UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission file number
December 31, 2003 1-1225
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Wyeth
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(Exact name of registrant as specified in its charter)
Delaware 13-2526821
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
Five Giralda Farms, Madison, NJ 07940-0874
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including
area code (973) 660-5000
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Securities registered pursuant to
Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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$2 Convertible Preferred Stock, $2.50
par value New York Stock Exchange
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Common Stock, $0.33 - 1/3 par value New York Stock Exchange
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes X No
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State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of
the last business day of the registrant's most recently completed second fiscal
quarter.
Aggregate market value at June 30, 2003 $60,628,530,512
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Outstanding at
March 1, 2004
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Common Stock, $0.33 - 1/3 par value 1,333,071,684
Documents incorporated by reference: List hereunder the following documents if
incorporated by reference and the Part of the Form 10-K into which the document
is incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statements; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes.
(1) 2003 Annual Report to Stockholders - In Parts I, II and IV
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(2) Proxy Statement to be filed on or about March 17, 2004 - In Part III
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PART I
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ITEM 1. BUSINESS
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General
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Unless stated to the contrary, or unless the context otherwise
requires, references to the Company in this report include Wyeth and
subsidiaries.
Wyeth, a Delaware corporation (the "Company") organized in 1926, is
currently engaged in the discovery, development, manufacture,
distribution and sale of a diversified line of products in three
primary businesses: Wyeth Pharmaceuticals ("Pharmaceuticals"), Wyeth
Consumer Healthcare ("Consumer Healthcare") and Fort Dodge Animal
Health ("Animal Health"). Pharmaceuticals include branded human
ethical pharmaceuticals, biologicals and nutritionals. Principal
products include neuroscience therapies, cardiovascular products,
nutritionals, gastroenterology drugs, anti-infectives, vaccines,
oncology therapies, musculoskeletal therapies, hemophilia
treatments, immunological products and women's health care products.
Consumer Healthcare products include analgesics, cough/cold/allergy
remedies, nutritional supplements, and hemorrhoidal, asthma and
other relief items sold over-the-counter. Principal Animal Health
products include vaccines, pharmaceuticals, parasite control and
growth implants.
Prior to July 15, 2002, the Company was the beneficial owner of
223,378,088 shares of Immunex Corporation ("Immunex") common stock.
On July 15, 2002, Amgen Inc. ("Amgen") completed its acquisition of
Immunex. Under the terms of the acquisition agreement, each share of
Immunex common stock was exchanged for 0.44 shares of Amgen common
stock and $4.50 in cash. Accordingly, the Company received
98,286,358 shares of Amgen common stock (representing approximately
7.7% of Amgen's outstanding common stock) and $1.005 billion in cash
in exchange for all of its shares of Immunex common stock. The
Company began selling its Amgen shares in the 2002 fourth quarter
and completed the sales of all such shares as of January 21, 2003
for aggregate net proceeds of $4.831 billion. The Company and Amgen
continue to co-promote ENBREL in the United States and Canada with
the Company having exclusive international rights to ENBREL. The
financial aspects of the existing licensing and marketing rights to
ENBREL remain substantially unchanged.
In October 2000, the Company had increased its ownership in Immunex
(subsequently acquired by Amgen) from approximately 53% to
approximately 55% by converting a $450 million convertible
subordinated note into 15,544,041 newly issued shares of common
stock of Immunex. In November 2000, through a public equity
offering, the Company sold 60.5 million shares of Immunex common
stock. Proceeds to the Company were approximately $2.405 billion
resulting in a pre-tax gain on the sale of $2.061 billion. The
public equity offering reduced the Company's ownership in Immunex,
at that time, from approximately 55% to approximately 41%, which
represented the ownership at December 31, 2000. As a result of the
reduction in ownership below 50%, the Company included the financial
results of Immunex on an equity basis retroactive to January 1,
2000.
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Additional information relating to Immunex/Amgen common stock
transactions is set forth in Note 2 of the Notes to Consolidated
Financial Statements in the Company's 2003 Annual Report to
Stockholders and is incorporated herein by reference. Also included
in Note 2 are descriptions of the 2002 first quarter sale of the
Company's Rhode Island facility to Immunex (subsequently acquired by
Amgen) and 2003, 2002 and 2001 net gains on sales of assets
including the 2002 fourth quarter sale of the Company's generic
human injectables product line to Baxter Healthcare Corporation.
On June 30, 2000, the Company completed the sale of its Cyanamid
Agricultural Products business, a manufacturer, distributor, and
seller of crop protection and pest control products worldwide, to
BASF Aktiengesellschaft ("BASF") for $3.800 billion in cash and the
assumption of certain debt. The Company recorded an after-tax loss
on the sale of this business and reflected this business as a
discontinued operation in the 2000 first quarter. The loss on the
sale was determined based on the difference in the book value of the
net assets sold compared with the price received for these net
assets. The sale of the Cyanamid Agricultural Products business
produced a gain for tax purposes and a loss for book purposes, as
the Company did not get a step-up in cost basis for tax purposes.
This divergence, primarily caused by goodwill, was included in the
basis for book purposes but was not included in the basis for tax
purposes. The lower tax basis created a taxable gain that required a
tax provision of approximately $855.2 million. This tax provision
was combined with the pre-tax book loss of approximately $717.8
million for a total after-tax loss on the sale of the business of
$1.573 billion.
Reportable Segments
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Financial information, by reportable segment, for each of the three
years ended December 31, 2003 is set forth in Note 15 of the Notes
to Consolidated Financial Statements in the Company's 2003 Annual
Report to Stockholders and is incorporated herein by reference.
The Company has four reportable segments: Pharmaceuticals, Consumer
Healthcare, Animal Health and Corporate. The Company's
Pharmaceuticals, Consumer Healthcare and Animal Health reportable
segments are strategic business units that offer different products
and services. Beginning in the 2003 fourth quarter, the Company
changed its reporting structure to include the Animal Health
business as a separate reportable segment. The Animal Health
business was previously reported within the Pharmaceuticals segment.
Prior period information presented in Note 15 of the Notes to
Consolidated Financial Statements in the Company's 2003 Annual
Report to Stockholders was restated to be on a comparable basis. The
reportable segments are managed separately because they manufacture,
distribute and sell distinct products and provide services, which
require various technologies and marketing strategies. The Company
sells its diversified line of products to wholesalers, pharmacies,
hospitals, physicians, retailers and other health care institutions
located in various markets in more than 140 countries throughout the
world. Wholesale distributors and large retail establishments
account for a large portion of the Company's consolidated net
revenue and trade receivables, especially in the United States. The
Company's top three customers accounted for 23% and 25% of the
Company's consolidated net revenue in 2003 and 2002, respectively.
The Company's largest customer accounted for 10% of consolidated net
revenue in 2003 and 2002. The Company continuously monitors the
creditworthiness
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of its customers and has established internal policies regarding
customer credit limits. The product designations appearing in
differentiated type herein are trademarks.
PHARMACEUTICALS SEGMENT
The Pharmaceuticals segment manufactures, distributes, and sells
branded human ethical pharmaceuticals, biologicals and nutritionals.
These products are promoted and sold worldwide primarily to
wholesalers, pharmacies, hospitals, physicians, retailers, and other
human health care institutions. Some of these sales are made to
large buying groups representing certain of these customers.
Principal product categories and their respective products are:
neuroscience therapies including EFFEXOR (marketed as EFEXOR
internationally) and EFFEXOR XR; cardiovascular products including
ALTACE (co-marketed with King Pharmaceuticals, Inc.) and INDERAL;
nutritionals including S-26, 2ND AGE PROMIL and 3RD AGE PROGRESS
(international markets only); gastroenterology drugs including ZOTON
(international markets only) and PROTONIX (U.S. market only);
anti-infectives including MINOCIN and ZOSYN (marketed as TAZOCIN
internationally); vaccines including PREVNAR (marketed as PREVENAR
internationally); oncology therapies; musculoskeletal therapies
including ENBREL and SYNVISC; hemophilia treatments including
BENEFIX Coagulation Factor IX (Recombinant) and REFACTO albumin-free
formulated Factor VIII (Recombinant); immunological products
including RAPAMUNE; and women's health care products including
PREMARIN, PREMPRO, PREMPHASE, and ALESSE (marketed as LOETTE
internationally). The Company manufactures these products in the
United States and Puerto Rico, and in 16 foreign countries.
Accounting for more than 10% of consolidated net revenue in 2003,
2002 and 2001 were sales of neuroscience therapies of $2.923
billion, $2.290 billion and $1.775 billion, respectively.
Neuroscience therapies include 2003, 2002 and 2001 sales related to
the EFFEXOR family of products of $2.712 billion, $2.072 billion and
$1.542 billion, respectively. In addition, sales of women's health
care products totaling $1.865 billion, $2.456 billion and $2.777
billion accounted for more than 10% of consolidated net revenue in
2003, 2002 and 2001, respectively, which include sales of the
PREMARIN family products of $1.275 billion, $1.880 billion and
$2.074 billion, respectively. Sales of gastroenterology drugs of
$1.857 billion, which include sales of $1.493 billion related to
PROTONIX also exceeded 10% of consolidated net revenue in 2003.
Except as noted above, no other single pharmaceutical product or
category of products accounted for more than 10% of consolidated net
revenue in 2003, 2002 or 2001.
CONSUMER HEALTHCARE SEGMENT
The Consumer Healthcare segment manufactures, distributes and sells
over-the-counter health care products. Principal Consumer Healthcare
product categories and their respective products are: analgesics
including ADVIL; cough/cold/allergy remedies including ROBITUSSIN,
DIMETAPP and ALAVERT; nutritional supplements including CENTRUM
products, CALTRATE and SOLGAR products; and hemorrhoidal, asthma and
other relief items including CHAPSTICK. These products are generally
sold to wholesalers and retailers and are promoted primarily to
consumers
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worldwide through advertising. These products are manufactured in
the United States and Puerto Rico, and in nine foreign countries.
No single Consumer Healthcare product or category of products
accounted for more than 10% of consolidated net revenue in 2003,
2002 or 2001.
ANIMAL HEALTH SEGMENT
The Animal Health segment manufactures, distributes and sells animal
biological and pharmaceutical products. Principal Animal Health
product categories include pharmaceuticals, vaccines including WEST
NILE - Innovator and parasite control including CYDECTIN, and growth
implants. These products are sold to wholesalers, veterinarians and
other animal health care providers. The Company manufactures these
products in the United States and in seven foreign countries.
No single Animal Health product or category of products accounted
for more than 10% of consolidated net revenue in 2003, 2002 or 2001.
CORPORATE SEGMENT
Corporate is responsible for the treasury, tax and legal operations
of the Company's businesses and maintains and/or incurs certain
assets, liabilities, income, expenses, gains and losses related to
the overall management of the Company which are not allocated to the
other reportable segments. These items include interest expense and
interest income, gains on the sales of investments and other
corporate assets, gains relating to Immunex/Amgen common stock
transactions, certain litigation provisions, including the REDUX and
PONDIMIN litigation charges, special charges and other miscellaneous
items. See Note 15 of the Notes to Consolidated Financial Statements
in the Company's 2003 Annual Report to Stockholders for Corporate
segment information, as well as additional disclosure relating to
certain significant items listed above.
Sources and Availability of Raw Materials
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Generally, raw materials and packaging supplies are purchased in the
open market from various outside vendors. The loss of any one source
of supply would not have a material adverse effect on the Company's
future results of operations. However, finished dosage forms of
SYNVISC are produced by a single third-party manufacturer, and
certain raw materials for REFACTO, RAPAMUNE, ZOTON, ZOSYN and oral
contraceptives are sourced from sole third-party suppliers.
Patents and Trademarks
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Patent protection is, in the aggregate, considered to be of material
importance in the Company's marketing of pharmaceutical products in
the United States and in most major foreign markets. Patents may
cover products, formulations, processes for, or intermediates useful
in, the manufacture of products, or the uses of products. The
Company owns, has applied for, or is licensed under, a large number
of patents, both in
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the United States and other countries. Protection for individual
products extends for varying periods in accordance with the date
of grant and the legal life of patents in countries in which
patents are granted. The protection afforded, which may also vary
from country to country, depends upon the type of patent, its
scope of coverage, and the availability of legal remedies in the
country. There is no assurance that the patents the Company is
seeking will be granted or that the patents the Company has been
granted would be found valid if challenged. Moreover, patents
relating to particular products, uses, formulations, or processes
do not preclude other manufacturers from employing alternative
processes or from marketing alternative products or formulations
that might successfully compete with the Company's patented
products.
Patent portfolios developed for products introduced by the Company
normally provide market exclusivity. The Company considers patent
protection for certain products, processes, and uses to be important
to its operations. For many of its products, in addition to compound
patent protection, the Company holds other patents on manufacturing
processes, formulations, or uses that may extend exclusivity beyond
the expiration of the compound patent. Patents are in effect for the
following major products in the United States. SYNVISC, a visco
supplementation for treatment of osteoarthritis of the knee, has
patent protection until at least 2010. The anti-infective ZOSYN has
patent protection until at least 2007. ENBREL has patent protection
until at least 2014. The anti-depressants EFFEXOR and EFFEXOR XR
have patent protection until at least 2008. (Refer herein for a
discussion of a lawsuit filed by the Company against Teva
Pharmaceuticals USA ("Teva") in connection with Teva's filing of an
Abbreviated New Drug Application ("ANDA") relating to EFFEXOR XR.)
PREMPRO, a combination estrogen and progestin product, has patent
protection until at least 2015. BENEFIX Coagulation Factor IX
(Recombinant), a blood-clotting factor for hemophilia B, has patent
protection until at least 2011. REFACTO, a recombinant factor VIII
product without human serum albumin, has patent protection until at
least 2010. PREVNAR, the Company's 7-valent pneumococcal conjugate
vaccine has patent protection until at least 2004 and patent
extension under the Hatch-Waxman Act has been applied for, which
would extend exclusivity until 2007. PROTONIX, the Company's product
for the short-term treatment of erosive esophagitis, has patent
protection until at least 2010. PROHEART and CYDECTIN, the Company's
Animal Health parasite control products, have patent protection
until at least 2007 and patent extension has been applied for which
would extend exclusivity until 2012.
The Company has other patent rights covering additional products
that have smaller net revenues. Patents on some of its newest
products and late-stage product candidates could become significant
to the Company's business in the future.
While the expiration of a product patent normally results in a loss
of market exclusivity for the covered product, commercial benefits
may continue to be derived from later-expiring patents on processes
and intermediates, patents relating to the use of products, patents
relating to novel compositions and formulations; manufacturing trade
secrets; trademark use; and marketing exclusivity that may be
available under pharmaceutical regulatory laws. The effect of
product patent expiration also depends upon many other factors such
as the nature of the market and the position of the product in it,
the growth of
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the market, the complexities and economics of the process for
manufacture of the active ingredient of the product and the
requirements of new drug provisions of the Federal Food, Drug and
Cosmetic Act or similar laws and regulations in other countries.
Additions to market exclusivity are sought in the United States and
other countries through all relevant laws, including laws increasing
patent life. Some of the benefits of increases in patent life have
been partially offset by a general increase in the number of
incentives for and use of generic products. In addition,
improvements in intellectual property laws are sought in the United
States and other countries through reform of patent and other
relevant laws and implementation of international treaties.
Outside the United States, the standard of intellectual property
protection for pharmaceuticals varies widely. While many countries
have reasonably strong patent laws, other countries currently
provide little or no effective protection for inventions or other
intellectual property rights. Under the Trade-Related Aspects of
Intellectual Property Agreement administered by the World Trade
Organization, over 140 countries have now agreed to provide
non-discriminatory protection for most pharmaceutical inventions and
to assure that adequate and effective rights are available to all
patent owners. However, in many countries, this agreement will not
become fully effective for many years. It is possible that changes
to this agreement will be made in the future that will diminish or
further delay its implementation in developing countries. It is too
soon to assess how much, if at all, the Company will benefit
commercially from these changes.
The Drug Price Competition and Patent Term Restoration Act of 1984,
commonly known as "Hatch-Waxman," made a complex set of changes to
both patent and new-drug-approval laws in the United States. Before
Hatch-Waxman, no drug could be approved without providing the U.S.
Food and Drug Administration ("FDA") complete safety and efficacy
studies, i.e., a complete New Drug Application ("NDA"). Hatch-Waxman
authorizes the FDA to approve generic versions of innovative
medicines without such information by filing an ANDA. In an ANDA,
the generic manufacturer must demonstrate only pharmaceutical
equivalence and bioequivalence between the generic version and the
NDA-approved drug - not safety and efficacy. Absent a successful
patent challenge, the FDA cannot approve an ANDA until after the
innovator's patents expire. However, after the innovator has
marketed its product for four years, a generic manufacturer may file
an ANDA alleging that one or more of the patents listed in the
innovator's NDA are invalid or not infringed. This allegation is
commonly known as a "Paragraph IV certification." The innovator must
then file suit against the generic manufacturer to protect its
patents. If one or more of the NDA-listed patents are successfully
challenged, the first filer of a Paragraph IV certification may be
entitled to a 180-day period of market exclusivity over all other
generic manufacturers. In recent years, generic manufacturers have
used Paragraph IV certifications extensively to challenge patents on
a wide array of innovative pharmaceuticals, and the Company expects
this trend to continue.
