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BUSINESS REVIEW<br />
Continued healthy growth<br />
In 1998, Pharma continued to pursue its strategy of<br />
autonomous growth. While worldwide the<br />
prescription drugs market is growing at about<br />
6 percent in U.S. dollar terms, we managed to<br />
achieve a very healthy sales increase of 13 percent<br />
in this field. The launch of new innovative products<br />
and their good acceptance in the market, as well as<br />
our improved geo mix, were the major factors in this<br />
development.<br />
We made considerable efforts to further improve<br />
our presence in the key U.S. market. Over the years,<br />
Organon Teknika and Intervet have been<br />
establishing bridgeheads in the U.S. market, partly<br />
through acquisitions and partly through a grassroots<br />
approach.<br />
More recently, because of its lengthier product<br />
development tracks, Organon built a rapidly<br />
expanding base for its business in the United States.<br />
To service the successful launch of its oral<br />
contraceptives, fertility products, and Remeron®<br />
antidepressant, Organon has been making strong<br />
efforts to extend its U.S. field force, from a mere<br />
470 in 1994 to some 1,100 people in 1999.<br />
Organon’s sales in the United States increased<br />
67 percent in 1998, contributing considerably to<br />
Organon’s worldwide growth. Meanwhile,<br />
manufacturing, R&D, and medical service staff are<br />
preparing the launch in the United States of eight<br />
new innovative products for the coming two years.<br />
Of course, adverse currency developments and the<br />
crisis in Asia also affected Pharma’s sales. Organon<br />
and our veterinary business unit Intervet (which had<br />
aimed at expanding its positions in Asia) suffered<br />
from developments in that area. Nevertheless,<br />
Intervet achieved a healthy 8 percent growth<br />
worldwide, outperforming most of its competitors.<br />
AKZO NOBEL ANNUAL REPORT 1998<br />
25<br />
PHARMA<br />
In hospital pharmaceuticals, Organon Teknika had a<br />
quite successful year. In the highly competitive<br />
diagnostics area it was able to extend the so-called<br />
”installed base” for its key diagnostic equipment<br />
systems, which should further enhance its returns<br />
through growing reagent supplies for these systems<br />
in the years to come.<br />
Diosynth registered increasing sales to noncaptive<br />
clients, who now account for more than 60 percent<br />
of its total output. In order to keep pace with<br />
expected growth in demand for sophisticated new<br />
pharmaceutical compounds, Diosynth is investing in<br />
additional biotechnological and downstream<br />
processing facilities. From a strategic point of view<br />
this will further strengthen the know-how base for<br />
our total Pharma operations.<br />
Over-the-counter pregnancy tests of Chefaro<br />
maintained their leading position in Europe.<br />
Over the years Pharma’s steadily improving geo and<br />
product mix has resulted in a continuous growth of<br />
gross margin, permitting us to step up R&D,<br />
marketing, and service efforts.<br />
All of Pharma’s business units have been taking<br />
measures to structurally reinforce and streamline<br />
their facilities and organization. Organon continued<br />
to expand its second R&D site in Newhouse,<br />
Scotland, by opening new laboratories, while<br />
Intervet broke ground for a second European R&D<br />
facility in Angers, France. Some older production<br />
facilities in Europe were sold or closed. Organon<br />
Teknika integrated its headquarters with its main<br />
European R&D and production site in Boxtel, the<br />
Netherlands, closing down its Turnhout, Belgium,<br />
offices.
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