Lonza to proceed with growth investments amid COVID-19 turmoil

17 Mar 2020 --- In a bid to increase its competitive advantage, Lonza is surging ahead with its investments in growth projects, including capacity expansions and new technologies supporting the full life cycle of molecules. This is detailed in the company’s 2019 online Annual Report, published today, alongside its Sustainability Report, in accordance with Global Reporting Initiative guidelines. Lonza is undeterred from its ambitious growth plans, despite industry-wide complications caused by the spread of COVID-19.

“In general, growth projects are proceeding well in China, Europe and the US. We are diligently monitoring a very fluid situation. Our construction project for biologic medicines in Guangzhou, China is now back at work after a short delay and we are still carefully following government guidelines to protect workers at that site,” Claude Dartiguelongue, Head of Consumer Health Ingredients at Lonza, tells NutritionInsight.

The company is also set to further expand its Greenwood, US, facility in mid-2020. This integrated facility will offer capsule manufacturing, ingredient production and finished dosage forms at the same site. Dartiguelongue states that the company is closely monitoring the COVID-19 outbreak in the US to assess any effects on this expansion.

“Meanwhile for our existing operations, we have implemented a number of measures designed to limit the risk of spread of the virus including travel restrictions, increased hygiene and temperature checks, working from home where possible and split teams in some manufacturing facilities,” Dartiguelongue adds.

Many players across the nutrition industry are already seeing the effects of COVID-19 on business. Trade shows, including Vitafoods Europe, are getting canceled or postponed. Acknowledging the toll this takes – especially on fledgling companies – the organizers of Natural Products Expo West have established a US$5 million fund for those affected. However, PharmaLinea Chairman and Founder, Blaž Gorjup, previously told NutritionInsight that although new product launches are on hold, the supplement market is still seeing a boost in sales. 

“Having just joined the company, my focus is on 2020 and beyond. The current situation with COVID-19 serves to highlight how important our health is and maintaining a healthy immune system is on top of everyone’s minds – our ResistAid supplement is an example of what we can offer consumers. A key focus area for us is applying our ingredients and formulation know-how into combination products – for example combining UC-II undenatured type II collagen in combination with vitamin K2. This needs a particular formulation and dosage form in a Licaps liquid-filled hard capsules to offer an all-in-one bone-and-joint health solution,” details Dartiguelongue.

Lonza has invested in new capacity, the expansion of its value chain and geographic coverage.Weighing up risk-return profiles
Lonza is reaching an inflection point as biopharma performance over the last few years was based on historic investments. It states that to continue its current growth trajectory and meet market demand, it has invested in new capacity, the expansion of its value chain and geographic coverage. These projects are expected to contribute to continued growth beyond the Mid-Term Guidance 2022, as facilities are ramped up over several years before full utilization and profitability levels are achieved.

The company states that when investing in new initiatives, it works to weigh up risk-return profiles. For larger commercial investments, it seeks contractual commitment before build-out. For multi-purpose assets and clinical assets, decisions are based on robust demand projections. Depending on business models, capital expenditure contributions and milestone payments by customers may be part of the investment approach.

Currently, the contract development and manufacturing organization (CDMO) industry is experiencing a time of radical change and disruption, according to Lonza. This is driven by the rate of scientific and technological advancement in the industry. At this time, pharma and biotech companies are increasingly focusing on the breadth and depth of end-to-end solutions that deliver a path to commercialization to save time, better deal with complexity and gain access to knowledge.

Providing context for financials
In January, Lonza released its financial results, where it was revealed that increased competition in the space of nutritional hard capsules negatively impacted the company’s 2019 profits. Nonetheless, the company reported nearly 7 percent sales growth with CHF 5.9 billion (US$6.1 billion) in sales. Meanwhile, LPBN saw sales growth of 11 percent and delivered CHF 4.2 billion (US$4.3 billion) sales in 2019. 

Building on this, today’s publication provides additional figures and industry trend information to Lonza’s customers, which total more than 7,000 around the world. The company notes that the broader nutrition industry continues to grow with segments such as joint health, sports nutrition and digestive health forecast to grow rapidly. Meanwhile, the nutritional capsules market, however, is expected to grow in line with the overall capsules market of moderate GDP growth.

The company also highlights that consumers are looking for greater transparency in the products they buy. They want to understand how a product was made and where it came from. Trusted products offering clean label, natural, plant-based credentials and information on ingredient sourcing and processing are of great consumer interest. In addition, the convergence of the food and pharma market continues with an increasing range of supplements, functional foods, and nutraceuticals to promote and expand health-span. 

By Katherine Durrell