Akzo Nobel of the Netherlands said this morning it intends to split its business into two independent companies, one focusing on pharmaceuticals and the other on coatings and chemicals.
The news came on the same day as Akzo’s 2005 results meeting, at which net profit of 961 million euros ($1.15 billion) – about the same as in 2004 - was announced, falling in line with expectations. Revenues were up 6% at 13 billion euros for the year.
Pharma will be spun out of the group, initially via an initial public offering (IPO) that will create a new company called Organon Biosciences. A complete separation of the pharma business should take place two to three years after the IPO, which is scheduled for the second half of this year.
The move comes after a concerted effort by Akzo’s management, started in 2004, to ‘fix pharma’ and turn around a business that, at the time, was facing patent expirations on key product lines, safety issues with some products and an increasingly competitive operating environment for its contract manufacturing business.
The chemicals business has been restructured in parallel with pharma, with non-core assets such as ink and adhesive resins, oleochemicals, salt specialties, PVC additives and its methyl amines/choline chloride activities – collectively accounting for 750 million euros in annual sales - all on the block.
Toon Wilderbeek, who currently heads the pharma business at Akzo and will serve as CEO of Organon Biosciences, said that pharma had reached a turning point and was now ‘positioned to deliver strong, profitable growth.'
The move is expected to please investors and analysts who considered that pharma was a distraction for Akzo’s management and too small to make the group a major player in the industry. The independent pharma unit will comprise Organon, which recently subsumed the Diosynth contract manufacturing unit, and Akzo’s Intervet veterinary business.
Looking to the future, Akzo has high hopes for the new company’s Nobilon vaccines arm, set up in 2003 at a time when interest in vaccines, previously considered a low-profit, commodity business, was being rekindled across the drug industry. The first vaccines from Nobilon are due to reach the market in 2009.
Meanwhile, Organon Biosciences’ clinical pipeline will be headed by asenapine, an antipsychotic drug for schizophrenia developed alongside Pfizer. Wilderbeek said the timing of the IPO will depend on the outcome of Phase III clinical trials of this compound, due to be reported later this year.
In 2005, the Organon business posted a 3% rise in revenues to 2.45 billion euros, returning to growth after several years of decline since the antidepressant Remeron (mirtazapine) lost patent protection in the USA. The increase was attributed to strong performances from fertility treatment Puregon/Follistim (follitropin beta) and contraceptive Nuvaring (etonogestrel/ethinylestradiol).