The Company has filed a suit against Teva alleging that the filing
of an ANDA by Teva seeking FDA approval to market 37.5 mg, 75 mg and
150 mg venlafaxine HCl extended-release capsules infringes certain
of the Company's patents. Venlafaxine HCl is the
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active ingredient used in EFFEXOR XR. This matter is more fully
described in Item 3. Legal Proceedings, which discussion is
incorporated herein by reference.
Aventis Pharma Deutschland ("Aventis") and King Pharmaceuticals,
Inc. ("King") have filed suit against Cobalt Pharmaceuticals
("Cobalt"). The amended complaint alleges that the filing of an ANDA
by Cobalt seeking FDA approval to market generic 1.25 mg, 2.5 mg, 5
mg, and 10 mg ramipril capsules infringes two Aventis patents. The
Company co-promotes ALTACE (ramipril) together with King. This
matter is more fully described in Item 3. Legal Proceedings, which
discussion is incorporated herein by reference.
Sales in the Consumer Healthcare business are largely supported by
the Company's trademarks and brand names. These trademarks and brand
names are a significant part of the Company's business and in some
countries have a perpetual life as long as they remain in use. In
some other countries, trademark protection continues as long as
registered. Registration is for a fixed term and can be renewed
indefinitely. In the aggregate, the value of these trademarks and
brand names are important to the Company's operation.
Seasonality
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Sales of Consumer Healthcare products are affected by seasonal
demand for cough/cold products and, as a result, second quarter
results for these products tend to be lower than results in other
quarters.
Competition
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PHARMACEUTICALS SEGMENT
The Company operates in the highly competitive pharmaceutical
industry. The Company has many major multinational competitors and
numerous smaller U.S. and foreign competitors. Based on net revenue,
the Company believes it ranks within the top 10 competitors in the
global pharmaceutical industry.
The Company's competitive position is affected by many factors
including prices; costs and resources available to develop, enhance
and promote products; customer acceptance; product quality and
efficacy; patent protection; development of alternative therapies
by competitors; scientific and technological advances; the
availability of generic substitutes; and governmental actions
affecting drug importation, pricing and generic substitutes. In the
United States, the growth of managed care organizations, such as
health maintenance organizations and pharmaceutical benefit
management companies, has resulted in increased competitive
pressures. Moreover, the continued growth of generic substitutes is
further promoted by legislation, regulation and various incentives
enacted and promulgated in both the public and private sectors.
PREMARIN, the Company's principal conjugated estrogens product
manufactured from pregnant mare's urine, and related products
PREMPRO and PREMPHASE (which are single tablet combinations of the
conjugated estrogens in PREMARIN and the progestin
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medroxyprogesterone acetate) are the leaders in their categories and
contribute significantly to net revenue and results of operations.
PREMARIN's natural composition is not subject to patent protection
(although PREMPRO has patent protection). PREMARIN, PREMPRO and
PREMPHASE are indicated for the treatment of certain menopausal
symptoms. They also are approved for the prevention of osteoporosis,
a condition involving a loss of bone mass in postmenopausal women.
Their use for that purpose in women without symptoms should be
limited to cases where non-hormonal treatments have been seriously
considered and rejected. Estrogen-containing products manufactured
by other companies have been marketed for many years for the
treatment of menopausal symptoms. During the past several years,
other manufacturers have introduced products for the treatment
and/or prevention of osteoporosis. New products containing different
estrogens and/or different progestins than those found in PREMPRO
and PREMPHASE, utilizing various forms of delivery and having many
forms of the same indications, also have been introduced. Some
companies have also attempted to obtain approval for generic
versions of PREMARIN. These products, if approved, would be
routinely substitutable for PREMARIN and related products under many
state laws and third-party insurance payer plans. In May 1997, the
FDA announced that it would not approve certain synthetic estrogen
products as generic equivalents of PREMARIN given known
compositional differences between the active ingredient of these
products and PREMARIN. Although the FDA has not approved any generic
equivalent to PREMARIN to date, PREMARIN will continue to be subject
to competition from existing and new competing estrogen and other
products for its approved indications and may be subject to generic
competition from either synthetic or natural conjugated estrogens
products in the future. One other company has announced that it has
applied for FDA approval of a generic version of PREMARIN derived
from the same natural source. Following a bench trial in November
2002, a federal court found, in an order issued on October 2, 2003,
that the company which had developed the estrogens to be used in
this product, Natural Biologics, Inc., had misappropriated certain
of the Company's trade secrets relating to the manufacture of
PREMARIN. The court has entered a permanent injunction that, inter
alia, bars Natural Biologics, Inc. from using the misappropriated
trade secrets and from engaging in the research, development,
production or manufacture of estrogens from urine. Wyeth v. Natural
Biologics, Inc., et al., No. 98-2469 (JNE/JGL), U.S.D.C., D. Minn.
Natural Biologics, Inc. has filed an appeal from the court's
injunction. The Company cannot predict the timing or outcome of the
appeal or of any other effort by any other company along these
lines.
Market demand for ENBREL is strong; however, the sales growth had
been constrained by limits on the existing source of supply. In
December 2002, the retrofitted Rhode Island facility owned by Amgen
was completed and manufacturing production was approved by the FDA.
Consequently, manufacturing capacity for ENBREL significantly
increased in 2003. Market demand has continued to grow and
additional manufacturing supply is projected to be required. In
April 2002, Immunex (prior to being acquired by Amgen) announced it
entered into a manufacturing agreement with Genentech, Inc. to
produce ENBREL beginning in 2004, subject to FDA approval. The
current plan for the longer term includes an additional
manufacturing facility, which is being constructed by the Company in
Ireland and expansion of the Rhode Island facility, both of which
are expected to be completed during 2005.
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Worldwide demand for PREVNAR continues to grow. The
manufacturing-related constraints that led to backorders throughout
2002 were resolved early in 2003. By April 2003, demand in the
United States and other markets where PREVNAR was available was met,
and this continued through October 2003. More than 20 million doses
of PREVNAR were produced in 2003. However, a late 2003 shutdown of
the filling lines at the Company's Pearl River, New York facility
was extended by six weeks beyond the original plan. As a result of
this shutdown and other manufacturing issues, delays in product
availability are anticipated throughout the first half of 2004 in
all markets. As a result of delays in product availability, the
Centers for Disease Control and Prevention and the European Agency
for the Evaluation of Medicinal Products have issued interim dosing
recommendations to reduce usage during the supply-constrained
period. Capacity should be enhanced throughout 2004 due to internal
improvements and third-party capacity. Although production issues
are not yet fully resolved, the Company believes 2004 production
will exceed the 2003 level.
Refer to "Patents and Trademarks" section, herein for discussion of
ANDA filings being submitted by generic competitors relating to
EFFEXOR XR and ALTACE.
CONSUMER HEALTHCARE SEGMENT
The Consumer Healthcare business has many competitors. Based on net
sales, the Company believes it ranks within the top five major
competitors in the consumer health care industry. The Company's
competitive position is affected by several factors including
resources available to develop, enhance and promote products;
customer acceptance; product quality; development of alternative
therapies by competitors; growth of generic store brands; and
scientific and technological advances.
ANIMAL HEALTH SEGMENT
The Company competes with many major multinational competitors and
numerous other producers of animal health products worldwide. Based
on net revenue, the Company believes it ranks within the top five
competitors in the worldwide animal health marketplace.
Important competitive factors include price and cost effectiveness;
development of new products and processes; customer acceptance;
quality and efficacy; patent protection; innovation; development of
new products by competitors; scientific and technological advances;
and effective promotion to veterinary professionals and consumers.
Research and Development
------------------------
Worldwide research and development activities are focused on
discovering, developing and bringing to market new products to treat
and/or prevent some of the most serious health care problems. During
2003, several major collaborative research and development
arrangements were initiated or continued with other pharmaceutical
and biotechnology companies. Research and development expenditures
totaled approximately $2.094 billion in 2003, $2.080 billion in 2002
and $1.870 billion in 2001
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with approximately 93%, 93% and 94% of these expenditures in the
Pharmaceuticals segment in 2003, 2002 and 2001, respectively.
At December 31, 2003, the Company's significant new product
opportunities included two New Drug Applications, one preliminary
market approval application and 12 biologics license applications
filed with the FDA for review, and 60 active Investigational New
Drug Applications. Additionally, the Company has filed six
Supplemental Drug Applications seeking approval for significant new
uses of existing products.
During 2003, FDA approval was granted for ENBREL to reduce the signs
and symptoms in patients with active ankylosing spondylitis ("AS");
in early 2004, the European Commission also approved ENBREL for
adults with severe active AS. Additionally, ENBREL received FDA
approval for an expanded indication to inhibit the progression of
structural damage of active arthritis in patients with psoriatic
arthritis and an indication to improve physical functions in
patients with moderately-to-severely active rheumatoid arthritis.
Finally, in August 2003 the FDA approved a once-weekly dosing
schedule for ENBREL.
New low-dose formulations of PREMPRO gained FDA approval in March
and June 2003 and also received approval for expanded uses to
include the prevention of postmenopausal osteoporosis. In April and
July 2003, the FDA approved a new low-dose strength of PREMARIN for
treatment of vasomotor symptoms and postmenopausal osteoporosis.
Also in April, the FDA approved RAPAMUNE for a new indication that
provides for withdrawal of cyclosporine from the immunosuppressive
regimen two to four months after renal transplantation in patients
at low to moderate immunologic risk.
During 2003, the Company launched over-the-counter products
ROBITUSSIN COUGHGELS and CHILDREN'S DIMETAPP ND NON-DROWSY ALLERGY.
Regulation
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The Company's various health care products are subject to regulation
by government agencies throughout the world. The primary emphasis of
these regulatory requirements is to assure the safety and
effectiveness of the Company's products. In the United States, the
FDA, under the Federal Food, Drug and Cosmetic Act and the Public
Health Service Act, regulates many of the Company's health care
products, including human and animal pharmaceuticals, vaccines, and
consumer health care products. The Federal Trade Commission ("FTC")
has the authority to regulate the promotion and advertising of
consumer health care products including over-the-counter drugs and
dietary supplements. The U.S. Department of Agriculture regulates
the Company's domestic animal vaccine products. The FDA's
enforcement powers include the imposition of criminal and civil
sanctions against companies, including seizures of regulated
products, and criminal sanctions against individuals. The FDA's
enforcement powers also include its inspection of the numerous
facilities operated by the Company. To facilitate compliance, the
Company from time to time may institute voluntary compliance actions
such as product recalls when it believes it is appropriate to do so.
In addition, many states have similar regulatory requirements. Most
of the Company's pharmaceutical products, and an
I-10
increasing number of its consumer health care products, are
regulated under the FDA's new drug approval processes, which
mandate pre-market approval of all new drugs. Such processes
require extensive time, testing and documentation for approval,
resulting in significant costs for new product introductions. The
Company's U.S. Pharmaceuticals business is also affected by the
Controlled Substances Act, administered by the Drug Enforcement
Administration, which regulates strictly all narcotic and
habit-forming drug substances. In addition, in the countries
where the Company does business outside the United States, it is
subject to regulatory and legislative climates that, in many
instances, are similar to or more restrictive than that described
above. The Company devotes significant resources to dealing with
the extensive federal, state and local regulatory requirements
applicable to its products in the United States and internationally.
Federal law also requires drug manufacturers to pay rebates to state
Medicaid programs in order for their products to be eligible for
federal matching funds under the Social Security Act. Additionally,
a number of states are, or may be, pursuing similar initiatives for
rebates and other strategies to contain the cost of pharmaceutical
products. The federal Vaccines for Children entitlement program
enables states to purchase vaccines at federal vaccine prices and
limits federal vaccine price increases in certain respects. Federal
and state rebate programs are expected to continue.
The FDA Modernization Act, which was passed in 1997, as extended by
the Best Pharmaceuticals for Children Act, which was passed in 2002,
includes a Pediatric Exclusivity Provision that may provide an
additional six months of market exclusivity in the United States for
new or currently marketed drugs, if certain pediatric studies
requested by the FDA are completed by the applicant. The Company is
considering seeking exclusivity based on pediatric studies for
certain of the Company's products.
The Company's Wyeth Pharmaceuticals division, a related subsidiary,
and certain employees (including an executive officer of the
Company) are subject to a consent decree entered into with the FDA
in October 2000 following the seizure in June 2000 from the
Company's distribution centers in Tennessee and Puerto Rico of a
small quantity of certain of the Company's products manufactured at
the Company's Marietta, Pennsylvania facility. The seizures were
based on FDA allegations that products were not manufactured in
accordance with current Good Manufacturing Practices. The consent
decree, which has been approved by the U.S. District Court for the
Eastern District of Tennessee, does not represent an admission by
the Company or the employees of any violation of the Federal Food,
Drug and Cosmetic Act or its regulations. The consent decree allows
the continued manufacture of all of the products that the Company
intends to manufacture at its Marietta, Pennsylvania facility, as
well as the Company's Pearl River, New York facility, subject to
review by independent consultants of manufacturing records prior to
distribution of individual lots. In addition, as provided in the
consent decree, an expert consultant has conducted a comprehensive
inspection of the Marietta and Pearl River facilities and the
Company has identified various actions to address the consultant's
observations. The Company is in an ongoing process of completing
these actions and obtaining verification of the Company's actions by
the expert consultant. The verification process is subject to review
by the FDA.
I-11
Health care costs will continue to be the subject of attention in
both the public and private sectors in the United States. Similarly,
health care spending, including pharmaceutical pricing, is subject
to increasing governmental review in international markets. The
Company cannot predict whether future health care initiatives will
be adopted or the extent to which the Company's business may be
affected by these initiatives or other potential future legislative
or regulatory developments.
Environmental
-------------
Certain of the Company's operations are affected by a variety of
federal, state and local environmental protection laws and
regulations and the Company has, in a number of instances, been
notified of its potential responsibility relating to the generation,
storage, treatment and disposal of hazardous waste. In addition, the
Company has been advised that it may be a responsible party in
several sites on the National Priority List created by the
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), commonly known as Superfund (See Item 3. Legal
Proceedings). In connection with the spin-off in 1993 by American
Cyanamid Company (now known as Wyeth Holdings Corporation)
("Cyanamid") of Cytec Industries Inc. ("Cytec"), Cyanamid's former
chemicals business, Cytec assumed the environmental liabilities
relating to the chemicals businesses, except for the former chemical
business site at Bound Brook, New Jersey, and certain sites for
which there is shared responsibility between Cyanamid and Cytec.
This assumption is not binding on third parties, and if Cytec were
unable to satisfy these liabilities, they would, in the absence of
other circumstances, be enforceable against Cyanamid. The Company
has no reason to believe that it has any practical exposure to any
of the liabilities against which Cytec has agreed to assume and
indemnify Cyanamid. Cyanamid was acquired by the Company in 1994.
Additional information on environmental matters is set forth in Note
7 of the Notes to Consolidated Financial Statements in the Company's
2003 Annual Report to Stockholders and is incorporated herein by
reference.
Employees
---------
At December 31, 2003, the Company had 52,385 employees worldwide,
with 28,500 employed in the United States including Puerto Rico.
Approximately 15% of the Company's worldwide employees are
represented by various collective bargaining groups. Relations with
most organized labor groups remain relatively stable.
Financial Information about the Company's U.S. and International
----------------------------------------------------------------
Operations
----------
Financial information about U.S. and international operations for
each of the three years ended December 31, 2003 is set forth in Note
15 of the Notes to Consolidated Financial Statements in the
Company's 2003 Annual Report to Stockholders and is incorporated
herein by reference.
I-12
The Company's operations outside the United States are conducted
primarily through subsidiaries. International net revenue in 2003
amounted to 40% of the Company's total worldwide net revenue.
The Company's international businesses are subject to risks of
currency fluctuations, governmental actions and other governmental
proceedings, which are inherent in conducting business outside of
the United States. The Company does not regard these factors as
deterrents to maintaining or expanding its non-U.S. operations.
Additional information about international operations is set forth
under the caption "Quantitative and Qualitative Disclosures about
Market Risk" in Management's Discussion and Analysis of Financial
Condition and Results of Operations in the Company's 2003 Annual
Report to Stockholders and is incorporated herein by reference.
Availability of Information
---------------------------
The annual report on Form 10-K and all other Company periodic
reports (including quarterly reports on Form 10-Q, current reports
on Form 8-K and all amendments thereto) are available promptly after
filing with the Securities and Exchange Commission ("SEC") on the
Company's Internet website at www.wyeth.com. Copies are also
available, without charge, by contacting Wyeth Investor Relations
at (973) 660-5000.
