Lonza cuts staff, issues profits warning
pharmafile | November 2, 2009 | News story | Manufacturing and Production |Â Â CMOÂ
Swiss contract manufacturer and fine chemical firm Lonza has announced it will cut around 5% of its workforce and may shut down plants after a slump in profits caused by cancelled and postponed contracts.
Lonza, which until recently was bidding to take over Canadian CMO Patheon, said in a statement issued yesterday that it was aiming to slash costs by CHF 60 to 80 million ($59m-$79m) over the next two years.
The announcement spurred a run on the company's shares, which dropped 25% on the Zurich stock exchange, ending the day at CHF 79.50. Analysts said the results raised concerns about how insulated both Lonza and its pharmaceutical clients are from the impact of the recession.
"The third quarter was characterised by an accumulation of unexpected events since the end of September 2009 which will reduce operational earnings before interest and taxes (EBIT) towards a level of CHF 360-380 million for the full year," said the firm in a statement.
The events included cancellations and postponements in large-scale biopharmaceutical custom manufacturing, an 18-month delay of a lead customer project in cell therapy due to disappointing clinical results and continued low order level for its Exclusive Synthesis business, which handles contract manufacturing of chemical pharmaceuticals and intermediates.
In addition to the staff reductions, Lonza said it would adapt its biopharmaceutical production capacity to enable it to fill large-scale plants with smaller-volume orders, for example phase II and II clinical trial materials.
"This environment of high volatility is expected to continue for the next few years," said Lonza chief executive Stefan Borgas.
Last week, Lonza withdrew its $460 million bid for Patheon after failing to persuade major shareholder and rival bidder JLL to accept its offer.
Borgas said on a conference call that despite the tough operating environment Lonza was still interested in making acquisitions to boost its position in areas such as contract research and finished dosage form contract manufacturing.
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