Lonza looks to the future as it reveals 2007 profit hike

By Kirsty Barnes

- Last updated on GMT

Related tags Lonza Biotechnology

Lonza has revealed a profit hike for the full year of 2007,
reflecting the fruit of its "revised growth strategies"
across its business units, said the firm, which also announced its
"innovations" for future growth and the signing of a new
Sanofi Pasteur deal.

The company saw its operating profit shoot up 36 per cent over the year to CHF408m, exceeding analysts' expectations, while operating margin reached 14.2, an improvement of 1 percentage point. A 25.5 per cent increase in sales to CHF2.9bn helped the firm achieve this result, as did a lower tax rate of 16.5 per cent, although this rate is due to rise to 18 per cent this year. Lonza also pointed to its growth strategies for the Bioscience, Nutrition Ingredients and Microbial Control segments, which "are designed to deliver enhanced returns".​ The company has been busy making changes to focus its business around the life sciences industry, which it now sees as core. As a result, 90 per cent of Lonza's sales now relate directly to life sciences. During 2007 a "portfolio transformation"​ involved the sale of the purified isophthalic acid facility in Singapore and the divestiture of the majority of the remaining stake in Polynt, an Italian firm that makes intermediates for the production of Polymers. However, the most significant step for Lonza was the completing its acquisition of two Cambrex subsidiaries, Research Bioproducts and microbial biopharmaceutical, part of a strategic move into biopharmaceuticals that is already beginning the bear fruit. Lonza's existing Biopharmaceuticals business sector integrated the microbial biopharmaceutical division, which brought expertise within microbial fermentation. In contrast, the Research Bioproducts division was renamed as 'Lonza Bioscience' and now operates as a stand-alone business unit. The division has expertise in endotoxin detection, cell-based research and cell therapy manufacturing, and is complementary to Lonza's biopharmaceuticals division. "The full-year performance was characterised by Lonza's portfolio changes and solid developments in all businesses, with Biopharmaceuticals experiencing particularly strong growth. The successfully integrated Bioscience division performed according to expectations,"​ said a company statement. Meanwhile, the firm improved its cash flow during 2007. Company CEO Stefan Borgas said that while Lonza does not have any particular acquisition targets in its sights, re-investing excess cash in acquisitions is preferable over paying it out to shareholders, and he does see purchases of up to CHF100m as "always possible".​ At the time of the results announcement, Lonza also outlined its new Lonza Innovation for Future Technology (LIFT) initiative, which will aim to deliver long-term technology breakthroughs and new business platforms across all its divisions, and has been created to secure the firm "a flourishing future".​ The company said that LIFT will "respond to the need for technology innovation in both products and processes to stimulate Lonza's growth in the next decade"​ and will be funded with a budget in the low double-digit CHFm per year. As part of this, the firm will establish a full-time team to manage "innovation projects"​ in its chemistry and our biotechnology platforms, which will be chosen based on input from the three related divisions; company-wide innovation workshops; and outside experts. The projects will be long-term, with five to eight years expected between initial ideas and business implementation, and peak sales anticipated in ten to twelve years, the firm said. Meanwhile, Lonza also took the opportunity to announce the signing of a technical service agreement with Sanofi Pasteur related to the new cell-based influenza vaccine developed by the latter. Lonza said it will provide Sanofi with its "expertise"​ in mammalian cell culture operations, having already demonstrated the production scale potential in a bioreactor run of 20,000 litres. "This agreement is a significant step forward for Lonza in the area of vaccines, demonstrating that we are now able to offer extensive research, process development and manufacturing services based on our microbial and mammalian expertise,"​ said Dr Stephan Kutzer, head of Lonza Biopharmaceuticals.

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