In a move that has caught the pharmaceutical industry by surprise, Akzo Nobel has sold Organon BioSciences to the USA’s Schering-Plough on the morning when the Dutch group was scheduled to give more details about a much-touted initial public offering for its drugs unit.
Under the terms of the deal, which is expected to close by the end of the year, S-P will pay 11 billion euros in cash for Organon and the latter says that the purchase should be accretive to earnings per share by about $0.10 in the first full year, minus accounting adjustments and acquisition-related costs. S-P expects to save $500 million annually from the acquisition after the first three years.
Chief executive Fred Hassan said the transaction is part of a strategy “to transform S-P into a global high-performance company for the long term." He added that “it is the right deal at the right time” and Organon provides an excellent fit “strategically, scientifically and financially."
Mr Hassan claimed that the deal gives S-P immediate access to central nervous system and women's health care products and “also fills a gap in our late-stage pipeline by adding five compounds in Phase III development and a number of promising projects in Phase II.” Also, “in light of S-P's expanding early pipeline, Organon's strong biologics manufacturing capability is a further important asset for the combined company,” he added.
Organon’s revenues were up 8% to 2.61 billion euros in 2006, driven by its firm's contraceptives (notably NuvaRing) and infertility treatment Puregon/Follistim (follitropin beta). Highlights of its pipeline include the schizophrenia drug asenapine, which although dropped by previous partner Pfizer, could be filed in the USA within the year and Org 50081, a serotonin-2 blocker for the treatment of insomnia.
For Akzo’s part, chief executive Hans Wijers said that “we are convinced that we have found a good home” for the unit, noting that “while an independent future also offered potentially exciting possibilities, the partnership with S-P…will give more scope to develop the unique capabilities of Organon.”
This view was backed by investors who sent Akzo’s shares soaring over 16% in early trading, delighted with the price that the company had managed to secure. The planned IPO had been expected to raise 8-9 billion euros and Organon’s management had been in London as late as Friday outlining the benefits of the listing. Little did observers realise that talks with S-P had already begun a week and a half earlier.