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Lonza expands biopharmaceutical business

Life sciences will in future make up 90 per cent of Lonza's business

(Keystone)

Swiss chemicals group Lonza has agreed to buy two units from the United States drugs maker, Cambrex Corp, for $460 million (SFr584 million).

The deal to purchase the units, Research Bioproducts and Microbial Biopharmaceutical, will strengthen Lonza's biopharmaceutical business.

The Basel-based group said the purchase, together with the upcoming initial public offering (IPO) of its Polynt SpA polymers unit, would lead to a better financial performance in coming years.

"These acquisitions and the IPO of Polynt accelerate the delivery of Lonza's strategic shift towards life sciences that we mapped out two years ago," Lonza's Chief Executive Officer, Stefan Borgas, said in a statement.

Life sciences would make up close to 90 per cent of sales after the deal and the flotation of the Polynt unit, said Lonza, which makes ingredients for the pharmaceutical industry.

The group raised its guidance for sales growth to eight to 12 per cent per year and for operating growth to the mid-to-high teens range per year. The acquisitions would add to earnings per share as of 2008, Lonza added.

Advantages

Commenting on the deal, Bank Vontobel analyst Martin Vögtli told swissinfo that the Research Bioproducts segment offered more attractive short-term advantages with annual profits of $150 million, 10 per cent annual growth and high margins.

"Besides that, it offers a completely new customer base for Lonza who have not so far been involved in this area."

Microbial Pharmaceutical, however, has been losing money for several years and, at best, will break even in two years' time, according to Vögtli.

"The major risk is to bring profitability up, but Lonza is quite optimistic they can achieve this with the current pipeline," he told swissinfo.

"It also gives Lonza new capacity in this area that would take three years and cost three times as much for them to build up on their own."

Cambrex said in a statement from its headquarters in East Rutherford, New Jersey, that it expected to realise net proceeds, after taxes and transaction-related costs, of about $450 million.

This would be used to repay all outstanding debt and help fund a special dividend to stockholders.

Earlier this month, Lonza said it would list a majority stake in its Polynt unit in Italy in a bid to increase overall profitability and analysts had expected it to raise forecasts as it focuses on its core pharmaceutical and biotech businesses.

swissinfo with agencies

Key facts

Lonza, which is a chemical and biotechnology company, recorded sales of SFr2.52 billion in 2005 and a net profit of SFr188 million.
It operates 23 production and research and development sites around the world.
Lonza employs about 6,400 people and is one of the leading manufacturers of chemical intermediaries, active ingredients and biopharmaceuticals for the pharmaceutical and agrochemical industries.

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