ITEM 2. PROPERTIES
----------
The Company's corporate headquarters and the headquarters of its
Consumer Healthcare business are located in Madison, New Jersey. The
Company's U.S. and international Pharmaceuticals operations are
headquartered in owned facilities in Collegeville and Great Valley,
Pennsylvania. The Company's Animal Health business is headquartered
in Overland Park, Kansas, a leased facility. The Company's
international subsidiaries and affiliates, which generally own their
properties, have manufacturing facilities in 17 countries outside
the United States.
The properties listed below are the principal manufacturing plants
(M) and research laboratories (R) of the Company as of December 31,
2003, listed in alphabetical order by state or country. All of these
properties are owned except certain facilities in Guayama, Puerto
Rico, which are under lease. The Company also owns or leases a
number of other smaller properties worldwide, which are used for
manufacturing, research, warehousing and office space.
Pharmaceuticals (P), Consumer Healthcare (C) and Animal Health (A):
United States: Reportable Segment
-------------- ------------------
Charles City, Iowa (M) (A)
Fort Dodge, Iowa (M, R) (A)
Andover, Massachusetts (M, R) (P)
Cambridge, Massachusetts (R) (P)
Princeton, New Jersey (R) (P)
Chazy, New York (R) (P)
Pearl River, New York (M, R) (P) (C)
Rouses Point, New York (M, R) (P) (C)
Sanford, North Carolina (M, R) (P)
Collegeville, Pennsylvania (R) (P)
I-13
United States: Reportable Segment
-------------- ------------------
Carolina, Puerto Rico (M) (P)
Guayama, Puerto Rico (M) (P) (C)
Richmond, Virginia (M, R) (P) (C)
International: Reportable Segment
-------------- ------------------
St. Laurent, Canada (M, R) (P) (C)
Suzhou, China (M) (P) (C)
Havant, England (M, R) (P) (C)
Ghatkopar, India (M) (P)
Askeaton, Ireland (M, R) (P)
Newbridge, Ireland (M) (P)
Catania, Italy (M, R) (P) (A)
Shiki, Japan (M, R) (P)
Vallejo, Mexico (M) (P) (C)
Cabuyao, Philippines (M) (P)
Tuas, Singapore (M) (P)
Gerona, Spain (M, R) (A)
Hsin-Chu Hsien, Taiwan (M) (P) (C) (A)
The Company has pharmaceutical manufacturing facilities under
construction in Grange Castle, Ireland. Further, the Company is
working to support larger scale manufacturing in Sanford, North
Carolina, Guayama, Puerto Rico and Newbridge, Ireland.
The Company believes its properties to be adequately maintained and
suitable for their intended use. The facilities generally have
sufficient capacity for existing needs and expected near-term growth
and expansion projects are undertaken as necessary to meet future
needs.
I-14
ITEM 3. LEGAL PROCEEDINGS
-----------------
The Company and its subsidiaries are parties to numerous lawsuits
and claims arising out of the conduct of its business, including
product liability and other tort claims.
The Company has been named as a defendant in numerous legal actions
relating to the diet drugs PONDIMIN (which in combination with
phentermine, a product that was not manufactured, distributed or
sold by the Company, was commonly referred to as "fen-phen") or
REDUX, which the Company estimated were used in the United States,
prior to their 1997 voluntary market withdrawal, by approximately
5.8 million people. These actions allege, among other things, that
the use of REDUX and/or PONDIMIN, independently or in combination
with phentermine, caused certain serious conditions, including
valvular heart disease.
On October 7, 1999, the Company announced a nationwide class action
settlement (the "settlement") to resolve litigation brought against
the Company regarding the use of the diet drugs REDUX or PONDIMIN.
The settlement covered all claims arising out of the use of REDUX or
PONDIMIN, except for claims of primary pulmonary hypertension
("PPH"), and was open to all REDUX or PONDIMIN users in the United
States.
On November 23, 1999, U.S. District Judge Louis C. Bechtle granted
preliminary approval of the settlement and directed that notice of
the settlement terms be provided to class members. The notice
program began in December 1999. In early May 2000, the district
court held a hearing on the fairness of the terms of the settlement,
with an additional one-day hearing on August 10, 2000. On August 28,
2000, Judge Bechtle issued an order approving the settlement.
Several appeals were taken from that order to the U.S. Court of
Appeals for the Third Circuit. All but one of those appeals was
withdrawn during 2001, and, on August 15, 2001, the Third Circuit
affirmed the approval of the settlement. When no petitions to the
U.S. Supreme Court for certiorari were filed by January 2, 2002, the
settlement was deemed to have received final judicial approval on
January 3, 2002.
As originally designed, the settlement was comprised of two
settlement funds. Fund A (with a value at the time of settlement of
$1 billion, plus $200.0 million for legal fees) was created to cover
refunds, medical screening costs, additional medical services and
cash payments, education and research costs, and administration
costs. Fund A has been fully funded by contributions by the Company.
Fund B (which was to be funded by the Company on an as-needed basis
up to a total of $2.550 billion) would compensate claimants with
significant heart valve disease. Any funds remaining in Fund A after
all Fund A obligations were met were to be added to Fund B to be
available to pay Fund B injury claims. Payments into the fund may
continue, if necessary, until 2018.
In December 2002, following a joint motion by the Company and
plaintiffs' counsel, the Court approved an amendment to the
settlement agreement which provided for the merger of Funds A and B
into a combined fund which will now cover all expenses and injury
claims in connection with the settlement. The effect of the merger
is to accelerate
I-15
the spillover of the expected remainder in Fund A, which is now
available to pay Fund B claims. The merger of the two funds took
place in January 2003.
Diet drug users choosing to opt out of the settlement class were
required to do so by March 30, 2000. The settlement agreement also
gave class members who participate in the settlement the opportunity
to opt out of the settlement at two later stages, although they
remain members of the class and there are restrictions on the nature
of claims they can pursue outside of the settlement. Class members
who were diagnosed with certain levels of valvular regurgitation
within a specified time frame could opt out following their
diagnosis and prior to receiving any further benefits under the
settlement ("Intermediate opt outs"). Class members who were
diagnosed with certain levels of regurgitation and who elect to
remain in the settlement, but who later develop a more severe
valvular condition, may opt out at the time the more serious
condition develops ("Back-End opt outs"). Under either of these
latter two opt out alternatives, class members may not seek or
recover punitive damages, may sue only for the condition giving rise
to the opt out right, and may not rely on verdicts, judgments or
factual findings made in other lawsuits. The Sixth Amendment to the
settlement agreement also gave certain class members an additional
opt out right, which is discussed below.
On January 18, 2002, as collateral for the Company's financial
obligations under the settlement, the Company established a security
fund in the amount of $370.0 million. In April 2002, pursuant to an
agreement among the Company, class counsel and representatives of
the settlement trust, an additional $45.0 million (later reduced to
$35.0 million) was added to the security fund. In February 2003, as
required by the amendment to the settlement agreement merging the
two settlement funds discussed above, an additional $535.2 million
was added by the Company to the security fund bringing the total
amount in the security fund to $940.2 million at December 31, 2003.
The amounts in the security fund are owned by the Company and will
earn interest income for the Company while residing in the security
fund. The Company will be required to deposit an additional $180.0
million in the security fund if the Company's credit rating, as
reported by both Moody's and Standard & Poor's, falls below
investment grade.
The Company recorded an initial litigation charge of $4.750 billion
in connection with the REDUX and PONDIMIN litigation in 1999, an
additional charge of $7.500 billion in 2000, a third litigation
charge of $950.0 million in 2001, a fourth charge of $1.400 billion
in 2002 and a fifth litigation charge of $2 billion in the 2003
third quarter. The remaining accrual at December 31, 2003 was $3.517
billion.
The number of individuals who have filed claims within the
settlement that allege significant heart valve disease (known as
"matrix" claims) has been higher than had been anticipated. The
settlement agreement grants the Company access to claims data
maintained by the settlement trust (the "Trust"). Based on its
review of that data, the Company understands that, as of February
25, 2004, the Trust had recorded approximately 113,000 matrix-level
claim forms. Approximately 28,400 of these forms were so deficient,
incomplete or duplicative of other forms filed by the same claimant
that, in the Company's view, it is unlikely that a significant
number of these forms will result in further claims processing.
I-16
The Company's understanding of the status of the remaining
approximately 84,600 forms, based on its analysis of data received
from the Trust through February 25, 2004, is as follows.
Approximately 12,240 of the matrix claims had been processed to
completion, with those claims either paid (approximately 3,100
claims, with payments of $1.168 billion), denied (approximately
8,200) or withdrawn. Approximately 2,800 claims were in some stage
of the 100% audit process ordered in late 2002 by the federal court
overseeing the national settlement. Approximately 20,600 claims
alleged conditions that, if true, would entitle the claimant to
receive a matrix award; these claims had not yet entered the audit
process. Another approximately 20,000 claims with similar
allegations have been purportedly substantiated by physicians whose
claims are now subject to the outcome of the Trust's Integrity
Program, discussed below. Approximately 28,800 claim forms did not
contain sufficient information even to assert a matrix claim,
although some of those claim forms could be made complete by the
submission of additional information and could therefore become
eligible to proceed to audit in the future. The remaining
approximately 160 claims were in the data entry process and could
not be assessed.
In addition to the approximately 113,000 matrix claims filed as of
February 25, 2004, additional matrix claims may be filed through
2015 by class members who develop a matrix condition in the future
if they have registered with the Trust by May 3, 2003, and have
demonstrated FDA+ regurgitation (i.e., mild or greater aortic
regurgitation, or moderate or greater mitral regurgitation) or mild
mitral regurgitation on an echocardiogram conducted after diet drug
use and obtained either outside of the Trust by January 3, 2003 or
within the Trust's screening program.
The Company's understanding, based on data received from the Trust
through February 25, 2004, is that audits had produced preliminary
or final results on 3,224 of the claims that had begun the 100%
audit process since its inception. Of these, 1,156 were found to be
payable at the amount claimed and 70 were found to be payable at a
lower amount than had been claimed. The remaining claims were found
ineligible for a matrix payment, although the claimants may appeal
that determination to the federal court overseeing the settlement.
Because it remains unclear whether the claims audited to date are a
representative sample of the claims that might proceed to audit, the
Company cannot predict the ultimate outcome of the audit process.
Both the volume and types of claims seeking matrix benefits received
by the Trust to date differ materially from the epidemiological
projections on which the court's approval of the settlement
agreement was predicated. Based upon data received from the Trust,
approximately 94% of the 20,700 matrix claimants who allege
conditions that, if true, would entitle them to an award (and
approximately 99% of the approximately 20,000 claims certified by
physicians currently subject to the Trust's Integrity Program) seek
an award under Level II of the five-level settlement matrix. (Level
II covers claims for moderate or severe mitral or aortic valve
regurgitation with complicating factors; depending upon the
claimant's age at the time of diagnosis, and assuming no factors are
present that would place the claim on one of the settlement's
reduced payment matrices, awards under Level II ranged from $192,111
to $643,500 on the settlement agreement's payment matrix.)
I-17
An ongoing investigation which the Company understands is being
conducted by counsel for the Trust and discovery conducted to date
by the Company in connection with certain Intermediate and Back-End
opt out cases (brought by some of the same lawyers who have filed
these Level II claims and supported by some of the same
cardiologists who have certified the Level II claims) cast
substantial doubt on the merits of many of these matrix claims and
their eligibility for a matrix payment from the Trust. Therefore, in
addition to the 100% audit process, the Trust has embarked upon an
Integrity Program, which is designed to protect the Trust from
paying illegitimate or fraudulent claims.
Pursuant to the Integrity Program, the Trust has required additional
information concerning matrix claims purportedly substantiated by 17
identified physicians in order to determine whether to permit those
claims to proceed to audit. Based upon data obtained from the Trust,
the Company believes that approximately 20,000 matrix claims were
purportedly substantiated by the 17 physicians covered by the
Integrity Program as of February 25, 2004. It is the Company's
understanding that additional claims substantiated by additional
physicians might be subjected to the same requirements of the
Integrity Program in the future. As an initial step in the integrity
review process, each of the identified physicians has been asked to
complete a comprehensive questionnaire regarding each claim and the
method by which the physician reached the conclusion that it was
valid. The ultimate disposition of any or all claims that are
subject to the Integrity Program is at this time uncertain. Counsel
for certain claimants affected by the program have challenged the
Trust's authority to implement the Integrity Program and to require
completion of the questionnaire before determining whether to permit
those claims to proceed to audit. While that motion was denied by
the court, additional challenges to the Integrity Program are
possible.
The Trust has also adopted a program to prioritize the handling of
those matrix claims that it believes are least likely to be
illegitimate. Under the program, claims under Levels III, IV and V
will be processed and audited on an expedited basis. (Level III
covers claims for heart valve disease requiring surgery to repair or
replace the valve, or conditions of equal severity. Levels IV and V
cover complications from, or more serious conditions than, heart
valve surgery.) The program will also prioritize the auditing of,
inter alia, Level I claims, all claims filed by a claimant without
counsel (i.e., on a pro se basis) and Level II claims substantiated
by physicians who have attested to fewer than 20 matrix claims.
The Trust has indicated that one of the goals of the Integrity
Program is to recoup funds from those entities that caused the Trust
to pay illegitimate claims and the Trust has filed several lawsuits
to that end. The Trust has filed a suit alleging violations of the
Racketeer Influenced and Corrupt Organizations ("RICO") Act against
a Kansas City cardiologist who attested under oath to the validity
of over 2,500 matrix claims. The suit alleges that the cardiologist
intentionally engaged in a pattern of racketeering activity to
defraud the Trust. The Trust has also filed a lawsuit against a New
York cardiologist who attested under oath to the validity of 83
matrix claims, alleging that the cardiologist engaged in, among
other things, misrepresentation, fraud, conspiracy to commit fraud,
and gross negligence.
I-18
Finally, the Trust has filed a number of motions directed at the
conduct of the companies that performed the echocardiograms on which
many matrix claims are based. In a pair of motions related to the
activities of a company known as EchoMotion, the Trust has asked the
court to stay payment of claims already audited and found payable in
whole or in part if the echocardiogram was performed by EchoMotion
and to disqualify all echocardiograms by EchoMotion that have been
used to support matrix claims that have not yet been audited. In
addition, the Trust has filed a motion seeking discovery of 14
specific companies whose echocardiograms support a large number of
claims to determine whether their practices violate the settlement.
The Trust has also sent letters to matrix claimants' lawyers
requesting information about additional unidentified companies and
has asked the Court's permission to subpoena the claimants' lawyers
for this information if necessary. The Company has joined in certain
of these motions. The Company does not currently have information
about the number of matrix claims potentially affected by these
motions.
The Company continues to monitor the progress of the Trust's audit
process and its Integrity Program and has brought and will continue
to bring to the attention of the Trust and the court overseeing the
settlement any additional irregularities that it uncovers in the
matrix claim process. Even if substantial progress is made by the
Trust, through its Integrity Program or other means, in reducing the
number of illegitimate matrix claims, a significant number of the
claims which proceed to audit might be interpreted as satisfying the
matrix eligibility criteria, notwithstanding the possibility that
the claimants may not in fact have serious heart valve disease. If
so, matrix claims found eligible for payment after audit may cause
total payments to exceed the $3.750 billion cap of the settlement
fund.
Should the settlement fund be exhausted, most of the matrix
claimants who filed their matrix claim on or before May 3, 2003 and
who pass the audit process at a time when there are insufficient
funds to pay their claim may pursue an additional opt out right
created by the Sixth Amendment to the settlement agreement, unless
the Company first elects, in its sole discretion, to pay the matrix
benefit after audit. Sixth Amendment opt out claimants may then sue
the Company in the tort system, subject to the settlement's
limitations on such claims. In addition to the limitations on all
Intermediate and Back-End opt outs (such as the prohibition on
seeking punitive damages and the requirement that the claimant sue
only on the valve condition that gave rise to the claim), a Sixth
Amendment opt out may not sue any defendant other than the Company
and may not join his or her claim with the claim of any other opt
out. The Company cannot predict the ultimate number of individuals
who might be in a position to elect a Sixth Amendment opt out or who
may in fact elect to do so, but that number could be substantial.
If the settlement fund were to be exhausted, some individuals who
registered to participate in the settlement by May 3, 2003, who had
demonstrated either FDA+ level regurgitation or mild mitral
regurgitation on an echocardiogram completed after diet drug use and
conducted either outside of the settlement prior to January 3, 2003
or within the settlement's screening program, and who subsequently
develop (at any time before the end of 2015) a valvular condition
that would qualify for a matrix payment might elect to pursue a
Back-End opt out. Such individuals may pursue a Back-End opt out
within 120 days of the date on which they first discover or should
have discovered their matrix condition. The Company cannot predict
the ultimate number of individuals who may be
I-19
in a position to elect a Back-End opt out or who may in fact elect
to do so, but that number could also be substantial.
