Lonza ups the stakes in US and Czech Republic

By Kirsty Barnes

- Last updated on GMT

Related tags Lonza Biotechnology

This week Lonza took over the reigns of two new US business units
from Cambrex after completing the largest acquisition in its
company history and also announced a capability expansion at its
Czech Republic site.

The Swiss contract manufacturer is now the proud owner of two former Cambrex units - Research Bioproducts and Microbial Biopharmaceuticals - after finally sealing the $460m (€354.2m) deal, first announced in October.

Both new businesses are based in Maryland and will continue to remain intact, including the 100 staff, however, the Microbial Biopharmaceuticals business will be integrated into Lonza's existing Biopharmaceuticals business sector under an 18-month "integration plan," while Research Bioproducts will now operate as a stand-alone business - renamed as Lonza Bioscience.

It is clear why Cambrex chose to sell its Baltimore-based Biopharma unit - the firm was crushed by a $140.3m loss in Q4 of 2005 and the bleed from the Biopharma unit, primarily due to loss of contracts and resultant under-capacity, was blamed for much of the company's woes.

"The poor performance of the Biopharma unit is dragging the company's profit margin down,"​ Luke Beshar, executive vice president and CFO of Cambrex told Outsourcing-Pharma.com mid last year.

"The unit has a very fixed high cost base, 70 cents in every sales dollar drops to the bottom line, so when sales are down in this segment, it has a very big impact on our margin."

However, these troubles did not deter Lonza, who said it now plans to turn the business around.

Cambrex's Microbial Biopharmaceuticals unit brings new mid-scale bioprocessing capabilities to add to the large-scale capabilities Lonza already has, Lonza spokesperson Margot Connor told Outsourcing-Pharma.com.

"We will place a tremendous focus on this business now and believe we have the experience in staff, operations and infrastructure to optimise processes in this facility."

"We also have a large existing client base in this field and are in discussions with them regarding our new capabilities."

In addition, a specially set-up integration team comprising of both Lonza and former Cambrex (now Lonza) employees will be looking at this unit closely to evaluate new business opportunities, said Connor.

As to whether the firm plans to make any future acquisitions that will provide small-scale bioprocessing capabilities, Connor said that "we are focusing this year on our integration program and while we continue to look out for new acquisitions that may be complimentary to our business, this is not a priority."

Meanwhile, the purchase of Cambrex's Bioproducts business is Lonza's fist foray into this field.

The unit, which includes biotech research products and therapeutic cell culture media, as well as contract cell therapy and microbial testing services, was a profitable business for Cambrex, and Lonza snapped it up in a bid to provide itself with a new plug into a "high growth market."

According to Connor, the components of this business are in their infancy and growing in demand, particularly the cell therapy sector.

"Bioproducts brings a whole new leg to the existing businesses we have and also fits in with our core business focus of lifesciences,"​ said Connor.

"We recently divested our polymer intermediates business as it was considered "non-core" as it was not focused in the lifesciences arena. But the Cambrex's Bioproducts business is 100 per cent focused in lifesciences and so is a good replacement."

The Bioproducts business also provides Lonza with new access into the supply chain market, exposing it to a new client base, said Connor.

Meanwhile in other announcements this week, Lonza said it is now undertaking an expansion at its microbial fermentation contract manufacturing facility in Kouøím, Czech Republic - the company's only site in Eastern Europe.

The CZK 1bn (€36m) expansion at the US Food and Drug Administration (FDA)-approved site is not intended to increase current capacity, but to add "new capabilities and upgrades to provide added value products produced in Kouøim,"​ said Connor, although exactly what these additional capabilities and upgrades are, she could not elaborate.

However, part of the motivation in the investment lies in Lonza's need to enhance its down-stream processing competencies to cater for a long-term clinical and commercial manufacturing agreement granted to the firm in November by US drug maker Altus.

After the completion of the project - expected by this year's third quarter - Lonza will begin production of Altus'ALTU-135 enzyme mixture.

ALTU-135 is an orally administered enzyme replacement therapy for patients with pancreatic insufficiency. Phase III clinical trials are planned for this year.

The scope of manufacturing agreement includes microbial fermentation, process optimization, technical and regulatory support and additional skilled employees will be hired for the purpose.

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