June 2003 Chemical Information Services Introduces E-Newsletter We live in an age where the amount of available information increases on a daily basis while the time we have available to process that information shrinks. As a provider of information services, Chemical Information Services is aware of the difficulties in staying abreast of the industry's latest news and current events. As a continuation of our commitment to provide our customers with valuable tools that enable their success, we are proud to introduce an E-newsletter that provides brief summaries of the top news stories from the preceding month. Because our colleagues have repeatedly told us that they don't have the time to look through all of the major industry trade magazines, you can now be updated on leading news items by reviewing our brief newsletter just once per month. We review the top market-oriented news from the Americas, Europe and Asia for notable and concise summaries that highlight the major points of each story. To further assist you, we organize the stories into major categories so that you can find the information you are interested in quickly and easily. The brief summaries are placed into categories such as business/finance, pharmaceuticals, commodity chemicals, companies and personnel, just to name a few. At Chemical Information Services we value the needs of our customers and our market. This E-newsletter was designed specifically with those needs in mind. Please let us know if you find the newsletter valuable. We also welcome suggestions for improvements. Please send your comments to us at chemicalinformer@chemicalinfo.com.   FDA Approves Lescol The FDA approved Novartis Pharmaceuticals' cholesterol drug Lescol (Fluvastatin sodium) for preventing coronary events in patients with heart disease. The agency's decision is based on a study by Novartis that demonstrated the ability of Lescol to reduce the chances of a recurrent cardiac event by 22 percent versus placebo.   FDA Recommends Approval for Xolair An FDA advisory panel unanimously recommended approval of Genentech's biologics license application (BLA) for the IgE blocker Xolair (Omalizumab) for treatment of moderate-to-severe allergic asthma in adults and adolescents. The FDA is expected to vote on final approval in the summer of 2003. Genentech hopes to eventually gains approval for Xolair to treat pediatric patients and those suffering from food allergies and allergic rhinitis. Datamontior projects sales of Xolair will reach $593 million by 2010, with a compounded annual growth rate of 42.3 percent from 2003 to 2010.   Iressa receives FDA Approval The FDA approved AstraZeneca's drug Iressa for the treatment of advanced non small cell lung cancer. The drug met the FDA's requirements for accelerated approval because no approved treatment existed. AstraZeneca says that lung cancer is the leading cause of cancer deaths in the United States, with an estimated 157,000 deaths in 2003.   Schering and MerLion Sign Drug Discovery Deals Schering signed a four-year agreement with Astex Technology (Cambridge Science Park, UK) that focuses on the discovery of orally-available small molecule drugs targeting solid tumors. MerLion Pharmaceuticals (Singapore) signed an agreement with NovImmune (Switzerland) for the discovery and development of immunosuppression and immunomodulation drugs.   Schering Corporation Target of U.S. Grand Jury Investigation Pharmaceutical manufacturer Schering-Plough received a letter from the U.S. attorney in Massachusetts advising it that subsidiary Schering Corporation is a target of a U.S. grand jury investigation. The criminal investigation covers four areas - providing remuneration, items or services to induce the purchase of Schering pharmaceutical products; sale of misbranded or unapproved drugs promoted for indications not approved by the U.S. Food and Drug Administration (FDA); submitting false pricing information; and document destruction and obstruction of justice relating to the government's investigation. The company said it continues to cooperate with the U.S. investigation.   Tufts Research Group Reports Eight-Fold Increase in Clinical Trial Costs Since 1970 The Tufts Center for the Study of Drug Development (TCSDD) reports that clinical trial costs have increased eightfold since 1970 and now account for a significant percent of the nearly $900 million in development costs associated with new drugs. The total cost of drug development (preclinical plus clinical costs) increased 5.8 times in the same period. TCSDD also reports that only one in five drug candidates that progresses to the clinical trials stage will receive approval from the U.S. Food and Drug Administration; development time can be as long as 13-15 years.   FDA Approves Reyataz for HIV An FDA advisory panel unanimously recommended approval for a new drug application for protease inhibitor Reyataz (Atazanavir) from Bristol-Myers Squibb Company (BMS) to treat HIV infection in combination with other antiretroviral agents. The drug is expected to be launched later this year and is differentiated by its once-daily dosing. Lehman Brothers predicts sales of Reyataz to peak at $600 - $800 million.   