Lonza Business Update First Quarter 2010
Strong performance in the first quarter in Life Science Ingredients with improved visibility in Life Science Ingredients and Bioscience, new Custom Manufacturing contract signing improved but volatility remains in place until year end.
22 Apr 2010 --- In the first quarter of 2010 Lonza experienced a market demand on last year’s level. While the visibility is improving stepwise in all businesses, the volatility still persists in the Custom Manufacturing businesses. Overall a full recovery of the economic environment is not yet seizable. The counterbalancing measures of the re-engineering project have been defined and the implementation moves forward with expected savings at CHF 70-80 million to be delivered until the end of Q1 2011. The financial situation is stable and the balance street structure continues to improve.
Life Science Ingredients saw a volume recovery in Nutrition Ingredients and Microbial Control in the first quarter 2010 compared to 2009. In Nutrition Ingredients the sales for Carnipure products were above target due to new contracts signed with major players. In the Meta business, de-stocking of formulators and retailers happened as expected due to the dry 2009 season. In Microbial Control higher sales in Europe and Asia were compensating some slower development in the USA. The development of the India and China markets is on track. In Performance Intermediates diketene and HCN derivatives had a positive short-time volumes increase while crop protection demand was strongly reduced because of de-stocking at customers due to dry 2009 seasons. The reorganization of the chemical R&D is finalized and efficiency programs have started, as also the capacities are fully utilized with key development projects.
The pipelines in Custom Manufacturing remain strong and new contracts have been signed in all businesses. The order placements for the full year are stronger than at the same time in 2009; the volatility will continue to persist throughout the year. The stronger sales in Biological Manufacturing will counterbalance the higher 2009 engineering income as planned. This will also lead to an overall higher network utilization for 2010 compared to 2009. The competitive environment for Chemical Manufacturing continues to be strong and the on-going focus on cash conservation by customers is unchanged. This development is counterbalanced by increased levels of partnership discussion in specialty areas such peptides or HAPIs (highly active pharmaceutical ingredients) and continuous high level discussions on pipeline outsourcing.
Bioscience achieved product introductions according to plan while sales remained slightly behind expectations due to changed order pattern at customers. The project pipeline improved further with a considerable increase of products in phases close to commercialization. Research Solutions achieved a strong performance of BioAssays as well as Protein Analysis portfolios and signed a license agreement with Odyssey Thera to enter the promising cell based assays market. Therapeutic Cell Solutions was able to increase the pipeline which materialized in contracts with large pharma companies confirming a higher interest by many large pharma companies in this field. In Testing Solutions the global sales were relatively stable as the customer base continues to optimize their reagent inventory levels, make smaller purchases, and implement reduced testing initiatives.
“Although the environment remains volatile and we are not yet trusting the stronger demand to represent true and full economic recovery, the progress in the first quarter is encouraging. Customers placed more orders and we signed more new contracts than at the same time last year indicating that the outsourcing trend remains strong”, comments Lonza CEO Stefan Borgas. “Smaller pharma-companies have re-initiated trials as financial risk capital becomes more available. This stronger demand for clinical manufacture and development services leads to the expansion of our facility in Slough, UK, confirming the positive growth perception after 2010.”
