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Profits and capacity utilisation up at Lonza in H1 thanks to pharma

By Gareth MacDonald+

24-Jul-2014
Last updated on 24-Jul-2014 at 11:58 GMT

Lonza HQ in Basel, Switzerland
Lonza HQ in Basel, Switzerland

Lonza saw profits and capacity utilisation improve in the first half of 2014 with new pharma and biopharma supply contracts and ongoing restructuring being the key drivers.

Net profit surged to CHF140m ($155m) from CHF41m in the equivalent period last year, while revenue increased 7% to CHF1.8bn with the contribution from the Swiss life sciences supplier’s pharma and biotech segment growing 10% to CHF674m.

Lonza said the unit had seen good overall performance, citing the “strong momentum” achieved by its mammalian antibody drug conjugate business – which supplies the antibody for Roche’s HER2 breast cancer drug Kadcyla – as particularly important.

The contract manufacturer has been trying to increase the amount of high tech biopharmaceutical work it does – particularly at its site in Visp, Switzerland – for a few years to increase capacity utilisation and boost profits.

According to the H1 figures – these efforts seem to be working.

Lonza said: “The capacity utilization across the entire network was at budgeted levels in the first half of 2014 and is expected to improve going forward.

The firm added that it “continues to benefit from a good market positioning and our ability to meet growing customer interest in future technologies such as ADCs, cell therapy and viral therapy.”

Small molecule growth 

However, while large molecule manufacturing was a growth driver in H1, Lonza also said new small molecule active pharmaceutical ingredient (API) contracts – such as its production deal with Pharmacyclics – had helped it increase revenue and profits.

In the first quarter, Lonza announced that it had established an agreement with Pharmacyclics Inc, to support the commercial and clinical production of its first-in-class oral oncology drug, Imbruvica (ibrutinib).”

Whether this particular deal – terms of which have not been disclosed – will continue to be an important growth driver for Lonza depends on whether Imbruvica can compete against Roche’s Rituxan, Genentech’s Gazyva or Gilead’s Zydelig.

Outlook

Nevertheless, Lonza said it expects its pharma and biotech business to play an import role in the second half of the year and reiterated its forecast that annual profits and revenues will from 10% and 5%, respectively.

The Swiss firm cited several agreements signed by custom development business – notably its biologcs development deal with venture capital fund Index Ventures and its celiac disease treatment agreement with Amyra Biotech AG – as important going forward.

Lonza reiterated its target for an increase of about 10 percent in core EBIT for 2014, as well as revenue growth of around 5 percent. The group also said capital expenditure in 2014 would remain well below 300 million francs.

The firm is due to hold its conference call later today.