Crompton and GE Swap Businesses General Electric (GE) has agreed to purchase the OSI Specialties Organosilicones Unit of Crompton Corporation for $645 million in cash plus its plastics additives business, which has sales of $165 million per year. Crompton will also receive $105 - $250 million in quarterly "earn-out" payments for three years after closing based on the performance of the new GE silicones business. The deal enables GE to enter the organofunctional silicones market, while Crompton will reduce its debt and increase sales of its polymer additives business to $750 million per year.   Wella Finds P&G Offer Acceptable Procter & Gamble (P&G) offered to pay minority shareholders of the German family-owned Wella E65 instead of the initially offered E61.50, and the management board of Wella said it regarded the offer as "acceptable." P&G is offering E92.25 for ordinary shares, which are held mostly by the family. The full offer was available until May 28. Investment bank Greenhill found the bid to be legal and within the range of accepted evaluation methods.   Industry Feels Impact of Sars Severe Acute Respiratory Syndrome (SARS) is affecting the Asia/Pacific region as decreased demand for consumer goods from the region has in turn lead to a decline in both the demand for chemicals and their prices. Firms in the Beijing area are the most affected, but companies throughout Asia expect reduced sales. The full extent of the impact on the industry won't be known until gross domestic product numbers are reported at the end of the year.   EPA Administrator Resigns EPA administrator Christine Todd Whitman plans to resign her position on June 27 and return to New Jersey to spend more time with her family. She has been praised for working with the regulated community to develop reasonable environmental programs and market-based initiatives instead of taking the usual command-and-control approach.   European Governments Supporting European Chemical Industry on New Regulatory System The European Chemical Industry Council (Cefic) has indicated that many European Union governments and the governments of the ten states scheduled to join the EU in 2004 will most likely require changes to the planned Registration, Evaluation and Authorization of Chemicals (Reach) program before they will vote for its approval. Cefic is worried about the negative impact that Reach will have on the global competitiveness of the industry and is looking for changes in the scope of the program, testing costs and procedures for the registration and evaluation of chemicals.   REACH Proposals Published on Internet The European Commission (EC) published its draft proposals for its new Registration, Evaluation, Authorization of Chemicals (Reach) system on the Internet for eight weeks during consultation with stakeholders, including the chemical industry, user sectors and environmental and consumer organizations. Under the system, producers, importers and users of chemicals with an annual output of more than one tonne must assess the risks associated with the chemicals and document their safe use in a registered dossier within 11 years. The EC estimates that 80 percent of chemicals will need registration, while the remainder will require evaluation by authorities within each member state.   Canadian Supreme Court to Try Monsanto GM Canola Case Canada's Supreme Court is set to hear the case of a Saskatchewan farmer charged by Monsanto with growing the company's genetically modified (GM) canola without paying a license fee. The farmer, Percy Schmeiser, claims the seed blew into his field. A federal appeals court found Schmeiser in violation of Monsanto's patent, requiring payment of Can$15,000 (US$10,800) for using the seed without paying a license fee, plus more than Can$150,000 (US$108,000) in court costs.   Monsanto Claims Victory in Patent Dispute with Bayer CropScience Monsanto announced that it received a unanimous decision from the U.S. Board of Patent Appeals and Interferences, a unit of the U.S. Patent and Trademark Office, to uphold the patent rights and priority of Monsanto's DeKalb Genetics subsidiary for glufosinate-tolerant corn and rejected claims for patentability of the same technology by Bayer's affiliate Plant Genetics Systems (PGS). Bayer markets the product under the brand name Liberty Link.   Monsanto to Seek Royalties in Brazil Monsanto (St. Louis, MO) plans to collect royalty payments on the use of its RoundUp Ready genetically modified (GM) soya seeds planted illegally in Brazil. The company indicated that the Brazilian government's decision to allow trading of GM soya contributed to its decision to pursue discussions with soya producers. Slightly more than 10 percent of the Brazilian soya bean harvest in 2002-2003 is genetically modified, according to government statistics.   Sales of Biotechnology Products Expected to Increase Consulting Resources (Lexington, MA) reports that sales of biotechnology products are expected to grow at 11 percent per year through 2013, reaching $66 billion in the U.S. and $120 billion worldwide. Human therapeutics, projected to top $50 billion in 2013, are the leading category of product. Genetically modified crops have the fastest growth rate at 14 percent per year and are predicted to reach $6 billion in 2013.   