The Company's current understanding is that approximately 76,000
Intermediate opt out forms were submitted by May 3, 2003, the
applicable deadline for most class members (other than qualified
class members receiving echocardiograms through the Trust after
January 3, 2003, who may exercise Intermediate opt out rights within
120 days after the date of their echocardiogram). The number of
Back-End opt out forms received as of February 25, 2004 is estimated
to be approximately 20,000, although certain additional class
members may elect to exercise Back-End opt out rights in the future
(under the same procedure as described above) even if the settlement
fund is not exhausted. After eliminating forms that are duplicative
of other filings, forms that are filed on behalf of individuals who
have already either received payments from the Trust or settlements
from the Company, and forms that are otherwise invalid on their
face, it appears that approximately 78,000 individuals had filed
Intermediate or Back-End opt out forms as of February 25, 2004.
Purported Intermediate or Back-End opt outs (as well as Sixth
Amendment opt outs) who meet the settlement's medical eligibility
requirements may pursue lawsuits against the Company, but must prove
all elements of their claims - including liability, causation and
damages - without relying on verdicts, judgments or factual findings
made in other lawsuits. They also may not seek or recover punitive,
exemplary or multiple damages and may sue only for the valvular
condition giving rise to their opt out right. To effectuate these
provisions of the settlement, the federal court overseeing the
settlement has issued orders limiting the evidence that may be used
by plaintiffs in such cases. Those orders, however, are being
challenged on appeal. The appeal has been fully briefed and was
heard by a panel of the U.S. Court of Appeals for the Third Circuit
in December 2003. The panel has asked for supplemental briefing,
which has also been filed. The Company cannot predict the timing or
outcome of the appeal.
In addition to the specific matters discussed herein, the federal
court overseeing the national settlement has issued a number of
rulings concerning the processing of matrix claims and the rights
of, and limitations placed on, class members by the terms of the
settlement. Several of those rulings are being challenged on appeal.
Certain class members have also filed a number of motions, as well
as a lawsuit, attacking both the binding effect of the settlement
and the administration of the Trust. The Company cannot predict the
outcome of any of these motions or of the lawsuit.
As of February 25, 2004, approximately 28,000 individuals who had
filed Intermediate or Back-End opt out forms had filed lawsuits. The
claims of most of these 28,000 plaintiffs are now pending in federal
courts and have been or will be transferred for pretrial proceedings
to the federal court overseeing the national settlement. The Company
expects to challenge vigorously all Intermediate and Back-End opt
out claims of questionable validity or medical eligibility and the
number of such claims that meet the settlement's opt out criteria
will not be known for some time. As a result, the Company cannot
predict the ultimate number of purported Intermediate or Back-End
opt outs that will satisfy the settlement's opt out requirements,
but that number could be substantial.
I-20
As to those opt outs who are found eligible to pursue a lawsuit, the
Company also intends to vigorously defend these cases.
The Company has resolved the claims of all but a small percentage of
the "initial" opt outs (i.e., those individuals who exercised their
right to opt out of the settlement class) and continues to work
toward resolving the rest. It also continues to work toward
resolving the claims of individuals who allege that they have
developed PPH as a result of their use of the diet drugs. The
Company intends vigorously to defend those initial opt out and PPH
cases that cannot be resolved prior to trial.
On February 7, 2003, a jury in Santa Fe, New Mexico hearing the
REDUX lawsuit of Garcia v. Wyeth-Ayerst Laboratories Division of
American Home Products Corporation, et al., No. D-0101-CV-2000-1387,
1st Jud. Dist. Ct., Santa Fe Cty., New Mexico, an initial opt out
case, rendered a verdict in favor of the Company. Judgment was
subsequently entered in favor of the Company, and the plaintiff has
filed an appeal.
On November 6, 2003, a jury in the District Court of Texas, 60th
Judicial District, Jefferson County, returned a verdict in favor of
the plaintiff in the case of Hayes v. American Home Products, et
al., No. B-165,374, the first Intermediate opt out case to go to
trial. The jury in the Hayes case awarded the plaintiff $1.36
million in compensatory damages for injuries allegedly sustained by
the plaintiff due to her use of REDUX and PONDIMIN. The court
subsequently entered judgment in the amount of $588,480, based upon
a filing by the plaintiff conceding there was insufficient evidence
to support the jury's award of future medical expenses. The Company
has filed post-trial motions for judgment notwithstanding the
verdict or for a new trial and intends to pursue an appeal, if
necessary.
On November 26, 2003, a jury in Georgia Superior Court, Fulton
County, Atlanta Judicial Circuit, returned a verdict in favor of
Wyeth in the case of Eichmiller et al. v. American Home Products,
et al., Civ. A. No. 2002-CV-52077, the first Back-End opt out
case to go to trial. Judgment was subsequently entered in favor
of the Company, and the plaintiff has filed an appeal.
As noted above, in 2003, the Company increased its reserves in
connection with the REDUX and PONDIMIN diet drug matters by $2
billion, bringing the total of the charges taken to date to $16.600
billion. The $3.517 billion reserve at December 31, 2003 represents
management's best estimate of the minimum aggregate amount
anticipated to cover payments in connection with the Trust, up to
its cap, initial opt outs, PPH claims, Intermediate, Back-End or
Sixth Amendment opt outs (collectively, the "downstream" opt outs),
and the Company's legal fees related to the diet drug litigation.
Due to its inability to estimate the ultimate number of valid
downstream opt outs, and the merits and value of their claims, as
well as the inherent uncertainty surrounding any litigation, the
Company is unable to estimate the amount of any additional financial
exposure represented by the downstream opt out litigation. However,
the amount of financial exposure beyond that which has been recorded
could be significant.
The Company intends to defend itself vigorously in the diet drug
litigation and believes it can marshal significant resources and
legal defenses to limit its ultimate liability.
I-21
However, in light of the circumstances discussed above, including
the unknown number of valid matrix claims and the unknown number
and merits of valid downstream opt outs, it is not possible to
predict the ultimate liability of the Company in connection with
its diet drug legal proceedings. It is therefore not possible to
predict whether, and if so when, such proceedings will have a
material adverse effect on the Company's financial condition,
results of operations and/or cash flows and whether cash flows
from operating activities and existing and prospective financing
resources will be adequate to fund the Company's operations, pay
all liabilities related to the diet drug litigation, pay
dividends, maintain the ongoing programs of capital expenditures,
and repay both the principal and interest on its outstanding
obligations without the disposition of significant strategic core
assets and/or reductions in certain cash outflows.
The Company is a party to various lawsuits involving alleged
injuries as a result of the use of the NORPLANT SYSTEM, the
Company's implantable contraceptive containing levonorgestrel. By
final judgment dated August 14, 2002, United States District Judge
Richard A. Schell granted in part and denied in part the Company's
motion for summary judgment in the cases pending before him in the
federal multidistrict NORPLANT litigation. In re: Norplant
Contraceptive Products Liability Litigation, MDL No. 1038, U.S.D.C.,
E.D. Tex. Judge Schell concluded that the learned intermediary
doctrine barred plaintiffs' claims relating to any of 26 "Adverse
Reactions" included on the NORPLANT product labeling and that there
was insufficient evidence to support plaintiffs' allegations
relating to any side effects not among those 26 listed in the
labeling. The effect of Judge Schell's ruling was to grant summary
judgment against 2,960 plaintiffs in 710 cases (virtually all of the
plaintiffs asserting claims in the above MDL). Eighteen plaintiffs
appealed this judgment to the United States Court of Appeals for the
Fifth Circuit, which has now affirmed Judge Schell's ruling.
The Louisiana Court of Appeals for the Fourth Circuit affirmed a
lower court's certification of a statewide class of Louisiana
NORPLANT users and the Louisiana Supreme Court has refused to hear a
further appeal. Davis v. American Home Products Corporation, No. CDC
94-11684, Orleans Parish. The matter has returned to the trial court
level for further proceedings. The Company continues to believe that
it has compelling arguments against class certification, which has
been denied in all other federal and state cases.
The Company continues to defend several individual NORPLANT cases
alleging disparate injuries, including complications stemming from
the removal of NORPLANT capsules, miscarriage and stroke.
On July 9, 2002, interim findings from the Women's Health Initiative
("WHI") study evaluating hormone therapy ("HT") were released. The
estrogen plus progestin arm of the study (in which the Company's
PREMPRO product was used as the study drug) was stopped early
because of findings of slightly increased risks of breast cancer,
stroke and coronary heart disease among the women taking the drug
compared to those in the placebo group. The arm of the study
relating to the Company's PREMARIN conjugated estrogens product
continued through March 2004 when the National Institutes of Health
("NIH") announced preliminary findings from the estrogen-only arm of
the WHI study
I-22
and that it had decided to stop the study. NIH concluded that
estrogen alone does not appear to affect (either increase or
decrease) coronary heart disease and did not increase the risk of
breast cancer. In addition, NIH found an association with a
decrease in the risk of hip fracture and an increased risk of
stroke similar to the increase seen in the HT subset of the WHI
study. NIH also stated that analysis of preliminary data from the
separate Women's Health Initiative Memory Study ("WHIMS") showed
a trend toward increased risk of probable dementia and/or mild
cognitive impairment in women age 65 and older.
The Company is currently defending twenty-three class action
lawsuits relating to PREMPRO: Albertson, et al. v. Wyeth, No.
002944, Ct. Comm. Pleas, Phil. Cty., PA; Alexander, et al. v.
Wyeth, No. 03-WM-0160, U.S.D.C., Col.; Brown, et al. v. Wyeth,
No. CV03-0138 S, U.S.D.C., W.D. La.; Cook, et al. v. Wyeth, No.
4-02-CV-00529WRW, U.S.D.C., E.D. Ark.; Crosby, et al. v. Wyeth,
No. 03C2359, U.S.D.C., N.D., Ill; Cyrus, et al. v. Wyeth, No. 03
CV 754, U.S.D.C., S.D.N.Y.; Dooley, et al. v. Wyeth, No. 03-2034
KHV, U.S.D.C., D. Kan.; Favela et al. v. Wyeth, No. 02-5893DT,
U.S.D.C., C.D. Cal.; Gallo, et al. v. Wyeth, No. 02857, Ct. Comm.
Pleas, Phil. Cty., PA; Jenkins, et al. v. Wyeth, No. 03-2250,
U.S.D.C., E.D., Pa.; Katzman, et al. v. Wyeth, No. L-1285-03,
Sup. Ct., Morris Cty., NJ; Koenig, et al. v. Wyeth, No. 02-18165
CA 27, U.S.D.C., S.D. Fla.; Krueger, et al. v. Wyeth, Inc., No.
03 CV 2496, U.S.D.C., S.D. Cal.; Krznaric, et al. v. Wyeth, No.
EDCV 02-953 VAP SGL, U.S.D.C., C.D. Ga.; Kuhn, et al. v. Wyeth,
No. 02C4970, Cir. Ct., Brooke Cty., WV; Leone, et al. v. Wyeth,
No. 03CV0588, U.S.D.C., S.D., NY; Lewers, et al. v. Wyeth, No.
02C 4970, U.S.D.C., N.D. Ill.; Moradkhani, et al. v. Wyeth, No.
LACV03-7425, U.S.D.C., C.D., Ca.; Paul, et al. v. Wyeth, No.
03-2-17002-0 SEA, Super. Ct., King Cty., WA; Phelps, et al. v.
Wyeth, No. 03-80063, U.S.D.C., S.D., Fla.; Phillips, et al. v.
Wyeth, No. CV-03-005, Cir. Ct., Jefferson Cty., AL; Slater, et
al. v. Wyeth, No. 03-4016-CV-C-NKL, U.S.D.C., W.D. Mo.; and
Szabo, et al. v. Wyeth, No. SA02-757, U.S.D.C., C.D. Cal.
Plaintiffs in thirteen of the cases (Alexander, Crosby, Cyrus,
Dooley, Favela, Krueger, Krznaric, Leone, Lewers, Moradkhani,
Phelps, Slater, and Szabo) each seek to represent a nationwide class
of women who have ever ingested PREMPRO. They generally seek similar
relief on behalf of the putative class: 1) purchase price refunds;
2) medical monitoring expenses and 3) an order requiring the Company
to inform the public of the reported risks of PREMPRO. The
plaintiffs in the Albertson and Gallo cases seek to represent
classes of Pennsylvania women who have ingested the drug and seek
purchase price refunds and medical monitoring expenses on their
behalf. Plaintiffs in the Brown and Jenkins cases seek similar
relief on behalf of putative classes of Louisiana users of PREMPRO.
Plaintiffs in the Cook, Katzman, Koenig, Kuhn, Paul, and Phillips
cases are seeking similar relief on behalf of putative classes of
Arkansas, New Jersey, Florida, West Virginia, Washington, and
Alabama users of PREMPRO, respectively. There are no class actions
pending relating to PREMARIN.
In addition to the class actions, the Company is defending
approximately 300 individual actions and approximately 55
multi-plaintiff actions in various courts for personal injuries
allegedly arising out of the use of PREMARIN or PREMPRO, including
breast cancer, stroke and heart disease. Together, these cases
assert claims on behalf of approximately 800 women allegedly injured
by PREMPRO or PREMARIN.
I-23
The federal Judicial Panel on Multidistrict Litigation ("JPML") has
ordered that all federal PREMPRO cases (including the federal
putative class actions described above) be transferred for
coordinated pretrial proceedings to the United States District Court
for the Eastern District of Arkansas, before United States District
Judge William R. Wilson, Jr. Since entry of that order, the JPML has
also begun transferring cases involving PREMARIN to the same court.
In the litigation involving DURACT, the Company's non-narcotic
analgesic pain reliever, which was voluntarily withdrawn from the
market in 1998, one putative personal injury class action remains
pending. Chimento, et al. v. Wyeth-Ayerst, et al., No. 982488, Dist.
Ct., St. Bernard Parish, LA, seeks the certification of a class of
Louisiana residents who were exposed to and who allegedly suffered
injury from DURACT. Plaintiffs seek compensatory and punitive
damages, the refund of all purchase costs, and the creation of a
court-supervised medical monitoring program for the diagnosis and
treatment of liver damage and related conditions allegedly caused by
DURACT. There are also six individual lawsuits pending involving
approximately 150 former DURACT users alleging various injuries,
including kidney failure, hepatitis, liver transplant and death and
one economic damages case involving breach of contract and unjust
enrichment claims.
The Company is a defendant in three lawsuits in which plaintiffs
purport to represent statewide classes of health care workers who
have been injured by needle and syringe devices manufactured by the
Company's former Sherwood-Davis & Geck ("Sherwood") subsidiary. The
complaints have been filed in Oklahoma (Palmer v. AHPC, et al., No.
CJ-98-685, Dist. Ct., Sequoyah Cty.), Texas (Usrey v. Becton
Dickinson, et al., No. 342-173329-98, Dist. Ct., Tarrant Cty.), and
South Carolina (Bales v. AHPC et al., No. 98-CP-40-4343, Circ. Ct.,
Richland Cty.) and all contain virtually identical allegations. Each
names the Company, Becton Dickinson and Company, Sherwood's largest
competitor, and Tyco International (U.S.) Inc. ("Tyco"), Sherwood's
current corporate owner, as well as several distributors of medical
devices. The complaints allege that the needle and syringe devices
designed and manufactured by Sherwood are defective in that they
expose health care workers to the risk of accidental needlesticks
and the resultant possibility of acquiring blood-borne diseases.
Each named plaintiff seeks to represent a statewide class of health
care workers who have sustained a "contaminated" needlestick,
reported the incident to their employer and have tested negative for
a blood-borne disease. The complaints seek recovery for the costs of
medical testing and treatment for the needlesticks. Similar actions
brought in Alabama, California, New Jersey, New York, Ohio,
Pennsylvania and Florida have each been dismissed. The Company is
being defended and indemnified in each of these cases by Tyco with
respect to injuries alleged to have occurred after February 27,
1998, the date of the Company's divestiture of the business of
Sherwood. The Company remains responsible for injuries occurring
prior to that date and is defending and indemnifying Tyco for those
injuries.
In January 2000, the trial court in the Usrey matter certified a
class of Texas health care workers who, during the period January
18, 1997 to January 18, 2000, sustained a contaminated needlestick
while using one of the defendants' products, reported the incident
and tested negative for any blood-borne disease. In October 2001,
the Texas
I-24
Court of Appeals reversed the class certification order and
remanded the case to the District Court for further proceedings.
Plaintiffs have not pursued the matter on remand. Plaintiffs have
indicated that they intend to dismiss the lawsuit, but have not
yet done so. The cases pending in Oklahoma and South Carolina
remain dormant. No discovery has been undertaken in those matters
and no class certification hearing dates have been set. In March
2003, class certification was denied in Benner v. AHPC, et al.,
99 Civ. 4785 (WHP), U.S.D.C., S.D.N.Y., the putative New York
class action, and plaintiff subsequently dismissed the case
without prejudice.
