductive efficiency, and treat and prevent disease, we also stand to benefit as consumers worldwide increase their demand for safe foods--from poultry to livestock to farmed fish. All of these factors position Alpharma for improved growth and profitability. But our greatest strength at Alpharma is our people. Our management team is loyal, experienced and highly qualified. They have run the Company sensibly, making decisions as a team and taking prudent and judicious risk when it made sense to do so. They are supported by our 3,300 people who work diligently to further our success. Each Alpharma employee, at every level of our organization, contributes to our corporate culture with his or her team-oriented, entrepreneurial spirit. We also share a commitment to serving our customers. At the same time we share a passion for sustainable results--results that enhance shareholder value. Most of all, we share a dedication to one clear mission&mdashø build Alpharma into an outstanding organization that makes a meaningful contribution to affordable medicine and safe food supplies on a global scale.
Alpharma Inc. (known until 1995 as A.L. Pharma Inc.) is an international pharmaceutical company involved in manufacturing and marketing specialty generic and branded pharmaceuticals for human as well as animal health products. Formed in 1975 as A.L. Laboratories, a wholly owned subsidiary of the Norwegian pharmaceutical and animal health company, Apothekernes Laboratorium, the company initially focused on producing animal feed antibiotics, particularly bacitracin, then increasingly became involved in manufacturing and marketing human pharmaceuticals. By the mid-1990s, A.L. Pharma's U.S. and international presence in the human pharmaceutical and animal products markets had increased considerably from the company's modest beginnings, positioning it as one of the emerging companies in the global pharmaceutical market.
Origins in the Late 1970s
A.L. Laboratories was formed in 1975 as a wholly owned subsidiary of Apothekernes Laboratorium A.S., a Norwegian manufacturer and marketer of pharmaceutical and health products for humans and animals. Founded in 1903, Apothekernes Laboratorium had been involved for years in the manufacture of bacitracin, an antibiotic for animal feed use. Initially, when Apothekernes Laboratorium began manufacturing bacitracin at its production facility in Oslo during the early 1950s, the substance was marketed as a pharmaceutical grade bulk antibiotic. Shortly thereafter, the applications for bacitracin broadened, and by the late 1950s Apothekernes Laboratorium began marketing the product as an animal feed additive. Bacitracin became the mainstay product for the newly-formed A.L. Laboratories when it established its headquarters in Englewood, New Jersey, in 1975.
Instrumental in the formation of A.L. Laboratories was I. Roy Cohen, who, along with Einer W. Sissener, figured prominently in the company's history for roughly the next 20 years. Under Cohen's and Sissener's stewardship, A.L. Laboratories experienced dramatic growth, evolving into a well-rounded pharmaceutical company that, like its progenitor, Apothekernes Laboratorium, enjoyed considerable presence in the pharmaceutical markets for both humans and animals. Initially, however, Cohen, who served as A.L. Laboratories' president, steered the company toward further growth in the bacitracin field. With annual revenues totaling $6 million shortly after formation, the full development of the company into other segments of the pharmaceutical market was a matter of time.
The expansion of A.L. Laboratories' size and scope was facilitated by its relationship with Apothekernes Laboratorium. With its parent company's backing, A.L. Laboratories received more favorable terms on bank credit than competitor companies of commensurate size. This was an invaluable asset during the company's formative years, particularly when it came to acquiring other companies.
The 1979 acquisition of the chemical and fermentation businesses of Dawe's Laboratories, Inc. was an important step toward increasing the company's U.S. and European presence in the bacitracin field. Located in Chicago Heights, Illinois, these facilities included chemical, fermentation, and blending installations that provided A.L. Laboratories with its entry into organic chemical production and augmented its bacitracin manufacturing capabilities. Ground was broken the following year for a multi-million dollar expansion of the Chicago Heights facilities that, as Cohen related to Chemical Marketing Reporter at the time, would 'greatly increase antibiotic production capacity [and] multiply our output of feed grade bacitracin.' With the bacitracin manufactured at these facilities, A.L. Laboratories marketed its primary product, 'Bacitracin-MD,' a feed supplement, used for disease prevention, growth promotion, and feed efficiency in the poultry and swine industries.
