Lonza reports stronger demand in Q1 but remains cautious

Cost-cutting at pharma impacted on Lonza in 2009, resulting in net profit falling by 62 per cent, but there are signs that the situation is improving and the outsourcing trend remains strong.

Stefan Borgas, CEO of Lonza, reported that there has been year-on-year growth in the number of orders and contracts signed. In particular, Borgas highlighted the re-initiation of trials by smaller pharmas, resulting in stronger demand for clinical manufacture and development services.

This “leads to the expansion​” of Lonza’s facility in Slough, UK, added Borgas, but in other areas the company is seeking to make cutbacks. Lonza anticipates that this “re-engineering project​” will deliver savings of CHF 70m to 80m ($65m to 75m) until the end of the first quarter of 2011.

Implementation of these measures is intended to ensure Lonza remains competitive and can achieve sustainable growth, said Borgas when the plan was announced in January.

Custom manufacturing​

The custom manufacturing unit of Lonza is the largest contributor to sales but is facing lower visibility than the other divisions, life science ingredients and bioscience.

This is a consequence of continued volatility in the sector, which Lonza expects to continue throughout 2010. There are signs of encouragement though, with order placements improving year-on-year and stronger sales in biological manufacturing.

Furthermore, Lonza reports increased levels of partnership discussion in speciality areas such as peptides and highly active pharmaceutical ingredients (HAPIs), as well as continuous high level interest in pipeline outsourcing.

Offsetting these gains is chemical manufacturing, where a competitive environment and “cash conservation​” by clients are on-going. The company’s outlook for 2010 remains unchanged.