In November 2000, the Company withdrew from the market those
formulations of its DIMETAPP and ROBITUSSIN cough/cold products,
which contained the ingredient phenylpropanolamine ("PPA") at the
request of the FDA. The FDA's request followed the reports of a
study that raised a possible association between PPA-containing
products and the risk of hemorrhagic stroke. Effective November
6, 2000, the Company announced that it would no longer ship
products containing PPA to its retailers. The Company is
currently a named defendant in approximately 800 lawsuits (on
behalf of a total of approximately 1,550 plaintiffs) filed in
federal and state courts throughout the United States, including
one case filed in the Ontario Superior Court of Justice. All
federal cases involving PPA claims have been transferred to the
United States District Court for the Western District of
Washington before United States District Judge Barbara Jacobs
Rothstein. (In re Phenylpropanolamine (PPA) Products Liability
Litigation, MDL No. 1407). Three of the approximately 800 PPA
lawsuits are putative class actions. One of the putative class
actions (the lawsuit pending in Canada) alleges claims for
personal injury and economic loss. McColl, et al. v.
Whitehall-Robins Inc., No. 02-CV-239690CF, Ontario Superior Court
of Justice. The other two putative class action lawsuits allege
misrepresentations regarding the risks involved with products
containing PPA and seek disgorgement or restitution of any moneys
acquired by means of the alleged misrepresentation, as well as
attorneys' fees, on behalf of the putative classes. Guinta, et
al. v. American Home Products Corporation, No. MID-L-010277-01,
Super. Ct., Middlesex Cty., NJ; Risti, et al. v. Novartis
Consumer Health, Inc., et al., No. MID-L-4053-01 Super. Ct.,
Middlesex Cty., NJ. Class certification has not yet been decided
in any of these three cases. In every instance to date in which
class certification has been decided in a PPA case (in 15 cases
in federal and state courts), certification has been denied. In
one putative non-personal injury class action where class
certification has been denied, the plaintiffs have filed a
petition for permission to appeal, which is still pending.
Twenty-two of the non-class personal injury PPA cases are
currently scheduled for trial during 2004.
The Company has been served with approximately 350 lawsuits, ten
of which are putative class actions, alleging that the cumulative
effect of thimerosal, a preservative used in certain vaccines
manufactured and distributed by the Company as well as by other
vaccine manufacturers, causes severe neurological damage,
including autism in children. The class actions and relief sought
are as follows: Daigle, et al. v. Aventis Pasteur Inc., et al.,
No. 02-2131F, Super. Ct., Suffolk Cty., MA (statewide class for
medical monitoring, a fund for research and compensation for
personal injuries); Demos, et al. v. Aventis Pasteur, et al., No.
01-22544CA15, Circ. Ct., Dade Cty., FL (nationwide class for
medical monitoring, personal injuries and injunctive relief
against future sales); Cyr, et al. v. Aventis Pasteur, Inc., et
al., No. 01-C-663, Super. Ct., Hillsborough Cty., NH
I-25
(statewide class for personal injuries and injunctive relief);
King, et al. v. Aventis Pasteur, Inc., et al., No. 01-CV-1305,
U.S.D.C., D. Ore. (nationwide class for personal injuries and
injunctive relief); Mead, et al. v. Aventis Pasteur, Inc., et
al., No. 01-CV-1402, U.S.D.C., D. Ore. (nationwide class for
medical monitoring); Garcia, et al., v. Abbott, et al., No.
C02-168C, District Court, Western District of Seattle, WA
(nationwide class on behalf of all individuals who purchased any
childhood vaccine containing thimerosal); Shadie, et al. v.
Abbott, et al., No. 3-CV-02-0702, U.S.D.C., M.D., Pa. (nationwide
class on behalf of all children vaccinated with
thimerosal-containing vaccines from 1990 to present); Ashton, et
al. v. Aventis Pasteur Inc., et al., Class Action Complaint
004026, Ct. Comm. Pleas, Philadelphia Cty., PA (nationwide class
action for medical monitoring, personal injuries and injunctive
relief); Wax, et al. v. Abbott, et al., No. CV 02 2018, U.S.D.C.,
E.D.N.Y. (nationwide class on behalf of all persons residing in
the U.S. who were exposed to thimerosal); Castaldi et al. v.
Aventis Pasteur Inc., et al., Master Complaint No. 2,
Coordination Proceeding, The Vaccine Cases, No. 4246, Super. Ct.,
Los Angeles Cty., CA (statewide class for medical monitoring).
The Company generally files motions to dismiss in all of the cases
for failure of the minor plaintiffs to file in the first instance
under the National Vaccine Injury Compensation Program (the "Vaccine
Act"). The Vaccine Act mandates that plaintiffs alleging injury from
childhood vaccines first bring a claim under the Vaccine Act. At the
conclusion of that proceeding, the plaintiff may bring a lawsuit in
state or federal court. In July 2002, the United States Court of
Federal Claims, which handles all cases brought under the Vaccine
Act, issued Autism General Order #1 (the "Order") accepting
jurisdiction of the thimerosal matters by establishing an Omnibus
Autism Proceeding, which allows petitioners who claim to suffer from
autism or autism spectrum disorder as a result of receiving
thimerosal-containing childhood vaccines the chance to proceed
pursuant to a two-step procedure that will occur over a period of
two years. The first step will be an inquiry into the general
causation issues involved in the cases; the second step will entail
the application of the general causation conclusions to the
individual cases. Petitioners claiming injury from thimerosal in
childhood vaccines are not required, however, to proceed under the
Order and may continue to pursue claims under the Vaccine Act in the
normal course, which may allow petitioners to proceed in state or
federal court after the expiration of 240 days. Nineteen claimants
who have not elected to participate in the Omnibus Autism Proceeding
have filed lawsuits against the Company following the expiration of
the 240-day period. Approximately 260 other claimants are eligible
to withdraw, but have not as yet done so.
In addition to the claims brought by or on behalf of children
allegedly injured by exposure to thimerosal, certain of the
approximately 350 thimerosal cases have been brought by parents in
their individual capacities, for loss of services and loss of
consortium of the injured child. These claims are not currently
covered by the Vaccine Act, although every court that has addressed
this issue has determined that it is appropriate to stay such claims
when there is a related claim pending under the Vaccine Act. To the
extent a claim is asserted for loss of consortium that is not linked
to a claim filed under the Vaccine Act, it is possible that courts
will allow such parental claims to proceed in state or federal
court.
Four thimerosal cases are currently scheduled for trial, with the
first scheduled for spring 2005.
I-26
The Company is unable at the present time to estimate a range of
potential exposure, if any, with respect to the NORPLANT, PREMPRO,
PREMARIN, DURACT, needlestick, PPA, and thimerosal litigations.
In 2000, the Company entered into a consent decree with the FDA
relating to the manufacturing of products by the Company at its
facilities in Marietta, Pennsylvania and Pearl River, New York. This
matter is discussed in greater detail under the caption
"Regulation," herein, which discussion is incorporated herein by
reference.
In September 2003, the U.S. Court of Appeals for the Federal Circuit
affirmed the District Court's holding of liability that the
University of Colorado employees are the sole inventors of the
MATERNA formulation patent and the awards of $55.7 million in
compensatory damages, together with $1.0 million in exemplary
damages and post-judgment interest. The Company's petition for a
rehearing en banc has been denied. University of Colorado et al. v.
American Cyanamid Company, No. 93-K-1657, U.S.D.C., D.Col.
The Company paid the outstanding judgment and the accrued
post-judgment interest in the amount of $58.13 million in January
2004. The Company has filed a petition to the U.S. Supreme Court
seeking a writ of certiorari.
In September 2002, Israel Bio-Engineering Project ("IBEP") filed an
action against Amgen, Immunex, the Company and one of the Company's
subsidiaries (Docket No. C02-6880 ER, D.Ca.) alleging infringement
of U.S. Patent 5,981,701, by the manufacture, offer for sale,
distribution and sale of ENBREL. IBEP is not the assignee of record
of this patent, but is alleging ownership. IBEP has requested a jury
trial. IBEP seeks an accounting of damages and of any royalties or
license fees paid to a third party and seeks to have the damages
trebled on account of alleged willful infringement. IBEP also seeks
to require the defendants to take a compulsory non-exclusive
license. Under its agreement with Amgen for the promotion of ENBREL,
the Company has an obligation to pay a portion of the patent
litigation expenses related to ENBREL in the U.S. and Canada as well
as a portion of any damages or other monetary relief awarded in such
patent litigation. Yeda Research and Development Co., Ltd., the
assignee of record of the patent, intervened in the case and filed a
summary judgment motion seeking a ruling that it is the owner of the
patent. On February 18, 2004, the Court granted summary judgment in
favor of the defendants that IBEP does not own the `701 Patent. The
Company expects IBEP to appeal. The Company intends, and Amgen has
advised the Company that it intends, to vigorously oppose any
appeal.
On March 24, 2003, the Company filed suit in the United States
District Court for the District of New Jersey against Teva
Pharmaceuticals, USA (Wyeth v. Teva Pharmaceuticals USA, Inc.,
Docket No. 03-CV-1293 (KSH), U.S.D.C., D. N.J.) alleging that the
filing of an ANDA by Teva seeking FDA approval to market 37.5 mg, 75
mg, and 150 mg venlafaxine HC1 extended-release capsules infringes
certain of the Company's patents. Venlafaxine HCl is the active
ingredient used in EFFEXOR XR. The patents involved in the
litigation relate to extended-release formulations of
I-27
venlafaxine and/or methods of their use. These patents expire in
2017. Teva has asserted that these patents are invalid and/or not
infringed. Under the 30-month stay provision of the Hatch-Waxman
Act, any FDA approval of Teva's ANDA cannot be made effective
before August 2005 unless the court earlier decides that the
patents are invalid or not infringed. Teva has not, to date, made
any allegations as to the Company's patent covering the compound,
venlafaxine. Accordingly, Teva's ANDA may further not be approved
until the expiration of that patent, and its associated pediatric
exclusivity period, on June 13, 2008. The Company intends to
pursue the causes of actions under this litigation vigorously.
On March 14, 2003, Aventis Pharma Deutschland and King
Pharmaceuticals, Inc. filed a patent infringement suit against
Cobalt Pharmaceuticals in the United States District Court for the
District of Massachusetts (Aventis Pharma Deutschland GmbH and King
Pharmaceuticals, Inc. v. Cobalt Pharmaceuticals Inc., Docket No.
03-10492JLT, U.S.D.C., D. Mass.) alleging that Cobalt infringes an
Aventis composition of matter patents for ramipril, which expires in
October 2008, by filing an ANDA with the FDA seeking approval to
market generic 1.25 mg, 2.5 mg, 5 mg, and 10 mg ramipril capsules.
The Company co-promotes ALTACE (ramipril) together with King
Pharmaceuticals, Inc. Cobalt has alleged that this patent is
invalid. Under the 30-month stay provision of the Hatch-Waxman Act,
any FDA approval of Cobalt's ANDA cannot be made effective before
August 2005, unless the court earlier finds the patent invalid or
not infringed. The suit does not concern a second patent, which also
covers ramipril that expires in January 2005. Cobalt has stated that
it is not seeking FDA approval until this second patent expires in
January 2005. Aventis and King have also asserted infringement of an
additional patent which expires in 2012 and which relates to a
method of treating cardiac insufficiency with ramipril. Cobalt
contends that the latter patent is invalid and/or not infringed.
This patent is not subject to the 30-month stay provision of the
Hatch-Waxman Act.
In August 2003, the U.S. Court of Appeals for the Federal Circuit
affirmed the decision in favor of the Company by the U.S. District
Court for the District of New Jersey that claims 1 and 3 of the
Schering's patent claiming a metabolite of loratadine were invalid.
Schering Corp. v. Geneva Pharmaceuticals, Inc., et al., Nos. 02-1545
and 02-1549, U.S.C.A., Fed. Cir. The Company had been sued by
Schering for infringing this patent as a result of filing
applications with the FDA seeking to market generic and
over-the-counter loratadine products. Schering's petition seeking
rehearing in the U.S. Court of Appeals for the Federal Circuit was
denied on October 28, 2003. The deadline for Schering to seek
certiorari from the U.S. Supreme Court passed without the filing of
a petition. The decision in favor of the Company by the lower court
remains unchanged.
Boston Scientific brought a patent infringement lawsuit against
Cordis, seeking to enforce a patent on stent coatings against
Cordis' CYPHER sirolimus drug-eluting stent, Boston Scientific
Scimed v. Cordis, Docket No. 03-283, U.S.D.C., D. Del. In an earlier
filed action, Cordis sued Boston Scientific seeking to enforce
Cordis' stent architecture patent. In the respective actions, both
Boston Scientific and Cordis sought a preliminary injunction against
the other. On November 21, 2003, both motions for preliminary
injunction were denied. Although the Company is not a party to this
litigation, if Cordis were to be enjoined from selling the CYPHER
Stent, the Company could lose licensing
I-28
income. Cordis has advised the Company that it intends to vigorously
defend this litigation.
In November 2003, the U.S. Patent and Trademark Office Board of
Patent Appeals ruled for the Company in the interference concerning
a Genentech patent application and a Company patent, which claims a
truncated Factor VIII protein, which expires in February 2010. Wyeth
markets a truncated Factor VIII protein covered by the claims of the
patents as REFACTO. The Board's decision in November 2003 concluded
that the Company was the first to invent the claimed protein.
Genentech and Bayer Healthcare LLC have challenged the Board's
decision by filing an action pursuant to 35 U.S.C. Section 146 in
the United States District Court for the District of Delaware on
December 23, 2003.
The Company is currently a defendant in eight lawsuits alleging
Medicare fraud arising out of the alleged manipulation of the
Average Wholesale Price ("AWP") of Medicare Part B "Covered Drugs".
While not one of the eight cases, the Company was originally named
as a defendant in a leading case entitled Citizens for Consumer
Justice, et al. v. Abbott Laboratories, Inc., et al., No.
OICV-12257, U.S.D.C., E.D. Mass. This case was a putative class
action filed in December 2001 by several consumer public interest
groups and named as defendants the Company and 27 other
pharmaceutical manufacturers. Each of the companies was alleged to
have artificially inflated the AWP of its Medicare Covered Drugs.
AWP is the basis for the price at which Medicare reimburses
practitioners for drugs and the complaint alleged that it is often
significantly higher than the actual price paid by the practitioner.
Plaintiffs claimed that their members who purchased Covered Drugs
and paid a 20% co-payment under the Medicare reimbursement rules
were injured by the allegedly-inflated AWPs. The complaint alleged
that defendants have engaged in a civil conspiracy under the RICO
Act and also alleged violations of federal antitrust laws. Recently,
plaintiffs in the Citizens for Consumer Justice case filed an
Amended Consolidated Complaint that does not name Wyeth as a
defendant. No claims are therefore currently pending against the
Company in this matter. The Company was, however, subsequently named
as a defendant, and is a party in eight similar cases, as described
below. The federal JPML has ordered that these cases be transferred
to the Honorable Patti Saris, U.S.D.J., in the United States
District Court for the District of Massachusetts, the judge handling
the Citizens for Consumer Justice case. Turner, et al. v. Wyeth, et
al., No. C02-5006BZ, U.S.D.C., N.D. Cal. and Thompson v. Abbott
Laboratories, Inc., et al., No. C-02-4450-B2, U.S.D.C., N.D. Cal.
are putative class actions on behalf of California patients and
third-party payers who allegedly have been injured by the
defendants' alleged manipulation of the AWPs for their
pharmaceutical products. These cases seek equitable and injunctive
relief, including restitution under California's unfair and
deceptive practices statute. A similar case, Swanston, et al., v.
Abbott Laboratories, Inc., et al., No. CV-03-0062-PHX-SMM, U.S.D.C.,
D. Ariz., seeks similar relief on behalf of a putative class of
Arizona residents. (This matter was pending before Judge Saris, but
has recently been remanded to Arizona state court.) International
Union of Operating Engineers, et al. v. Astra Zeneca, et al., No.
03-3226 JEI, U.S.D.C., D.N.J., seeks relief similar to that
requested in Swanston, but on behalf of a putative class of New
Jersey residents. In addition, the Company is a defendant in four
lawsuits instituted by governmental entities claiming injuries on
behalf of both the governmental entity and its citizens: State of
California, et al. v. Wyeth, et al., CV 03-2238, U.S.D.C., C.D.,
Cal.; County of Suffolk v. Wyeth, et al., No. CV 03 229, U.S.D.C.,
E.D.N.Y.;
I-29
County of Westchester v. Wyeth, et al., CV 03 6178,U.S.D.C.,
S.D.N.Y.; and County of Rockland v. Wyeth, et al., CV 03 7055,
U.S.D.C., S.D.N.Y. All four of these governmental entity cases
are now pending in federal court and are in the process of being
transferred to Judge Saris pursuant to order of the JPML.
