Biologics manufacturing helps Lonza to early turnaround

Lonza, the world's leading ingredient maker, has been investing in its pharmaceutical manufacturing capacity and capabilities in areas like antibody drug conjugates (ADCs), even as it has been trimming plants and people, and for good reason. The growth in that area helped its Pharma & Biotech segment turn in more than 15% growth for the year and, in turn, helped the entire company realize one of its recovery goals a full year ahead of schedule, the Swiss company said Wednesday.

Lonza CEO Richard Ridinger

The company reported full-year revenues of 3.64 billion Swiss francs and margins of 20.4%, a measure that was met 12 months earlier than it was shooting for. "For the third consecutive year, our full-year results demonstrate that we're making good progress in transforming Lonza," CEO Richard Ridinger said in a statement. "Thanks to the efforts of our employees and managers, we will continue our journey from a product-focused organization into a market-driven one."

The Swiss company spent $1.35 billion in 2012 to buy U.S.-based Arch Chemicals, but the debt for that deal had to be paid in three years. The task for that was handed to Ridinger when he became CEO months later. He quickly launched a three-year restructuring effort to trim costs and build margins.

The company reported today that its pharmaceutical manufacturing division, which makes up about 40% of the company's revenues, had sales of 1.446 billion Swiss francs ($1.7 billion) and core earnings of 385 million Swiss francs. The company acknowledged that the steep slide in the value of the franc recently will make continuing the trend challenging but said the currency difficulties are manageable.

Achieving its margin goals required the Swiss company to make major cuts. In 2012 it whacked 400 jobs at its giant API plant at its headquarters in Visp, where costs were high. The company also closed a plant in Ireland and one in St. Beauzire, France. The next year it decided to give up on a troubled biologics plant in Hopkinton, MA, cutting another 250 jobs. It moved its biologics work to its plant in Visp and pumped in 14 million Swiss francs to double ADC capacity there.

Today it said those investments have paid off. "Market interest and demand in new technologies--particularly for antibody drug conjugates (ADCs), cell therapy and viral therapy--continued in 2014. … These factors resulted in additional contracts for commercial and clinical-stage products."

- here's the announcement
- find related financials here

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