In the late 1970s, the FDA, responding to the complaints by meat and poultry producers that many of the products marketed as animal feed antibiotics were found to cause pernicious side effects, stepped in and began closely scrutinizing the production of animal feed antibiotics. Excluded from these charges of product inferiority was A.L. Laboratories' Bacitracin-MD, a product meat and poultry producers favored because it did not develop tissue residues in animals. Demand for Bacitracin-MD, and its companion product, 'Solu-tracin 50', consequently shot up, providing a boost to A.L. Laboratories' business and creating a need for increased production, a need the expansion of the Chicago Heights facilities was designed to meet.
With business steadily growing, A.L. Laboratories entered the early 1980s propelled by the increasing popularity of bacitracin. By 1983, the company's Bacitracin-MD had been renamed as BMD. That year, A.L. Laboratories completed a major transaction, perhaps the most pivotal purchase in the company's early history, when it acquired a Danish health concern named A/S Dumex. Based in Copenhagen, Dumex was a manufacturer of branded pharmaceuticals, fermentation antibiotics, and nutritional beverage products, which the company sold in more than 40 countries. Included in the deal were manufacturing facilities that, along with Dumex' product line, complemented A.L. Laboratories' business in the United States and in Norway and gave the company access to important markets in Africa and Asia, where historically it had maintained only a nominal presence.
Entering the Human Pharmaceuticals Market in the 1980s
The following year, A.L. Laboratories became a publicly-held corporation, as Apothekernes Laboratorium gradually began to cede a part of its stake in its formerly wholly owned U.S. subsidiary. The year of A.L. Laboratories' initial public offering also marked the first full year that the company's 1983 acquisition of Dumex contributed to annual revenue. For the year, A.L. Laboratories generated $85.9 million and posted $4.3 million in net income, a laudable increase in nine years.
Broadening Product Line in the 1980s
Such growth prompted A.L. Laboratories' management to desire to become a much larger company. To this end, A.L. Laboratories increasingly became involved in the manufacture and marketing of pharmaceuticals for humans and less aggressively pursued its interests in the animal antibiotic market. This new business strategy was manifested in 1987, when A.L. Laboratories acquired Baltimore, Maryland-based Barre-National from Revco D.S. Inc. for $95 million. The largest U.S. manufacturer of generic cold medicines, Barre-National manufactured more than 200 prescription and over-the-counter drugs, giving A.L. Laboratories a substantial stake in the pharmaceutical market. But, the greatest asset the acquisition gave the company was Barre-National's commanding lead in the liquid (as opposed to tablets or capsules) generic drug market. In this expanding niche of the more broadly defined pharmaceutical market, Barre-National controlled 40 percent of the U.S. market, an entirely new market for A.L. Laboratories that represented the company's future.
Before being acquired by A.L. Laboratories, Barre-National had produced $45 million in annual revenues; by the end of 1988, the first full year under A.L. Laboratories' corporate umbrella, Barre-National's revenues jumped to $65 million, pushing A.L. Laboratories' revenue total for the year to $236.4 million. The growth of Barre-National (which, like Dumex, operated as a subsidiary of A.L. Laboratories) and the initial success recorded in the company's new market validated the decision by A.L. Laboratories' management to seek expansion through the manufacture and marketing of liquid generics, which promised to increase in popularity in the coming years. From 1989 to 1994, the liquid generics market was projected to nearly triple in dollar volume to reach $400 million, a substantial portion of which A.L. Laboratories expected to garner through Barre-National's tight grip on the market. Moreover, there was a relative paucity of competition in the field; only 12 percent of branded (non-generic) liquid pharmaceuticals had generic counterparts, while 25 percent of the branded pharmaceutical tablet and capsule products competed against generic equivalents. With these encouraging signs pointing toward potentially dramatic growth, Cohen gave the rest of the company's management a formidable goal. Cohen expected A.L. Laboratories to be a $1 billion company by the end of the 1990s.
In late 1989, pharmaceutical sales composed 65 percent of the company's business, while animal health products contributed 20 percent. Although A.L. Laboratories had shifted its focus to pharmaceuticals for human use, the company still held an enviable position in the animal antibiotic industry, which continued to suffer from allegations that many of the products contained harmful residues. A.L. Laboratories had avoided these charges and earned a profitable reputation as one of the few reliable animal antibiotic manufacturers. Barre-National, by now in its second full year under A.L. Laboratories management, continued to grow, contributing $85 million, or 30 percent, to its parent company's revenue total. Shortly after Cohen made his prediction that A.L. Laboratories would reach the $1 billion plateau by the end of the decade, the company recorded $266.2 million in revenue. Although still a long way from the target figure, Cohen had plans to help A.L. Laboratories achieve the goal.