Atofina and Samsung Sign Agreement for Joint Venture Atofina (France) and Samsung General Chemicals (SGC, South Korea) have signed a final $1.55 billion contract for their 50:50 petrochemicals joint venture. Atofina will be responsible for $775 million and SGC the remainder plus its manufacturing site and personnel in Daesan, South Korea. Samsung Atofina plans to be launched officially in July 2003. SGC benefits from the marketing and technical expertise of Atofina, while Atofina gains direct access to the Asian petrochemicals market.   Taiwan's Two Ethylene Producers in Race to Build Chinese Petrochemical Corp. (CPC) and Formosa Petrochemical Corp. (FPCC) are both believed to be focusing on Yunlin County, Taiwan, as the possible site for their planned world-scale crackers. Both companies have downstream buyers, but the firm that has the first operational cracker will have the better opportunity secure a position as a supplier to the rest of the market. FPCC is already talking with engineering contractors and Taiwan's Environmental Protection Administration.   Dow Considers Appeal on Asbestos Case The Dow Chemical Company is considering whether or not to appeal a $1.2 million verdict awarded to a carpenter who allegedly developed cancer as a result of exposure to asbestos. The verdict was significant because it was the first time a jury has determined that asbestos made by Dow's Union Carbide unit, acquired in 2001, could cause a specific type of cancer (in this case, peritoneal mesothelioma).   ICI Cuts Jobs as First Step in Cost Reduction Program ICI announced that it plans to cut 700 jobs as part of a cost reduction program to address its declining profits. Divestments are not being considered at this time, though rationalization of production and reorganization of the supply chain are being pursued. The European paints business will lose 460 jobs, National Starch will see 120 job cuts, and Quest will lose 115 employees.   Lonza Announces Lower Profits and Job Cuts Lonza announced that its first-half operating profits will be 20 percent below the SF217 million ($167 million) it reported last year, largely due to difficulties with its custom manufacturing operations. The company also reported that it is implementing a SF50 million restructuring program to achieve an annualized cost reduction of SF100 million. As part of the restructuring, Lonza will cut 500 jobs, or about 8 percent of its workforce. The company plans to integrate its early-stage clinical development activities into a single technology services business and combine its cGMP operations into a single custom manufacturing business.   Pfizer Invests in Expansion Pfizer announced it will invest up to $400 million during the next five years to expand existing operations in New Jersey, including the expansion of its Morris Plains office and R&D facilities. The company will also pay nearly $400 million to buy an office building in Manhattan and renovate its existing facilities in New York City. During the next 15 years, Pfizer plans to invest up to $1 billion in the city. The company will be closing R&D sites including Pharmacia's Skokie, Ill., and South San Francisco facilities and Pfizer's Fresnes, France and High Wycombe, the U.K. development site.   Akzo Nobel Initiates Restructuring Program Akzo Nobel NV has initiated a restructuring program that includes $573 million in asset sales and 700 job cuts in its pharmaceutical operations. Once the pharmaceuticals business is under control, the company will try to improve the performance of its coatings and chemicals segments as well. Once the divestitures, which the company has not specified, are complete, Akzo will look for appropriate acquisitions to attain its target of a 30 percent return on investment.   Huntsman Takes Over ICI's Stake in Huntsman International Huntsman completed the purchase of both the 30 percent stake in Huntsman International held by ICI and the 9 percent stake held by J.P. Morgan Partners and MidOcean Capital Investors. The purchases were made with proceeds from a bond offering by HMP Equity Holdings, which is 51 percent owned by the Huntsman family and 49 percent owned by the private equity firm MatlinPatterson (New York).   Many U.S. Oil Companies Experience Decreased Earnings Rising energy and feedstock costs have offset price increases and higher volumes for the domestic petrochemical businesses of U.S. oil firms, resulting in lower earnings. ExxonMobil reported a fourfold decrease in U.S. chemical earnings to $16 million, while ChevronTexaco's U.S. earnings dropped from $16 million to $3 million. ConocoPhillips reported a net loss of $23 million (up from $11 million the previous year) and Sunoco experienced a $4 million loss in its chemicals business as compared to a $2 million income in the previous one-year period.   Mergers & Acquisitions in the Chemical Industry on the Rise Again In an attempt to reduce debt, many chemical firms are restructuring their portfolios and offering higher quality businesses for sale. Approximately $4 billion in deals were completed in the first quarter of 2003, up from $2 billion in the same period of 2002, with 16 of these transactions valued at more than $25 million. Some of the companies looking to divest businesses include BP (performance products), DuPont (DuPont Textiles & Interiors), Dow Chemical (non-strategic and under-performing assets), OM Group (part of dmc2), Clariant (pharmaceutical and crop protection fine chemicals businesses), Goodyear Tire & Rubber