22 December 2003 00:00 [Source: PCE]
Lonza has long been one of the most admired companies in the custom synthesis and life sciences sectors. But when times are hard, as they have been in the custom fine chemical business over the past few years, even the bluest of blue chips are not immune.
In an attempt to reorganise the business better to focus on custom manufacturing and chemicals, Lonza this year has implemented a wide-ranging restructuring programme. The stated objectives were to improve efficiency and reduce overhead costs in all business sectors and service functions. A key step was to integrate the former business sectors Exclusive Synthesis (chemical), BiotecHard (microbial) and Biologics (mammalian), which have been combined into a single custom manufacturing business.
Focusing on continuous pipeline expansion, this newly aggregated business offers a broad range of cutting-edge technologies aimed at capturing business in all phases of clinical development, thus increasing our opportunities to fill large reactors. At the same time, combining our large-scale production activities will increase operational efficiencies.
Lonza's group operating income fell by almost a fifth in the first half, sales were down by more than 10% and margins were also down.
Exclusive Synthesis experienced delays in product approvals and an unfavourable product mix. Biotechnology saw a slight reduction in sales, while margins remained at the previous year's level. Even Lonza's much coveted mammalian cell culture fermentation activities were impacted by failures in clinical trials of customer products.
The more traditional activities, organic fine chemicals, performance chemicals and polymer intermediates have been negatively impacted by higher raw material and energy prices and unfavourable exchange rates.
Undoubtedly, Lonza is hugely dependent on its big customers in Lonza LCM, but it says its has about 90 projects in the pipeline. Currently, there are more than 50 small molecules synthesis projects, which is a 50% increase on 2001, and the portfolio includes 40 projects for the synthesis of large molecules.
Lonza says that with key intermediates and active ingredients it is involved with more than 50% of the potential global blockbuster pharmaceuticals coming to, or expected on, the market between 2003 and 2005. No single product or customer represents more than 10% of the new division's sales, it says. Lonza has had problems this year filling its two mammalian cell fermentation plants, but for 2004 it has about a third of that capacity already booked and a third under negotiation.
However, there have been some bright spots in all the gloom for Lonza. This summer it announced that it has entered into a long-term supply agreement with Celltech Group, under which Lonza LCM will manufacture PEGylated antibody fragment-based drugs for Celltech at its production facility for microbial biopharmaceuticals. Lonza and Celltech also announced the settlement of CDP 571 agreement. Under the terms of the agreement, Celltech has reserved at Lonza LCM a fixed annual manufacturing capacity in its 1000 litre and 15 000 litre fermenter systems for recombinant microbial products, covering the period 2004 to 2010, at pre-agreed rates. The agreement allows Celltech flexibility in scheduling to meet the clinical timelines for its portfolio of PEGylated antibody fragment-based development products. Lonza Biotec will provide technology transfer, scale-up, current good manufacturing practice and quality control testing services at its site in Visp, Switzerland.
Markus Gemuend, chief executive officer of Lonza Group, says the contract is 'a further substantial step to strengthen our pipeline in the area of microbial biopharmaceuticals'. Celltech has developed proprietary technology for the production of very high affinity antibody fragments in a microbial fermentation system. These antibody fragments are chemically modified using polyethylene glycol to facilitate a long circulating half-life in patients. Celltech is developing products using this technology to address large disease markets such as rheumatoid arthritis and cancer.
The leading product using this technology, CDP 870, is currently being assessed in a large Phase III programme in rheumatoid arthritis by Celltech's partner, Pfizer. Celltech has three further PEGylated antibody fragment products in development and a broad portfolio of research programmes utilising this technology. At the same time, Celltech and Lonza LCM reached settlement regarding the termination of their supply agreement for the production of Celltech's anti-TNF-alpha antibody, CDP 571, releasing Celltech from any further obligations under this contract.
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