Under New Leadership in the 1990s
The most expeditious path was through the acquisition of pharmaceutical and animal antibiotic companies, a course of action for which Cohen prepared. Also during this time, Cohen, then in his late 60s, began looking for a suitable replacement for himself. This would be the first change in leadership in the company's history. After months of discussions in 1990, a suitable replacement was found in Richard P. Storm, an executive with 30 years of experience in the pharmaceutical industry. Of British and Norwegian descent, Storm was born in Argentina, where he later worked for Pfizer Inc., spending 19 years at the Argentinean operations of the giant pharmaceutical company. After leaving Pfizer, Storm moved to the United States in 1980 to join Abbott Laboratories, where he spent another four years before joining Rorer Group, a Fort Washington, Pennsylvania-based pharmaceutical manufacturer.
Selected as A.L. Laboratories' president and chief executive officer in January 1991, Storm left his position as executive vice-president at Rorer Group and immediately set himself to the task of achieving his new company's financial goal. The year of A.L. Laboratories predicted ascension to the $1 billion level had been formally pushed back to 2000, but Storm, nevertheless, approached its fulfillment with a sense of urgency. Several months before Storm assumed stewardship of A.L. Laboratories, the company had purchased NMC Laboratories Inc., a Glendale, New York-based manufacturer and marketer of prescription creams and ointments. The acquisition of NMC added $14 million to A.L. Laboratories annual revenue total, but, by the time Storm came aboard, Cohen had much more to offer his protégé.
In the months leading up to Storm's selection, Cohen had arranged the financing to launch a series of acquisitions, obtaining $220 million from a consortium of 11 European banks led by Union Bank of Norway. Accordingly, Cohen not only handed Storm the reins of the company in January 1991, but also a considerably fattened corporate wallet. Storm took both, clearly elated by the opportunity before him. In an article for the Business Journal of New Jersey, Storm related, 'It has been my objective to be a CEO of a NYSE-listed company. This is a major move; hopefully, the last in my career.' To the New York Times, Storm succinctly related that becoming chief executive of A.L. Laboratories 'fulfills all my ambitions.'
Six months later, however, Storm was gone, leaving without explanation at the end of July 1991. In response to Storm's departure, company officials stated that his background at large pharmaceutical companies did not conform to A.L. Laboratories entrepreneurial style. To fill the void left by Storm's exit, the company created a three-member office of the chief executive comprising Jeffrey E. Smith, A.L. Laboratories' chief financial officer since 1984, Cohen, and Sissener, who had been and continued to be the board's chairperson.
Two months after Storm left, A.L. Laboratories acquired the entire feed additive line of Solvay Animal Health Inc., a $12 million company that fleshed out A.L. Laboratories' animal health product line. The following year, in 1992, a story of significant importance to A.L. Laboratories appeared in the Wall Street Journal, announcing the possibility that the company was intending to combine some or all of its businesses with Apothekernes Laboratorium, which by this point held a less than 40 percent stake in the company. Actually, talk of somehow combining the complementary businesses of Apothekernes Laboratorium and A.L. Laboratories first began in the mid-1980s, but, by the early 1990s, these discussions had become much more purposeful and explicit. After several years of negotiations, it was agreed in October 1994 that A.L. Laboratories would purchase the pharmaceutical, animal health, aquatic animal health, and bulk antibiotics businesses of its former parent, Apothekernes Laboratorium.
Sissener asserted that the combined operations would help the company position itself for global competition in the specialized industry of human pharmaceutical and animal health products. Beyond the material assets gained, the acquisition led to a name change for A.L. Laboratories to A.L. Pharma Inc., which the company's management felt better reflected the scope of the company's operations and its greater interest in pharmaceuticals. A.L. Pharma also shifted its management structure to encompass five divisions, each consisting of a number of individual companies: U.S. Pharmaceuticals, International Pharmaceuticals, Fine Chemicals, Animal Health and Aquatic Animal Health. The reorganization entailed staff reductions totaling more than one hundred, product line and facility rationalizations, and the discontinuance of some outside research and development projects. Almost exactly one year later, the company changed its name again, to Alpharma Inc., and began to use this name for all its activities and on all its product packaging.
