Lonza Reports Solid Sales in Q3

Life Science Ingredients experienced normalized market demand with strong margins in Q3 compared with H1 2010. The business, however, faces increasing price pressure from competition and the Visp site is affected by weaker USD and Euro.

Oct 27 2010 --- In the third quarter of 2010 Lonza delivered solid sales based on local currencies. The translation effects from a strong Swiss Franc start to have an increasing impact on overall sales figures. Newly signed contracts and pipeline deals in the Custom Manufacturing business confirm an intact trend toward outsourcing. However, volatility is still persistent in the Custom Manufacturing market as more stringent regulatory product approvals continue to affect the business. Lonza’s global re-engineering project is on track with expected savings at CHF 70-80 million to be delivered by the end of Q1 2011. The financial situation is stable with improved balance sheet structure and free cash flow delivery. All innovation projects continue with strong progress.

Stefan Borgas, CEO of Lonza comments: “The progress in Biopharma and the identification of several new growth projects in Q3 show that we are clearly on track to deliver on our life science strategy. Although visibility continues to improve, volatility is persistent mainly due to slow regulatory product approvals. In addition, the macro-economic environment remains challenging. The translation effects from exchange rates have started to increasingly impact overall sales figures. We will be able to compensate this in 2010 through improved business development in Custom Manufacturing.”

Life Science Ingredients experienced normalized market demand with strong margins in Q3 compared with H1 2010. The business, however, faces increasing price pressure from competition and the Visp site is affected by weaker USD and Euro. The raising raw material costs come along without strong volume growth. In Nutrition Ingredients, the sales for vitamin B3 for Food and Pharma applications have been strong and the construction of the new niacinamide (vitamin B3) plant in Nansha (CN) has started. Competitive price pressure is starting to increase, but Lonza is determined to preserve market share. Carnipure and Carniking sales are in line with expectations and the pre-marketing of the new plants is fully underway. In Performance Intermediates, the demand for basic chemicals slowed down based on intensified competition and overcapacity in Asian markets. The profitability is lower due to the currency situation in Visp. The sales in Microbial Control were stable in the western markets and continue to grow in Asia. The innovation projects make good progress.

The capacity utilization and project pipelines in Custom Manufacturing continue to increase, confirming an intact outsourcing trend. In Chemical Manufacturing this was demonstrated with new multi-year contracts signed for two APIs in late stage developments, increased demand for manufacturing and R&D services in early phase projects and a strengthened project pipeline in advanced technologies such as conjugates, peptides or highly active pharmaceutical ingredients. Biological Manufacturing further developed strategic manufacturing partnerships (e.g. GSK, HGS) and was able to sign contracts with emerging companies (e.g. Elusys). For Microbial Biopharma, Lonza has signed multiple-product deals with several US-based pharma companies. This overall positive outsourcing trend is counterbalanced by ongoing volatility due to more stringent drug approvals by regulatory authorities, especially in chemical custom manufacturing. In Development Services, Lonza broadened its services for diversified customers’ requirements and strengthened strategic collaborations.

In Bioscience, new contracts signed in Q3 in Therapeutic Cell Solution will fully compensate the delayed lead product in 2011. The overall strong pipeline development in Cell Therapy indicates encouraging progress in this therapeutic area. The integration of Vivante GMP Solutions into this business unit is finalized and the broadened offering for the growing viral vaccine and gene therapy markets is backed by positive customer feedback. Overall media sales are below expectations due to customer de-stocking. In Research Solutions, sales are slightly over last year's level with various newly launched cell biology products. Sales in Testing Solutions continue to be strong in Asia/Pacific, India/Middle East and Latin America. The successful integration of Moda puts Lonza in a leading position in the paperless quality control testing.