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Lonza cuts 2009 guidance 14% and plans workforce cuts

By Gareth Macdonald , 02-Nov-2009

Lonza cuts 2009 earning guidance and may reduce its workforce under “Project Bond” cost cutting plan after a Q3 characterized by an “accumulation of unexpected events”

Late last week, the Swiss drug ingredients maker lowered its full year guidance to CHF380m (€252m), down 13.8 per cent on it previous target, citing order cancellations and postponements as the basis for the move.

And, while Lonza did not respond to in-PharmaTechnologist’s request for more information, it is understood that a key factor in the firm’s move was the 18-month delay to a cell therapy drug project in which it is involved.

Other factors affecting the Basel-headquartered firm since the end of September include lower-than-expected demand for its exclusive synthesis business and nutrition ingredients range, as well as ongoing “margin pressure on microbial control and performance intermediates.”

CEO Stefan Borgas was quick to respond to Lonza’s unexpected Q3 problems, setting out a programme of cost cutting measures designed to save between CHF60m and CHF80m over the next two years.

Borgas told analysts that: “By no means are we in a recovery mode in any of our markets around the world," adding that the firm will reduce its 8,500 strong workforce by 5 per cent and may close some of its manufacturing facilities.

He also said that Lonza will adapt some of its biomanufacturing plants so they can cater for smaller-scale clinical Phase II and III projects in order to boost capacity utilisation.

Despite this, Borgas said that: “Lonza isn't in a crisis. We will continue to expand our project pipeline in biologicals and chemicals and will sign additional pipeline deals to add to the long-term health of our business.”

However, Lonza’s announcement was accompanied by a 25 per cent fall, to CHF80, in its share price on the Zurich stock exchange.

Expansion through acquisitions

Despite the planned cutbacks and capacity reductions, Lonza still plans to expand its custom manufacturing project pipeline and increase longer-term customer collaborations.

The firm said it is still seeking to build its contract research and manufacturing offering through acquisitions, reiterating comments it made after withdrawing its bid for Canadian contractor Patheon last month.