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Akzo Nobel's recently restructured Pharma Group is primed to deliver double-digit growth this year on a business-like basis.

The restructuring has strengthened the Group's strategic focus on prescription pharmaceuticals, animal healthcare and complex active pharmaceutical ingredients (APIs), providing a solid basis for continuing the earnings growth established over the past five years.

This was the message delivered by Akzo Nobel's chief financial officer, Fritz Frohlich, at the company's Pharma Analysts and Investors Day in New York.

"Consistently solid results by the Pharma Group over the past five years, and more recently during the first half of this year, have firmly established Pharma as the driver of Akzo Nobel's financial performance," said Frohlich. "In 2000, when Pharma accounted for about 47% of earnings, we said we were aiming to raise that to over 50%, a goal we are well placed to achieve in 2001, as our half-year figures for 2001 showed."

Akzo Nobel Pharma has set its sights on joining the ranks of world-class pharma companies. Following the sale of Chefaro and Organon Teknika's diagnostics business over the past 12 months, the Group has focused its activities on prescription pharmaceuticals, animal healthcare, and the production of complex active pharmaceutical ingredients. This focused portfolio provides the best opportunities to exploit the extensive knowledge base, to capitalize on pipelines of innovative products, and to harness critical mass in selected markets. It also allows the Group to reap potential synergies from its pharmaceutical technology platforms and its R&D and manufacturing methodologies. "Our strategic trio - Organon, Intervet and Diosynth - provides Pharma with the best basis for continuing organic growth and healthy profitability," commented Paul Brons, responsible for Pharma on Akzo Nobel's Board of Management. "We are now configured to become a leading player in our chosen segments of the healthcare sector," he added.

Product launches and some recent acquisitions in the U.S. by the Group demonstrate Akzo Nobel Pharma's commitment to its strategy of strong expansion in North America. Since 1998, when the U.S. accounted for around 25 % of the Pharma Group's total sales, the U.S. contribution has grown to 33% in the first half of 2001. Its average annual growth in the U.S. over the past 4 years has been in the vicinity of 40%.

Organon's product pipeline continues to deliver

-- Arixtra(R), our new antithrombotic, receives FDA's approvable letter August 15, 2001; poised for U.S. launch

-- NuvaRing(R), our new contraceptive, approved by FDA on October 4, 2001; 15 European countries approved NuvaRing(R) in June 2001

-- Conversion from Remeron(R) to Remeron(R) SolTab(TM) on track

-- Antidepressant Ariza(R) filed with FDA in May 2001

-- Organon moving its headquarters to the U.S. during summer 2002

A key product for Organon and its partner in antithrombotics, Sanofi Synthelabo, is the innovative antithrombotic Arixtra(R), for which the Food and Drug Administration (FDA) issued an approvable letter in mid-August 2001 for introduction on the U.S. market for prevention of atherothrombosis after major orthopedic surgery. With 50% better prevention of deep venous thrombosis than current drugs, Arixtra is likely to become the new standard for acute anti-coagulant therapy. The U.S. product launch is expected by year-end, with Europe following around mid-2002. In addition, clinical trials are underway to study Arixtra's use in treating venous thrombosis and pulmonary embolism (phase III) and arterial thrombosis (phase IIb). Organon and Sanofi have an aggressive development program in place and their combined annual sales for all these indications of Arixtra are projected to peak at EUR 800 million worldwide.

In contraception, Organon - ranked No. 4 in a global market of EUR 4.2 billion - is bringing to market contraceptives featuring novel, innovative modes of delivery. In 2000 in Europe, Organon successfully launched Implanon(R), a single implanted rod that slowly releases a progestagen for a three-year period; a U.S. launch is planned for 2003. In June 2001 Organon received approval from 15 European countries for NuvaRing(R), its vaginal ring that releases `pill hormones' over a three-week period; U.S. approval for NuvaRing was received just last week. Estimates for NuvaRing and Implanon indicate peak annual sales of EUR 250 million and EUR 100 million, respectively. For male contraception, Phase IIb trials have just begun.

Organon's best-selling product, the antidepressant Remeron(R), ranks No. 7 in the EUR 13 billion worldwide market for antidepressants. Sales for 2001 are estimated at EUR 600 million. Remeron's position in the U.S. market, which accounts for roughly two-thirds of Organon's total antidepressant sales, was strengthened with the launch in February 2001 of its line extension Remeron(R) SolTab(TM), the first and only orally dissolving antidepressant in that market. Conversion of Remeron prescriptions to Remeron SolTab is on track. In 2002 Organon intends to launch its new antidepressant drug Ariza(R) on the U.S. market. Studies of this first 5HT1A agonist for treatment of major depression confirm its excellent safety and patient tolerance profile. The file was submitted to the FDA in May 2001. Ariza's peak annual sales potential is estimated at EUR 500 million. Co-promotion is being considered.

Organon has filed suit against three generic pharmaceutical companies, with a fourth case coming up, for infringement of its new usage patent for Remeron, as listed in the FDA Orange Book, 1999. Pending the outcome of these lawsuits, competitors are barred from entering the U.S. market with a generic form of Remeron. Exclusivity for Remeron in several EU countries expires between 2004 and 2006. In Japan, launch of Remeron is anticipated in 2004, with market exclusivity reaching to 2010.

A new, significant theme in Organon's pipeline is for drugs to treat rheumatoid arthritis (RA). One of several promising compounds in the pipeline, Org 39141 - now in Phase II trials - is a potentially potent and selective drug that is expected to meet the high demand for novel drugs to treat RA. Potential annual sales are considered to be substantial.

To facilitate ambitious organic growth, as well as strategic alliances and collaborations, Organon is moving its headquarters to the U.S., by far the biggest and most dynamic pharmaceutical market in the world. The new headquarters will be operational during the summer of 2002.