The SEC is conducting an investigation into allegations raised by a
former employee of the Company in a lawsuit, which had claimed
retaliation and constructive discharge. These allegations related,
among other things, to certain compensation-related tax issues in
several foreign jurisdictions. The Company has cooperated fully with
the SEC and believes that these matters will not result in material
liability to the Company.
In September 2000, Duramed Pharmaceuticals, Inc. (that has since
been acquired by Barr Laboratories, Inc. ("Barr")), a manufacturer
of a hormone therapy called Cenestin(R) filed a complaint against
the Company, alleging that the Company violated the antitrust laws
through the use of alleged exclusive contracts and "disguised"
exclusive contracts with managed care organizations and pharmacy
benefit managers concerning PREMARIN, Duramed Pharmaceuticals, Inc.
v. Wyeth Ayerst Labs., Inc., No. C 1 00 735, U.S.D.C., S.D. Oh.
The complaint also alleged that the Company attempted to monopolize
and monopolized the hormone therapy market in violation of the
antitrust laws through the use of such alleged exclusive contracts.
The Company and Barr settled this litigation in June 2003 and the
action has since been dismissed with prejudice.
Following the filing of the Duramed case, seven putative class
actions were filed on behalf of "end-payors" (defined as the last
persons and entities in the chain of distribution) and direct
purchasers in Ohio and New Jersey federal district courts and in
California state courts. These plaintiffs allege that the
Company's alleged anticompetitive exclusive contracts with
managed care organizations and pharmacy benefit managers violated
federal and state antitrust laws and thereby allowed the Company
to charge higher prices for PREMARIN than the Company would have
charged in the absence of the alleged anticompetitive exclusive
agreements. The complaints seek injunctive relief, damages and/or
disgorgement of profits. Due to certain consolidations in the
Ohio federal district court, three putative class actions and one
certified class action are presently pending against the Company.
One indirect-purchaser putative class action is pending in Ohio
federal district court (Ferrell v. Wyeth-Ayerst Laboratories,
Inc., Civ. A. No. C-1-01-447, U.S.D.C., S.D. Oh.), and two
putative indirect-purchaser class actions are pending in
California state courts (Blevins v. Wyeth-Ayerst Laboratories,
Inc., et al., Case No. 324380, Cal. Sup. Ct., San Francisco Cty.,
Cal.; Sullivan v. Wyeth-Ayerst Laboratories, Inc., Case No.
GIC796997, Cal. Sup. Ct., San Diego Cty., Cal.). In the Ferrell
action, the plaintiffs' motion for class certification and the
Company's motion to dismiss certain claims are pending and have
yet to be addressed by the federal court. A certified class
consisting of direct purchasers is currently pending in the Ohio
federal district court, J.B.D.L. Corp. v. Wyeth-Ayerst
Pharmaceuticals, Inc., Civ. A. No. C-1-01-704, U.S.D.C., S.D. Oh.
Additionally, two direct purchasers of PREMARIN during the
relevant time period (CVS Meridian, Inc. and Rite Aid
Corporation) have opted out of the federal direct-purchaser class
action and have filed a separate action, CVS Meridian, Inc. et
al. v. Wyeth, Civil A. No. C-1-03-781, U.S.D.C., S.D. Oh. The
Company believes that its contracts involving PREMARIN did not
violate state or federal laws.
I-30
The Company has been named a defendant, along with other
pharmaceutical manufacturers and other defendants, in lawsuits
brought on behalf of retail pharmacies and retail drug and grocery
chains, which were filed in various federal and state courts. These
cases allege that the Company and other defendants provided
discriminatory prices and allowances to managed care organizations
and others in violation of the Robinson-Patman Act engaged in
collusive conduct related to the alleged discriminatory pricing in
violation of the Sherman Act and various state laws. Many of these
cases have been settled by the Company, including a class action
suit settled in 1996, In re Brand Name Prescription Drugs Antitrust
Litigation, MDL 997, U.S.D.C., N.D. Ill. Three cases remain pending
in federal court against the Company and other defendants. These
cases involve plaintiffs that had opted out of the federal class
action. The Company believes that its pricing practices did not
violate antitrust or other laws and is defending the remaining
cases.
Plaintiffs have filed numerous lawsuits in federal and state courts
alleging civil claims relating to the settlement by the Company of
patent infringement litigation with Schering-Plough Corporation
concerning a generic version of Schering-Plough's K-Dur 20 potassium
chloride product. These actions followed the issuance of an
administrative complaint by the Federal Trade Commission, which
challenged the Company's patent litigation settlement as
anticompetitive. The Company settled with the FTC in April 2002. The
settlement was not an admission of liability and was entered to
avoid the costs and risks of litigation in light of the Company's
previously announced exit from the oral generics business.
Generally, plaintiffs claim that a 1998 settlement agreement between
the Company and Schering-Plough that resolved the patent
infringement action unlawfully delayed the market entry of generic
competition for K-Dur 20, and that this caused plaintiffs and others
to pay higher prices for potassium chloride supplements than
plaintiffs claim they would have paid without the patent case
settlement. Plaintiffs claim that this settlement restrained trade
and constituted an agreement to allow Schering-Plough to monopolize
the potassium chloride supplement markets.
The Company is aware of approximately forty-five such lawsuits that
have been filed against the Company. Forty of these lawsuits are
currently pending in federal court and have been consolidated or are
being coordinated as part of multi-district federal litigation being
conducted in the United States District Court for the District of
New Jersey, In re K-Dur Antitrust Litigation, MDL 1419, U.S.D.C., D.
N.J. One of these cases is brought as a purported class action on
behalf of direct purchasers of K-Dur 20 nationwide. In forty-two
cases, plaintiffs claim to be indirect purchasers or end-payors of
K-Dur 20 or to be bringing suit on behalf of such indirect
purchasers. These indirect-purchaser cases are brought as purported
class actions on behalf of various groups of indirect purchasers.
One case is brought by the Commonwealth of Pennsylvania, through its
Attorney General, on behalf of all departments, agencies and bureaus
of the Commonwealth that purchased K-Dur 20 or reimbursed such
purchases. One direct-purchaser action (representing approximately
23% of direct purchases) has been dismissed as a result of a
settlement with the Company. The pending complaints seek various
forms of relief under
I-31
federal and state laws, including damages in excess of $100
million, treble damages, restitution, disgorgement, declaratory
and injunctive relief and attorneys' fees.
The Florida Attorney General's Office has initiated an inquiry into
whether the Company's settlement with Schering-Plough violated
Florida's antitrust laws. The Company has provided documents and
information sought by the attorney general's office.
In 1999, the Brazilian Administrative Economic Defense Agency
("SDE") and local police authorities initiated investigations of
Laboratories Wyeth-Whitehall Ltda. ("LWWL") and other pharmaceutical
companies concerning possible violation of Brazilian competition
laws. SDE alleges that the companies sought to establish uniform
commercial policies regarding wholesalers and refused to sell
product to wholesalers that distribute generic products manufactured
by certain Brazilian pharmaceutical companies. Additionally,
administrative investigations by SDE are looking at allegations that
the Company and other pharmaceutical companies violated Brazilian
competition and consumer protection laws by raising prices
unlawfully. The Company has provided information both to SDE and to
police authorities. The police authorities have terminated their
investigation, concluding that the companies were not engaged in any
illegal action.
In 2003, the SDE concluded that LWWL and other pharmaceutical
companies violated Brazilian competition laws by agreeing to refuse
to sell products to wholesalers that distributed generic products.
The SDE, however, recommended the imposition of the minimum penalty
of 1% of LWWL's annual gross sales (approximately $1 million). This
recommendation does not become final until the Economic Defense
Administrative Council decides whether to adopt the recommendation
and impose the suggested penalty. The other SDE administrative
proceedings are still pending.
Following a 1999 application from certain drug wholesalers, the
Competition Commission in South Africa filed a referral with the
Competition Tribunal, which alleges that International Health
Distributors ("IHD") violated South Africa's competition law. IHD,
which is a joint venture of pharmaceutical companies (including
Wyeth South Africa ("WSA")), provides distribution services for the
joint venture members. The Commission's referral alleges that IHD
and its pharmaceutical company shareholders have fixed various terms
and conditions of sale in violation of South Africa's competition
law. Certain wholesalers in South Africa also sued IHD and its
members based on similar allegations.
In 2002, WSA reached an agreement to settle the claims alleged by
the wholesalers. Additionally, WSA has recently reached a
settlement with the Competition Commission that requires WSA to
divest its shareholding interest in IHD and make a settlement
payment to the Commission to cover a portion of the Commission's
costs incurred in prosecuting this action. WSA's settlement with
the Commission is not an admission of liability and was entered
to avoid the various costs associated with litigation.
The United Kingdom's Competition Commission has commenced an
investigation into the pricing and distribution practices of Fort
Dodge Animal Health and other animal health suppliers in the United
Kingdom. The inquiry focused on the rebate practices of
I-32
animal health suppliers, the price differential between certain
animal health products sold in the United Kingdom, as opposed to
other European countries, and the industry practice of selling to
wholesalers but not directly to pharmacists or veterinarians. The
inquiry also examined transfer pricing for animal health
products.
In April 2003, the Competition Commission issued its report on the
investigation into the supply of prescription-only veterinary
medicines and concluded that three monopoly situations exist in the
United Kingdom for such medicines. According to the report, one such
monopoly situation arises from the failure of eight animal-health
manufacturers, including Fort Dodge Animal Health U.K., to enable
pharmacies to obtain supplies of prescription-only veterinary
medicines on terms that would enable them to compete with veterinary
surgeons. The report recommended two remedies for the situation,
applicable to all of the relevant manufacturers, which are designed
to allow the pharmacies to obtain prescription-only veterinary
medicines on competitive terms with the veterinary surgeons. The
U.K. Office of Fair Trading is in the process of drafting terms of
orders to implement the Commission's remedies.
The Antitrust Division of the United States Department of Justice
has impaneled a grand jury that has issued a subpoena to the Company
in connection with the Division's investigation into allegations of
collusive activities with another pharmaceutical company. These
allegations relate to commission rates paid to a broker for a small
segment of the over-the-counter drug business (principally sales to
off-shore oil rigs) during 2001 and 2002. The Company is cooperating
with the Antitrust Division and believes that its activities
regarding brokers have not violated the antitrust laws.
On January 21, 2004, the Company was served with a subpoena from the
U.S. Office of Personnel Management, Office of the Inspector
General, requesting certain documents related to EFFEXOR. The
subpoena requests documents related principally to educating or
consulting with physicians, as well as marketing or promotion of
EFFEXOR to physicians or pharmacists from January 1, 1997 to
September 30, 2003. Other manufacturers of psychopharmacologic
products have also received subpoenas. The Company intends to
cooperate in responding to the subpoena.
As discussed in Item I (under the caption "Environmental"), the
Company is a party to, or otherwise involved in, legal proceedings
under CERCLA and similar state laws directed at the cleanup of
various sites including the Cyanamid-owned Bound Brook, N.J. site.
The Company's potential liability varies greatly from site to site.
For some sites, the potential liability is de minimis and, for
others, the final costs of cleanup have not yet been determined. As
assessments and cleanups proceed, these liabilities are reviewed
periodically and are adjusted as additional information becomes
available. Environmental liabilities are inherently unpredictable.
The liabilities can change substantially due to such factors as
additional information on the nature or extent of contamination,
methods of remediation required and other actions by governmental
agencies or private parties.
The Company's Wyeth Medica Ireland ("WMI") subsidiary has received a
Statement of Claim filed in the Irish High Court in Dublin by
Schuurmans & Van Ginneken ("SvG"), a Netherlands-based molasses and
liquid storage concern. SvG seeks compensation for the
I-33
contamination and disposal of up to 26,000 tons of molasses
allegedly contaminated with medroxyprogesterone acetate ("MPA").
SvG allegedly purchased sugar recovered from a sugar water
process stream disposed of by WMI for use in its molasses
refining operations. SvG further seeks compensation on behalf of
an unspecified number of its animal feed customers who are
alleged to have used contaminated molasses in their livestock
feed formulations. SvG seeks damages in excess of (euro)160
million. In July and August of 2003, formal claim letters on
behalf of various Dutch claimants, including the Dutch
Association for the Animal Feed Industry, the Dutch Trade Union
for Stock-Breeders, the Central Organization for the Meat Sector,
the Dutch Union of Traders in Cattle and Rined Fourages BV, a
distributor of animal feed, were served upon the Company's AHP
Manufacturing BV subsidiary. The damages alleged in the claim
letters amount to several million Euros and are akin to the
claims for which SvG seeks indemnification, i.e., claims for loss
of inventory and livestock due to contaminated animal feed. In
connection with its formal Statement of Claim, SvG levied
prejudgment attachments in the District Courts of Haarlem and
Amsterdam in the Netherlands on certain assets of WMI. SvG lifted
these attachments on December 18, 2003, after WMI provided SvG a
bank guarantee for (euro)135 million as security for the amounts
claimed by SvG in its Statement of Claim. SvG has agreed to
refrain from levying further attachments.
On July 26, 2002, a Brazilian Federal Public Attorney filed a public
civil action against the Federal Government of Brazil, LWWL, a
Brazilian subsidiary of the Company, and Colgate Palmolive Company,
as represented by its Brazilian subsidiary, Kolynos do Brasil Ltda.
("Kolynos"), seeking to nullify and overturn the April 11, 2000
decision by the Brazilian First Board of Tax Appeals which had found
that the capital gain of LWWL from its divestiture of its oral
health care business was not taxable in Brazil. The action seeks to
hold LWWL jointly and severally liable with Kolynos and the
Brazilian Federal Government. The amount of taxes originally
attributable to the transaction, as stated in current U.S. dollars,
was approximately $99.0 million. The Company believes that this
action is without merit.
On January 10, 2003, the U.S. Court of Appeals for the District of
Columbia Circuit reversed a decision of the District Court holding
that the Company was entitled to refunds with respect to taxes paid
in the amount of approximately $227 million and interest thereon
(approximately $155 million) with respect to losses claimed as a
deduction for federal income tax purposes arising from a partnership
investment in Boca Investerings Partnership (Boca Investerings
Partnership v. U.S., Docket No. 01-5429, 314 F. 3rd 625, D.C. Cir.
2003). On March 26, 2003, the Company's Petition for Panel Rehearing
and Rehearing En Banc to the U.S. Court of Appeals for the District
of Columbia Circuit were denied and remanded to the District Court
for additional proceedings consistent with the U.S. Court of
Appeals' opinion. Following the U.S. Supreme Court's denial of the
Company's writ of certiorari and remand to the District Court, the
District Court entered judgment in favor of the United States in
December 2003. The Company has filed a motion for reconsideration of
the District Court's order.
The Office of Federal Contract Compliance Programs served a Notice
of Violation on the Company dated September 9, 1998. The Company
subsequently received, on November 30, 1998, an Order to Show Cause
why proceedings should not be commenced. The Order
I-34
cites alleged disparities in pay between men and women in certain
job classifications and further cites alleged inadequate systems
to check for such disparities. The Company consented to the
agency's request to participate in a conciliation process before
the Office of the Solicitor within the Department of Labor. An
administrative complaint was served on July 25, 2003 and a
hearing has been scheduled for May 3, 2004.
The Company intends to defend vigorously all of the foregoing
litigation.
In the opinion of the Company, although the outcome of any
litigation cannot be predicted with certainty, the ultimate
liability of the Company in connection with pending litigation and
other matters discussed above (other than the litigation involving
REDUX and PONDIMIN, the potential effects of which are discussed
above) will not have a material adverse effect on the Company's
financial position but could be material to the results of
operations and cash flows in any one accounting period.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
None.
I-35
EXECUTIVE OFFICERS OF THE REGISTRANT AS OF MARCH 8, 2004
- --------------------------------------------------------
Each officer is elected to hold office until a successor is chosen or until
earlier removal or resignation. None of the executive officers is related to
another:
Elected as
Executive
Name Age Offices and Positions Officer
---- --- --------------------- -------
Robert Essner 56 Chairman of the Board, President September 1997
and Chief Executive Officer
Member of Executive Committee,
Chairman of Management,
Law/Regulatory Review,
Operations, Human Resources and
Benefits and Retirement
Committees
Business Experience: To March 1997, President,
Wyeth-Ayerst Laboratories, U.S.
Pharmaceuticals Business
March 1997 to September 1997,
President, Wyeth-Ayerst Laboratories
Division
September 1997 to July 2000,
Executive Vice President
July 2000 to May 2001, President and
Chief Operating Officer
May 2001 to December 2002,
President and Chief Executive
Officer
January 2003 to date, Chairman of
the Board, President and Chief
Executive Officer
I-36
Elected as
Executive
Name Age Offices and Positions Officer
---- --- --------------------- -------
Kenneth J. Martin 49 Executive Vice President and Chief February 2000
Financial Officer
Member of Management,
Law/Regulatory Review,
Operations, Human Resources and
Benefits and Retirement
Committees
Business Experience: To October 1996,
President, American Home Foods
November 1996 to February 1997,
President, International Home
Foods, Inc.
