A strong start to 2006 saw Dutch drugs and chemicals group Akzo Nobel post a set of first-quarter results that beat general expectations.
The group generated total net profit of 249 million euros which, although down 13% on the year-ago period due to special items, still significantly overshot the Reuters-reported average forecast of 174 million euros.
Last year, the company’s results benefited from a one-time payment of 149 million euros from US healthcare giant Johnson & Johnson, which Akzo's pharmaceutical unit Organon received from Johnson & Johnson's Janssen-Cilag group as part of the termination of their co-promotion agreement for the latter's antipsychotic drug Risperdal (risperidone).
First-quarter growth was driven by robust sales, up 12% at 3.4 billion euros on organic growth of 8% (and a 4% favourable currency effect) as all the group’s divisions – Organon, Intervet, Coatings and Chemicals - performed well during the period.
The group’s Organon unit posted a 12% hike in revenues to 644 million euros, led by a particularly strong performance in the US by its vaginal contraceptive ring, NuvaRing, which helped push its total revenues up 66% to 43 million euros. Operating income (excluding special items) was down 4% to at 85 million euros, “reflecting Organon’s increasing investments in future growth,” according to the company.
Commenting on Akzo’s overall performance for the quarter, Chief Financial Officer Rob Frohn said: “Our first quarter performance was very strong as we continued to deliver on growth. All units contributed to the 12% increase in revenues, with continued top line growth at Organon, record sales at Intervet, excellent Coatings volumes and a strong start to the year at Chemicals.”
Earlier this year, the group announced that it intends to split its business into two independent companies, one focusing on pharmaceuticals and the other on coatings and chemicals.
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.