Intervet: No. 2 in animal healthcare

-- Intervet moves to No. 2 worldwide position in animal healthcare

-- Growth of 10% in first half 2001, on the back of its innovative product lines

-- Integration Hoechst Roussel Vet and Bayer Biologicals successfully completed

-- Delivering pharma margins

Intervet, Akzo Nobel's animal healthcare business, has continued its strong performance, delivering sales growth of 10% for the first half of 2001. Intervet is now the world's No. 2 animal healthcare company, up from the No. 3 position it reached with the acquisition of Bayer Biologicals Inc. in 2000.

The successful integration of Hoechst Roussel Vet and its 2000 acquisition of Bayer Biologicals Inc. have borne fruit in 2001, with Intervet pushing its margins back up to human pharma levels.

Intervet's profitability is driven by its innovative biological (vaccines) and pharmaceutical products, which have been developed for a wide range of farm and companion animal species. Through increased R&D and selected acquisitions, Intervet has accelerated product launches of a large number of important new products for European, U.S. and Japanese markets, including vaccines for swine, poultry and dogs, and pharmaceuticals for dogs and cats.

Intervet is pursuing increased profitability by strengthening its already extensive range of viral and bacterial vaccines for all economically relevant species, in addition to developing antiparasitic vaccines. For its pharmaceutical products, Intervet is emphasizing proprietary antiparasitics. More emphasis will also be given to the companion animal market.

Diosynth: investing in the future

-- Diosynth establishes U.S. biotech bridgehead with acquisition of CBSI

-- Diosynth anticipating growth with investment in biotech manufacturing capacity

-- Diosynth poised to become a key player in manufacturing of complex biopharmaceutical ingredients.

Akzo Nobel's Diosynth business manufactures complex active pharmaceutical ingredients for the pharmaceutical industry. In 2000, its sales totaled EUR 380 million, with third party contracts accounting for around 60% of that amount. Its main products are steroids, synthetic peptides, carbohydrates, gonadotrophic hormones, insulins and heparin. Diosynth is synthesizing the complex molecule to be used in Organon's new antithrombotic drug, Arixtra.

With a scarcity in biotech manufacturing capacity looming, Diosynth has embarked on an ambitious program of strategic investments in production facilities. A purification and isolation unit was opened late 2000 and simultaneously construction began on an upstream processing unit comprising fermentation and cell culture facilities. The total cost of these investments is EUR 70 million. The expanded facilities complement Diosynth's extensive knowledge of and experience in the production of complex active pharmaceutical ingredients (APIs), making it an attractive supplier to the innovative pharmaceutical industry.

In June 2001 Diosynth acquired Covance Biotechnology Services Inc. (CBSI), a leading U.S. manufacturer of innovative biopharmaceutical substances, for EUR 210 million. The acquisition of CBSI, now called Diosynth RTP, adds process development and manufacturing capacity to supplement investments in manufacturing capacity already underway. It also firmly establishes Diosynth's business position in the U.S., which generates roughly 40% of total sales.

Recent approval for a further EUR 18 million investment to expand the biopharmaceutical manufacturing facilities already under construction at Oss, the Netherlands, underscores Diosynth's determination to increase its presence in the global market place. The extra capacity at the Oss site will serve the combined needs of Diosynth in Europe and Diosynth RTP in North America, enhancing the ability to meet market demand on both continents.

Akzo Nobel, based in the Netherlands, serves customers throughout the world with healthcare products, coatings and chemicals. Consolidated sales for 2000 totaled EUR 14 billion (USD 13 billion, GBP 8.5 billion). The company currently employs 67,500 people in more than 75 countries. Financial results for the third quarter of 2001 will be published on October 24, 2001.

Organon is a renowned global pharmaceutical company with a strong commitment to healthcare. The company develops and produces innovative prescription medicines for gynecology, psychiatry, cardiovascular disease and immunology. Organon products are sold in over 100 countries, more than half of which have an Organon subsidiary. The company currently employs around 12,000 people. N.V. Organon is the ethical pharmaceutical business unit of Akzo Nobel.

Intervet, a business unit of Akzo Nobel, headquartered in Boxmeer, the Netherlands, and with sales in 2000 reaching EUR 1,020 million, is focused on the research and development, manufacturing, and marketing of veterinary products. Intervet's products include vaccines for the prevention of infectious diseases, antibiotics, and endocrine products for fertility management, all intended for use in a variety of animal species including poultry, pigs, cattle, sheep and goats, horses, fish and pets. Intervet operates globally through its own marketing organizations. The company currently employs around 5,000 people.

Diosynth, a business unit of Akzo Nobel, is a science-driven and technology-based manufacturer of complex active pharmaceutical ingredients. The company's expertise is complex organic chemistry, extractions, cell culture, fermentation and chromatographic purification, including HPLC. These technologies are used on an industrial scale to manufacture steroids, synthetic peptides, opiate analogues, carbohydrates, heparin and recombinant proteins, as well as proprietary innovator products. Diosynth's operations are backed by a large development organization, strong commitment to Good Manufacturing Practice (cGMP) and strict adherence to HSE legislation. Diosynth is headquartered in Oss, the Netherlands, has about 3,000 employees and reached in 2000 a turnover of EUR 380 million (USD 350 million).

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Title Annotation:financial outlook and management strategies for Pharma Group and other Akzo Nobel busines units
Comment:AKZO NOBEL'S PHARMA ON COURSE FOR DOUBLE-DIGIT GROWTH.(financial outlook and management strategies for Pharma Group and other Akzo Nobel busines units)
Publication:Biotech Financial Reports
Article Type:Company Profile
Geographic Code:4EUNE
Date:Nov 1, 2001

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