February 1997 to March 1997,
Executive Vice President,
Wyeth-Ayerst International
March 1997 to September 1998,
President, Whitehall-Robins
October 1998 to January 2000,
Senior Vice President and Chief
Financial Officer, Wyeth-Ayerst
Pharmaceuticals
February 2000 to June 2002, Senior
Vice President and Chief Financial
Officer
June 2002 to date, Executive Vice
President and Chief Financial
Officer
Bernard J. Poussot 52 Executive Vice President and January 2001
President,
Wyeth Pharmaceuticals
Member of Management,
Law/Regulatory Review,
Operations and Human Resources
and Benefits Committees
Business Experience: January 1996 to September 1997,
President, Wyeth-Ayerst
International
September 1997 to January 2001,
President, Wyeth-Ayerst
Pharmaceuticals
January 2001 to June 2002, Senior Vice
President and President, Wyeth
Pharmaceuticals
June 2002 to date, Executive Vice
President and President, Wyeth
Pharmaceuticals
I-37
Elected as
Executive
Name Age Offices and Positions Officer
---- --- --------------------- -------
Lawrence V. Stein 54 Senior Vice President and General June 2001
Counsel
Member of Management,
Law/Regulatory Review,
Operations, Human Resources and
Benefits and Retirement
Committees
Business Experience: November 1992 to September 1997,
Senior Vice President and
General Counsel, Genetics
Institute
September 1997 to July 2000,
Associate General Counsel and
Senior Vice President and Chief
Legal Counsel, Wyeth-Ayerst and
Genetics Institute
July 2000 to June 2001, Vice President
and Deputy General Counsel
June 2001 to July 2003, Senior Vice
President and Deputy General
Counsel
July 2003 to date, Senior Vice
President and General Counsel
Paul J. Jones 58 Vice President and Controller May 1995
Member of Law/Regulatory Review
and Operations Committees
Business Experience: May 1995 to date, Vice President
and Controller
Rene R. Lewin 57 Vice President - Human Resources June 1994
Member of Management,
Law/Regulatory Review,
Operations, Human Resources and
Benefits and Retirement
Committees
Business Experience: June 1994 to date, Vice President -
Human Resources
I-38
Elected as
Executive
Name Age Offices and Positions Officer
---- --- --------------------- -------
Marily H. Rhudy 56 Vice President - Public Affairs June 2001
Member of Management and
Operations Committees
Business Experience: April 1994 to March 1997, Vice
President - Public Affairs,
Wyeth-Ayerst Laboratories
Division
March 1997 to September 1997, Vice
President - Global Public
Affairs, Wyeth-Ayerst
Laboratories Division
September 1997 to date, Vice
President - Public Affairs
E. Thomas Corcoran 56 President, Fort Dodge Animal Health June 2001
Division
Member of Management,
Operations and Human Resources
and Benefits Committees
Business Experience: September 1995 to date, President,
Fort Dodge Animal Health
Division
Ulf Wiinberg 45 President, Wyeth Consumer Healthcare March 2002
Member of Management,
Law/Regulatory Review,
Operations, and Human Resources
and Benefits Committees
Business Experience: To May 1997, Area Vice President
for Africa and the Middle East,
Wyeth-Ayerst
May 1997 to February 2002, Managing
Director of the United Kingdom
subsidiary of Wyeth-Ayerst
Pharmaceuticals
February 2002 to date, President,
Wyeth Consumer Healthcare
I-39
Elected as
Executive
Name Age Offices and Positions Officer
---- --- --------------------- -------
Joseph M. Mahady 50 Senior Vice President and June 2001
President, Wyeth
Pharmaceuticals - North America
Member of Management and
Operations Committees
Business Experience: September 1997 to June 2002,
President, Wyeth
Pharmaceuticals - North America
June 2002 to date, Senior Vice
President and President, Wyeth
Pharmaceuticals - North America
Robert R. Ruffolo, Jr. 53 Senior Vice President and June 2001
President, Wyeth Research
Member of Management,
Law/Regulatory Review,
Operations and Human Resources
and Benefits Committees
Business Experience: To November 2000, Senior Vice
President and Director,
Biological Sciences, SmithKline
Beecham
November 2000 to June 2002,
Executive Vice President,
Pharmaceutical Research and
Development, Wyeth Research
June 2002 to date, Senior Vice
President and President, Wyeth
Research
Robert N. Power 47 President, Wyeth Pharmaceuticals - June 2002
International
Member of Management and
Operations Committees
Business Experience: March 1998 to June 2002, President,
Wyeth Pharmaceuticals -
Europe/Middle East/Africa
June 2002 to date, President, Wyeth
Pharmaceuticals - International
I-40
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK, RELATED
---------------------------------------------
STOCKHOLDER MATTERS AND ISSUER PURCHASES AND EQUITY SECURITIES
--------------------------------------------------------------
(a) Market Information and Dividends
The New York Stock Exchange is the principal market on which the
Company's Common Stock is traded. Tables showing the high and low
sales price for the Common Stock, as reported in the consolidated
transaction reporting system, and the dividends paid per common
share for each quarterly period during the past two years, as
presented in Market Prices of Common Stock and Dividends on page 58
of the Company's 2003 Annual Report to Stockholders, are
incorporated herein by reference.
(b) Holders
There were 57,354 holders of record of the Company's Common Stock as
of the close of business on March 1, 2004.
(c) Issuance of Unregistered Securities
In December 2003, the Company completed a private placement of
$1.020 billion aggregate principal amount of Floating Rate
Convertible Senior Debentures due 2024 to Citigroup Global Markets
Inc., J.P. Morgan Securities Inc., UBS Securities LLC, Commerzbank
Aktiengesellschaft, Grand Cayman Branch and Scotia Capital (USA)
Inc. (the "Initial Purchasers") under the exemption from
registration provided in Rule 144A of the Securities Act of 1933.
The debentures are convertible prior to maturity into shares of the
Company's Common Stock only under any of the following
circumstances:
o during any calendar quarter commencing after March 31, 2004 and
prior to December 31, 2022 (and only during such calendar
quarter) if the last reported sale price of the Company's Common
Stock for at least 20 trading days during the period of 30
consecutive trading days ending on the last trading day of the
previous calendar quarter, is greater than or equal to 130% of
the applicable conversion price,
o at any time after December 31, 2022 and prior to maturity, if the
last reported sale price of the Company's Common Stock is greater
than or equal to 130% of the applicable conversion price on any
day after December 31, 2022,
o if the debentures have been called for redemption,
o upon the occurrence of specified corporate transactions, and
o during any period in which the credit rating assigned to the
debentures by either Moody's Investor Services, Inc. and its
successors ("Moody's") or Standard & Poor's
II-1
Ratings Services, a division of the McGraw-Hill Companies, Inc.
and its successors ("S&P") is lower than Baa3 or BBB-,
respectively, or the debentures are no longer rated by at least
one of S&P or Moody's.
The initial conversion price is $60.39 per share, subject to
adjustment for certain events. The conversion price is equivalent to
a conversion rate of 16.559 shares per $1,000 principal amount of
debentures. Upon conversion, the Company will have the right to
deliver, in lieu of the Company's Common Stock, cash or a
combination of cash and shares of the Company's Common Stock, in the
Company's sole discretion.
The Company originally issued the debentures to the Initial
Purchasers at a price of 100% of their principal amount. Proceeds
from the offering (after deducting related expenses) of
approximately $1.001 billion were utilized, together with existing
cash, to redeem in full the $1 billion outstanding aggregate
principal amount of the Company's 6.250% notes due 2006 and pay any
related premiums of approximately $92.3 million.
(d) Use of Proceeds from Registered Securities
On December 16, 2003, the Company completed a registered offering
under the Securities Act of 1933 of $1.750 billion of the Company's
5.500% notes due 2014, $500.0 million of the Company's 6.450% notes
due 2024 and $750.0 million of the Company's 6.500% notes due 2034.
The securities were registered under Registration Statement File No.
333-108312 (effective date November 24, 2003) and Registration
Statement File No. 333-111093 (effective date December 11, 2003).
Citigroup Global Markets Inc., J.P. Morgan Securities Inc., UBS
Securities LLC and Scotia Capital (USA) Inc. acted as underwriters
in the transaction. Proceeds from the offering (after deducting
related expenses) were approximately $2.960 billion. A portion of
such proceeds were utilized to repurchase approximately $691.0
million of the Company's 7.90% notes due 2005 pursuant to a tender
offer.
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
The data with respect to the last five fiscal years, appearing in
the Ten-Year Selected Financial Data presented on pages 26 and 27 of
the Company's 2003 Annual Report to Stockholders, are incorporated
herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Management's Discussion and Analysis of Financial Condition and
Results of Operations, appearing on pages 59 through 72 of the
Company's 2003 Annual Report to Stockholders, is incorporated herein
by reference.
II-2
ITEM 7(A). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
The Market Risk Disclosures as set forth in Management's Discussion
and Analysis of Financial Condition and Results of Operations,
appearing on page 70 of the Company's 2003 Annual Report to
Stockholders, are incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The Consolidated Financial Statements and Notes to Consolidated
Financial Statements on pages 28 through 55 of the Company's 2003
Annual Report to Stockholders, the Report of Independent Auditors on
page 56, and Quarterly Financial Data (Unaudited) on page 58, are
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH AUDITORS ON ACCOUNTING AND
------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
ITEM 9(A). CONTROLS AND PROCEDURES
-----------------------
As of December 31, 2003, the Company carried out an evaluation,
under the supervision and with the participation of the Company's
management, including the Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation
of the Company's disclosure controls and procedures pursuant to
Exchange Act Rule 13a-15. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures are reasonably
effective in design and practice to alert them, in a timely manner,
to material information relating to the Company (including its
consolidated subsidiaries) required to be included in the Company's
periodic SEC filings. During the 2003 fourth quarter, there were no
significant changes in the Company's internal control over financial
reporting or in other factors that could materially affect the
Company's internal control over financial reporting, nor were any
corrective actions required to be taken by the Company with regard
to significant deficiencies or material weaknesses in internal
control over financial reporting.
II-3
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
(a) Information relating to the Company's directors is incorporated
herein by reference to pages 3 through 5 of a definitive proxy
statement to be filed with the Securities and Exchange Commission on
or about March 17, 2004 ("the 2004 Proxy Statement").
(b) Information relating to the Company's audit committee, including
designation of "Financial Expert" under applicable Securities and
Exchange Commission rules, is incorporated herein by reference to
page 7 of the 2004 Proxy Statement.
(c) Information relating to the Company's executive officers as of March
8, 2004 is furnished in Part I hereof under a separate unnumbered
caption ("Executive Officers of the Registrant as of March 8,
2004").
(d) Information relating to certain filing obligations of directors and
executive officers of the Company under the federal securities laws
set forth on page 11 of the 2004 Proxy Statement under the caption
"Section 16(a) Beneficial Ownership Reporting Compliance" is
incorporated herein by reference.
(e) Information relating to the Company's code of ethics, included
within the Wyeth Code of Conduct, is available on the Wyeth Internet
website at www.wyeth.com. Copies of the Wyeth Code of Conduct are
also available, without charge, by contacting Wyeth Investor
Relations at (973) 660-5000.
(f) The Charters for the Company's Audit, Compensation and Benefits,
Nominating and Governance and Corporate Issues Committees, the
Nominating and Governance Committee Criteria and Procedures for
Board Candidate Selection and Wyeth's Corporate Governance
Guidelines are available on the Wyeth Internet website at
www.wyeth.com. Copies of these documents are also available, without
charge, by contacting Wyeth Investor Relations at (973) 660-5000.
ITEM 11. EXECUTIVE COMPENSATION
----------------------
Information relating to executive compensation is incorporated
herein by reference to pages 15 through 22 and the section titled
"Change in Control Severance Agreements" on pages 24 through 26 of
the 2004 Proxy Statement. Information with respect to compensation
of directors is incorporated herein by reference to pages 5 and 6 of
the 2004 Proxy Statement.
III-1
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
---------------------------------------------------
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
------------------------------------------
(a) Information relating to security ownership is incorporated herein by
reference to pages 11 and 12 of the 2004 Proxy Statement.
(b) Information regarding the Company's equity compensation plans is
incorporated herein by reference to page 24 of the 2004 Proxy
Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
Information regarding transactions with management and others and
indebtedness of management is incorporated herein by reference to
page 26 of the 2004 Proxy Statement.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
--------------------------------------
Information relating to principal accountant fees and services is
incorporated herein by reference to pages 36 and 37 of the 2004
Proxy Statement.
III-2
PART IV
-------
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
----------------------------------------------------------------
(a)1. Financial Statements
--------------------
The following Consolidated Financial Statements, Notes to
Consolidated Financial Statements and Report of Independent
Auditors, included on pages 28 through 56 of the Company's 2003
Annual Report to Stockholders, are incorporated herein by reference.
Pages
-----
Consolidated Balance Sheets as of
December 31, 2003 and 2002 28
Consolidated Statements of Operations
for the years ended December 31,
2003, 2002 and 2001 29
Consolidated Statements of Changes in
Stockholders' Equity for the years ended
December 31, 2003, 2002 and 2001 30
Consolidated Statements of Cash Flows
for the years ended December 31, 2003,
2002 and 2001 31
Notes to Consolidated Financial Statements 32-55
Report of Independent Auditors 56
(a)2. Financial Statement Schedule
----------------------------
Schedules are omitted because they are not applicable.
IV-1
ITEM 15. (Continued)
(a)3. Exhibits
--------
Exhibit No. Description
----------- -----------
(3.1) The Company's Restated Certificate of Incorporation is
incorporated by reference to Exhibit 3.1 of the Company's Annual
Report on Form 10-K for the year ended December 31, 2001.
(3.2) The Company's By-Laws is incorporated by reference to Exhibit 3.2
of the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2003.
(4.1) Indenture, dated as of April 10, 1992, between the Company and The
Chase Manhattan Bank (successor to Chemical Bank), as Trustee, is
incorporated by reference to Exhibit 2 of the Company's Form 8-A
dated August 25, 1992 (File 1-1225).
(4.2) Supplemental Indenture, dated October 13, 1992, between the
Company and The Chase Manhattan Bank (successor to Chemical Bank),
as Trustee, is incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1992 (File 1-1225).
(4.3) Second Supplemental Indenture, dated as of March 30, 2001, between
the Company and The Chase Manhattan Bank (as successor to
Manufacturers Hanover Trust Company) is incorporated by reference
to Exhibit 4.3 of the Registration Statement of Form S-4 of the
Company filed on April 27, 2001.
(4.4) Third Supplemental Indenture, dated as of February 14, 2003,
between the Company and JPMorgan Chase Bank (as successor to
Manufacturers Hanover Trust Company) is incorporated by reference
to Exhibit 4.4 of the Company's Annual Report on Form 10-K for the
year ended December 31, 2002.
(4.5) Fourth Supplemental Indenture, dated as of December 16, 2003,
between the Company and JPMorgan Chase Bank (as successor to
Manufacturers Hanover Trust Company) is incorporated by reference
to Exhibit 4.3 of the Registration Statement on Form S-3 for the
Company filed on February 3, 2004.
(4.6) Fifth Supplemental Indenture, dated as of December 16, 2003,
between the Company and JPMorgan Chase Bank (as successor to The
Chase Manhattan Bank).
(4.7) Certificate of Designation of Series A Junior Participating
Preferred Stock of the Company is incorporated herein by reference
to Exhibit 4.2 of the Company's Form 8-A, dated October 14, 1999.
(10.1) Purchase Agreement, by and among American Cyanamid Company,
American Home Products Corporation and BASF Aktiengesellschaft,
dated as of March 20, 2000 is incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for the period
ended March 31, 2000 (Confidential Treatment Requested -
confidential portions have been omitted and filed separately with
the Commission).
IV-2
(10.2) First Amendment to the Purchase Agreement, by and among
American Cyanamid Company, American Home Products Corporation,
and BASF Aktiengesellschaft dated as of June 30, 2000 is
incorporated by reference to Exhibit 10.2 to the Company's
Current Report on Form 8-K filed on July 17, 2000 (Confidential
Treatment Requested - confidential portions have been omitted and
filed separately with the Commission).
(10.3) Registration Rights Agreement, dated December 16, 2003, between
Wyeth, Citigroup Global Markets Inc. and J.P. Morgan Securities
Inc., as Representatives of the several Initial Purchasers, is
incorporated herein by reference to Exhibit 4.4 of the
Registration Statement on Form S-3 of the Company filed on
February 3, 2004.