By 1996, Alpharma's attractive 'niche focus' had enabled it to prosper. In addition to the 40 percent of its sales that were still in cough and flu products, it had become the world's largest producer of vaccines for farmed fish, controlling 70 percent of the world market for fish vaccines. The move into aquatic animal health had come about with the 1994 merger; A.L. Laboratories brought with it Biomed, which had helped develop one of the first commercially available fish vaccines that made widespread use of antibiotics unnecessary in fish farming. As aquaculture represented a rapidly growing industry--worldwide demand for fish protein was increasing at the same time that the wild fish harvest was declining--this market specialty represented a potential boon for Alpharma. In another promising venture, the company also began to market a generic version of the widely popular Rogaine product to combat hair loss in 1996.
By 1997, Alpharma had more than 170 prescription and over-the-counter products and pulled in revenue of $500 million. Intent upon broadening its market leadership positions through geographical expansion, it established a new subsidiary, Alpharma do Brasil Ltda., bringing its international market presence to 50 countries. As an increasing number of governments in Europe began to encourage generic drug substitution for branded drugs, the company focused on capturing lead market share on that continent as well. It also purchased the decoquinate business of Rhone-Poulenc Animal Nutrition, and, in the next several years, began to sell Decox worldwide. (Decoquinate is an anticoccidial feed additive developed for poultry and used in beef cattle and calves.) The company also purchased Cultor Food Sciences' non-core polymyx (an antibiotic) business and, in December, undertook an alliance with Xactdose, a packaging company specializing in oral liquid unit-dose medications, that would enable it to take a run at the managed care and hospital markets. In 1998, as the drug industry saw continued consolidation of its customer base--chains and wholesalers becoming bigger while partnering with generics companies--Alpharma repackaged many of its popular medications in unit doses.
In 1999, Alpharma entered the emerging French generic drug market through the acquisition of Jumer laboratories. It subsequently broadened its presence in Germany with the purchase of the Isis Pharma Group, the fifth largest generic firm in that country. These acquisitions, combined with the 1998 purchase of Cox Pharmaceuticals from Hoechst A.G., which allowed Alpharma to expand into Britain, established it as the second largest generics supplier in the United Kingdom and one of Europe's largest generics manufacturers. They solidified Alpharma's position as a leading generic manufacturer and supported its strategic agenda of moving into higher-margin generic items and branded generics.
Internal reorganization continued in 1998 with the appointment of Gert Munthe to the newly established position of president and chief operating officer. Munthe became CEO in June 1999, preparing to take over when Sissener stepped down in 1999. Munthe resigned, however, citing personal reasons for his withdrawal from company affairs in late 1999 and was replaced by Ingrid Wiik, who had been president of the company's International Pharmaceuticals Division as next in line for Sissener.
Under Wiik, who was elected president and chief executive officer in January 2000, Alpharma continued its strategic move into the higher margin market of branded products. It entered into an alliance with Ascent Pediatrics, Inc., a company that provided branded pharmaceutical products to the $3.5 billion pediatric market. It expanded its animal product line by acquiring I.D. Russell Laboratories, privately held manufacturer of therapeutic animal health products, and Southern Cross Biotech, manufacturer of a product that aids in the cost-effective production of lean pork. It also obtained exclusive rights to worldwide distribution of a high technology sperm analyzer and became the first generics manufacturer to market Minoxidil Topical Solution. Wiik, in her preface to the company's 1999 annual report, stated that Alpharma would remain competitive by anticipating and responding to its rapidly changing market environment, including the evolution of biotechnology and e-commerce, and that the company remained committed to meeting the growing demand for affordable medicine and safe food.
Principal Subsidiaries: Barre Parent Corp.; Barre-National, Inc.; Dumex; G.F.Reilly Co.; ParMed Pharmaceuticals, Inc.; Biomed, Inc.; NMC Laboratories, Inc.; Able Acquisitions, Inc.
Principal Divisions: U.S. Pharmaceuticals Division (USPD); International Pharmaceuticals Division (IPD); Fine Chemicals Division (FCD); Animal Health Division (AHD); Aquatic Animal Health Division (AAHD).
Principal Competitors: Johnson & Johnson; Merck & Co., Inc.; Watson Pharmaceuticals, Inc.; KV Pharmaceutical Co.; IVAX Corporation; Perrigo Co.