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Small molecules drive Lonza contract unit in 1H

By Phil Taylor , 24-Jul-2008

Lonza of Switzerland is reaping the benefit of a shift away from bulk chemicals and towards custom manufacturing of high-value pharmaceuticals with a 13 per cent hike in sales in the first half of the year.

Lonza's revenues came in at CHF 1.46bn ($1.41bn) helped by a solid performance across all its divisions, with earnings before interest and taxes (EBIT) up 15 per cent to CHF 235m.

A drive to improve operational efficiencies helped overcome the negative currency effects plaguing European companies with significant sales in the US and rising raw materials costs, said Lonza CEO Stefan Borgas.

"Despite some turbulence in the general economy, we had a strong financial performance and continued to make significant progress in the execution of our long term growth plans," he added.

The Exclusive Synthesis and Biopharmaceuticals business - which covers Lonza's contract manufacturing activities - did particularly well with good sales growth evident in the firm's small molecules business and a shift in the product mix towards higher-value products.

Overall sales at the division were up 19 per cent to CHF 765m, while EBIT rose nearly 21 per cent to CHF 141m.

However, the Biopharma Services business saw its performance held back by "several project delays and cancellations in early phases, due to a slow-down in funding for smaller biotechnology companies," according to Borgas.

Lonza's Riverside facility in the US is now operating at "high levels", said Borgas, while the plant at Barine in France has seen productivity increase 50 per cent in the last year.

There were some preliminary contributions from new manufacturing facilities that came on line towards the end of the half too, said Lonza.

A new small-scale line at Lonza's Nansha facility in China has come online, while other expansions for active pharmaceutical ingredient (API) production are on track to come on-stream in the fourth quarter of 2008.

Lonza's large-scale facility for highly-active pharmaceutical ingredients (HAPI) in Kourim, Czech Republic, has now been qualified. "The rejuvenation of the Kourim portfolio is on track," said Borgas.

In addition, the company recently reported the first successful production of a Good Manufacturing Practice (GMP) standard batch of an antibody-drug conjugate at Visp in Switzerland, reinforcing the capabilities of its biopharmaceuticals unit.

Joint development programme

One of the key changes at Lonza has been the expansion of its contract manufacturing model to include wide-ranging product pipeline agreements, such as the one signed with Novartis last month.

These involve Lonza and the client working together on all aspects of the development, scale up and manufacture of a biologic pipeline, in effect making the Swiss company a strategic partner across the board.

Borgas said there was growing interest and demand for this 'Total Product Life Cycle and Pipeline Management' concept, although as this is just starting up there was no major contribution to the first-half figures.

Meanwhile, the addition of two microbial production lines at Visp has been completed, with construction of new biologics capacity in Singapore and Portsmouth, US, on track.
"80 per cent of the capacity expansion at Lonza are committed today," said Borgas. Lonza is forecasting EBIT growth in mid to high teens until 2013.

Hopkinton expansion

Meanwhile, Lonza has also unveiled a plant to expand its microbial production site in Hopkinton, US, with a new high-titre 2,000l manufacturing train.

"This build-out is earlier than initially planned due to high market demand for mid-scale capacity in microbial manufacturing," said the company The new plant is scheduled to come on-stream in March 2009.

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