(10.4) Second Amendment to the Purchase Agreement, by and among American
Cyanamid Company, American Home Products Corporation, and BASF
Aktiengesellschaft dated as of December 9, 2000 is incorporated by
reference to Exhibit 10.5 of the Company's Annual Report on Form
10-K for the year ended December 31, 2001 (Confidential Treatment
Requested - confidential portions have been omitted and filed
separately with the Commission).
(10.5) 3-Year Credit Agreement, dated as of March 3, 2003 among the
Company, the banks and other financial institutions from time to
time parties thereto and JPMorgan Chase Bank, as administrative
agent for the lenders thereto is incorporated by reference to
Exhibit 10.5 of the Company's Annual Report on Form 10-K for the
year ended December 31, 2002.
(10.6) First Amendment to 3-Year Credit Agreement, dated as of February
11, 2004, among the Company, the banks and other financial
institutions from time to time parties thereto and JPMorgan Chase
Bank, as administrative agent for the lenders thereto.
(10.7) 5-Year Credit Agreement, dated as of February 11, 2004, among the
Company, the banks and other financial institutions from time to
time parties thereto and JPMorgan Chase Bank, as administrative
agent for the lenders thereto.
(10.8) Master Guarantee and Letter of Credit Agreement, dated as of
December 16, 2003, between the Company and ABN AMRO BANK, N.V.
(10.9)* 1990 Stock Incentive Plan is incorporated by reference to Exhibit
28 of the Company's Form S-8 Registration Statement File No.
33-41434 under the Securities and Exchange Act of 1933, filed June
28, 1991 (File 1-1225).
(10.10)* Amendment to the 1990 Stock Incentive Plan is incorporated by
reference to Exhibit 10.13 of the Company's Annual Report on Form
10-K for the year ended December 31, 1995 (File 1-1225).
*Denotes management contract or compensatory plan or arrangement required
to be filed as an exhibit hereto.
IV-3
(10.11)* Amendment to the 1990 Stock Incentive Plan is incorporated by
reference to Exhibit 10.21 of the Company's Annual Report on Form
10-K for the year ended December 31, 1996 (File 1-1225).
(10.12)* Amendment to the 1990 Stock Incentive Plan is incorporated by
reference to Exhibit 10.19 of the Company's Annual Report on Form
10-K for the year ended December 31, 2001.
(10.13)* 1993 Stock Incentive Plan, as amended to date, is incorporated by
reference to Appendix III of the Company's definitive Proxy
Statement filed March 18, 1999 (File 1-1225).
(10.14)* Amendment to the 1993 Stock Incentive Plan is incorporated by
reference to Exhibit 10.21 of the Company's Annual Report on Form
10-K for the year ended December 31, 2001.
(10.15)* 1996 Stock Incentive Plan, as amended to date, is incorporated by
reference to Appendix II of the Company's definitive Proxy
Statement filed March 18, 1999 (File 1-1225).
(10.16)* Amendment to the 1996 Stock Incentive Plan is incorporated by
reference to Exhibit 10.23 of the Company's Annual Report on Form
10-K for the year ended December 31, 2001.
(10.17)* 1999 Stock Incentive Plan is incorporated by reference to Appendix
I of the Company's definitive Proxy Statement filed March 18, 1999
(File 1-1225).
(10.18)* Amendment to the 1999 Stock Incentive Plan is incorporated by
reference to Exhibit 10.25 of the Company's Annual Report on Form
10-K for the year ended December 31, 2001.
(10.19)* Form of Stock Option Agreement (phased vesting) is incorporated by
reference to Exhibit 10.19 of the Company's Annual Report on Form
10-K for the year ended December 31, 2002.
(10.20)* Form of Special Stock Option Agreement (three-year vesting) is
incorporated by reference to Exhibit 10.28 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1995 (File
1-1225).
(10.21)* Amendment to Special Stock Option Agreement is incorporated by
reference to Exhibit 10.30 of the Company's Annual Report on Form
10-K for the year ended December 31, 1996 (File 1-1225).
(10.22)* Form of Stock Option Agreement (transferable options).
(10.23)* Form of Restricted Stock Performance Award Agreement under the
1996 Stock Incentive Plan, 1999 Stock Incentive Plan and 2002
Stock Incentive Plan (initial award) is incorporated by reference
to Exhibit 10.23 of the Company's Annual Report on Form 10-K for
the year ended December 31, 2002.
*Denotes management contract or compensatory plan or arrangement required
to be filed as an exhibit hereto.
IV-4
(10.24)* Form of Restricted Stock Performance Award Agreement under the
1996 Stock Incentive Plan, 1999 Stock Incentive Plan and 2002
Stock Incentive Plan (subsequent award) is incorporated by
reference to Exhibit 10.24 of the Company's Annual Report on Form
10-K for the year ended December 31, 2002.
(10.25)* Form of Special Stock Option Agreement with Robert Essner dated
June 21, 2001 (transferable option) is incorporated by reference
to Exhibit 10.25 of the Company's Annual Report on Form 10-K for
the year ended December 31, 2002.
(10.26)* Form of Restricted Stock Award Agreement with Robert Essner dated
June 21, 2001 (cliff vesting) is incorporated by reference to
Exhibit 10.26 of the Company's Annual Report on Form 10-K for the
year ended December 31, 2002.
(10.27)* Form of Restricted Stock Award Agreement with Robert Ruffolo dated
January 23, 2001 (phased vesting) is incorporated by reference to
Exhibit 10.27 of the Company's Annual Report on Form 10-K for the
year ended December 31, 2002.
(10.28)* Restricted Stock Trust Agreement under the 1993 Stock Incentive
Plan is incorporated by reference to Exhibit 10.23 of the
Company's Annual Report on Form 10-K for the year ended December
31, 1995 (File 1-1225).
(10.29)* Management Incentive Plan, as amended to date is incorporated by
reference to Exhibit 10.27 of the Company's Annual Report on Form
10-K for the year ended December 31, 1999.
(10.30)* 1994 Restricted Stock Plan for Non-Employee Directors, as amended
to date, is incorporated by reference to Exhibit 10.3 of the
Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 2001.
(10.31)* Stock Option Plan for Non-Employee Directors is incorporated by
reference to Exhibit 10.2 of the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 2001.
(10.32)* Form of Stock Option Agreement under the Stock Option Plan for
Non-Employee Directors is incorporated by reference to Exhibit
10.30 of the Company's Annual Report on Form 10-K for the year
ended December 31, 1999.
(10.33)* Savings Plan, as amended to date, is incorporated by reference to
Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 2003.
(10.34)* Retirement Plan for Outside Directors, as amended on January 27,
1994, is incorporated by reference to Exhibit 10.12 of the
Company's Annual Report on Form 10-K for the year ended December
31, 1993 (File 1-1225).
(10.35)* Directors' Deferral Plan, as amended to date, is incorporated by
reference to Exhibit 10.35 of the Company's Annual Report on Form
10-K for the year ended December 31, 2002.
*Denotes management contract or compensatory plan or arrangement required
to be filed as an exhibit hereto.
IV-5
(10.36)* Executive Incentive Plan is incorporated by reference to Appendix
D of the Company's definitive Proxy Statement filed March 20,
2002.
(10.37)* Deferred Compensation Plan, as amended to date.
(10.38)* Executive Retirement Plan is incorporated by reference to Exhibit
10.5 of the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2002.
(10.39)* Supplemental Employee Savings Plan, as amended to date, is
incorporated by reference to Exhibit 10.3 of the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31,
2003.
(10.40)* Supplemental Executive Retirement Plan, as amended to date, is
incorporated by reference to Exhibit 10.6 of the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.
(10.41)* Supplemental Employee Retirement Plan is incorporated by reference
to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 2003.
(10.42)* 2002 Stock Incentive Plan is incorporated by reference to Appendix
C of the Company's definitive Proxy Statement filed March 20,
2002.
(10.43)* American Cyanamid Company's Supplemental Executive Retirement Plan
is incorporated by reference to Exhibit 10K of American Cyanamid
Company's Annual Report on Form 10-K for the year ended December
31, 1988 (File 1-3426).
(10.44)* American Cyanamid Company's Supplemental Employees Retirement Plan
Trust Agreement, dated September 19, 1989, between American
Cyanamid Company and Morgan Guaranty Trust Company of New York is
incorporated by reference to Exhibit 10K of American Cyanamid
Company's Annual Report on Form 10-K for the year ended December
31, 1989 (File 1-3426).
(10.45)* American Cyanamid Company's ERISA Excess Retirement Plan is
incorporated by reference to Exhibit 10N of American Cyanamid
Company's Annual Report on Form 10-K for the year ended December
31, 1988 (File 1-3426).
(10.46)* American Cyanamid Company's Excess Retirement Plan Trust
Agreement, dated September 19, 1989, between American Cyanamid
Company and Morgan Guaranty Trust Company of New York is
incorporated by reference to Exhibit 10M of American Cyanamid
Company's Annual Report on Form 10-K for the year ended December
31, 1989 (File 1-3426).
(10.47)* Form of Severance Agreement entered into between the Company and
all executive officers is incorporated by reference to Exhibit
10.43 of the Company's Annual Report on Form 10-K for the year
ended December 31, 1997 (File 1-1225).
*Denotes management contract or compensatory plan or arrangement required
to be filed as an exhibit hereto.
IV-6
(10.48)* Agreement, dated as of March 6, 2001, by and between the Company
and John R. Stafford is incorporated by reference to Exhibit 10.1
of the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2001.
(10.49)* Amendatory Agreement, dated as of March 6, 2001, by and between
the Company and John R. Stafford is incorporated by reference to
Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 2001.
(10.50)* Union Savings Plan, as amended to date, is incorporated by
reference to Exhibit 10.4 of the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 2003.
(12) Computation of Ratio of Earnings to Fixed Charges.
(13) 2003 Annual Report to Stockholders. Such report, except for those
portions thereof which are expressly incorporated by reference
herein, is furnished solely for the information of the Commission
and is not to be deemed "filed" as part of this filing.
(16) Letter from Arthur Andersen LLP to the Securities and Exchange
Commission, dated March 18, 2002, is incorporated by reference to
Exhibit 16 to the Company's Current Report on Form 8-K, dated
March 18, 2002.
(21) Subsidiaries of the Company.
(23) Consent of Independent Accountants, PricewaterhouseCoopers LLP,
relating to their report dated January 22, 2004, except for Note
16 which is as of February 11, 2004, consenting to the
incorporation thereof in Registration Statements on Form S-3 (File
Nos. 33-45324, 33-57339, 333-108312, 333-111093 and 333-112450),
Form S-4 (File No. 333-59642) and on Form S-8 (File Nos. 2-96127,
33-24068, 33-41434, 33-53733, 33-55449, 33-45970, 33-14458,
33-50149, 33-55456, 333-15509, 333-76939, 333-67008, 333-64154,
333-59668, 333-89318, 333-98619 and 333-98623) by reference to the
Form 10-K of the Company filed for the year ended December 31,
2003.
(31.1) Certification of disclosure as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
(31.2) Certification of disclosure as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
(32.1) Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(32.2) Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*Denotes management contract or compensatory plan or arrangement required
to be filed as an exhibit hereto.
IV-7
(99) Cautionary Statements regarding "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995.
(99.1) Letter to the Securities and Exchange Commission regarding Arthur
Andersen LLP (pursuant to Temporary Note 3T) is incorporated by
reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 2001.
(99.2) Final Nationwide Class Action Settlement Agreement, dated November
18, 1999, as amended to date is incorporated by reference to
Exhibit 99.1 of the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 2000.
(99.3) Fifth Amendment, dated November 21, 2002, to Final Nationwide
Class Action Settlement Agreement, dated November 18, 1999, as
amended, is incorporated by reference to Exhibit 99.3 to the
Company's Annual Report on Form 10-K for the year ended December
31, 2002.
(99.4) Sixth Amendment, dated January 10, 2003, to Final Nationwide Class
Action Settlement Agreement, dated November 18, 1999, as amended,
is incorporated by reference to Exhibit 99.4 to the Company's
Annual Report on Form 10-K for the year ended December 31, 2002.
(99.5) Consent Decree, dated October 3, 2000, is incorporated by
reference to Exhibit 99.2 of the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 2000.
(99.6) Amended and Restated Promotion Agreement, dated as of December 16,
2001, by and between Immunex, the Company and Amgen Inc. (filed as
Exhibit 10.1 to Amgen's Registration Statement on Form S-4 (File
No. 333-81832) on January 31, 2002 and incorporated by reference
to Exhibit 99.2 of the Company's Current Report on Form 8-K, dated
July 29, 2002).
(b) Reports on Form 8-K
-------------------
The following Current Reports on Form 8-K were filed by the
Company:
o October 22, 2003 relating to furnishing information on
Wyeth's diet drug litigation and Wyeth's results for
the 2003 third quarter and first nine months (Items 9 and
12 disclosure).
o January 22, 2004 relating to furnishing Wyeth's earnings
results for the 2003 fourth quarter and full year (Item 12
disclosure).
IV-8
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Annual Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
WYETH
-----
(Registrant)
March 12, 2004 By /s/ Kenneth J. Martin
------------------------------------
Kenneth J. Martin
Executive Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
Principal Executive Officer:
/s/ Robert Essner Chairman of the Board, March 12, 2004
- ------------------------------------ President and
Robert Essner Chief Executive Officer
Principal Financial Officer:
/s/ Kenneth J. Martin Executive Vice President March 12, 2004
- ------------------------------------ and Chief Financial Officer
Kenneth J. Martin
Principal Accounting Officer:
/s/ Paul J. Jones Vice President and March 12, 2004
- ------------------------------------ Controller
Paul J. Jones
Directors:
/s/ Clifford L. Alexander, Jr. Director March 12, 2004
- ------------------------------------
Clifford L. Alexander, Jr.
/s/ Frank A. Bennack, Jr. Director March 12, 2004
- ------------------------------------
Frank A. Bennack, Jr.
/s/ Richard L. Carrion Director March 12, 2004
- ------------------------------------
Richard L. Carrion
/s/ John D. Feerick Director March 12, 2004
- ------------------------------------
John D. Feerick
/s/ Robert S. Langer, Sc.D. Director March 12, 2004
- ------------------------------------
Robert S. Langer, Sc.D.
IV-9
Signatures Title Date
---------- ----- ----
Director
- ------------------------------------
John P. Mascotte
/s/ Mary Lake Polan, M.D., Ph.D., Director March 12, 2004
M.P.H.
- ------------------------------------
Mary Lake Polan, M.D., Ph.D.,
M.P.H.
/s/ Ivan G. Seidenberg Director March 12, 2004
- ------------------------------------
Ivan G. Seidenberg
/s/ Walter V. Shipley Director March 12, 2004
- ------------------------------------
Walter V. Shipley
/s/ John R. Torell III Director March 12, 2004
- ------------------------------------
John R. Torell III
IV-10
INDEX TO EXHIBITS
-----------------
Exhibit No. Description
(4.6) Fifth Supplemental Indenture, dated as of December 16, 2003,
between the Company and JPMorgan Chase Bank (as successor to The
Chase Manhattan Bank).
(10.6) First Amendment to 3-Year Credit Agreement, dated as of February
11, 2004, among the Company, the banks and other financial
institutions from time to time parties thereto and JPMorgan Chase
Bank, as administrative agent for the lenders thereto.
(10.7) 5-Year Credit Agreement, dated as of February 11, 2004, among the
Company, the banks and other financial institutions from time to
time parties thereto and JPMorgan Chase Bank, as administrative
agent for the lenders thereto.
(10.8) Master Guarantee and Letter of Credit Agreement, dated as of
December 16, 2003, between the Company and ABN AMRO BANK, N.V.
(10.22)* Form of Stock Option Agreement (transferable options).
(10.37)* Deferred Compensation Plan, as amended to date.
(12) Computation of Ratio of Earnings to Fixed Charges.
(13) 2003 Annual Report to Stockholders. Such report, except for those
portions thereof which are expressly incorporated by reference
herein, is furnished solely for the information of the Commission
and is not to be deemed "filed" as part of this filing.
(21) Subsidiaries of the Company.
(23) Consent of Independent Accountants, PricewaterhouseCoopers LLP,
relating to their report dated January 22, 2004, except for Note
16 which is as of February 11, 2004, consenting to the
incorporation thereof in Registration Statements on Form S-3
(File Nos. 33-45324, 33-57339, 333-108312, 333-111093 and
333-112450), Form S-4 (File No. 333-59642) and on Form S-8 (File
Nos. 2-96127, 33-24068, 33-41434, 33-53733, 33-55449, 33-45970,
33-14458, 33-50149, 33-55456, 333-15509, 333-76939, 333-67008,
333-64154, 333-59668, 333-89318, 333-98619 and 333-98623) by
reference to the Form 10-K of the Company filed for the year
ended December 31, 2003.
(31.1) Certification of disclosure as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
(31.2) Certification of disclosure as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
*Denotes management contract or compensatory plan or arrangement required
to be filed as an exhibit hereto.
(32.1) Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(32.2) Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(99) Cautionary Statements regarding "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995.