Lonza Group restructures exclusive synthetic business

Lonza Group is to restructure its exclusive synthesis business both in the US and Switzerland to align its manufacturing base more closely to market conditions. Outsourcing of exclusive manufacturing by the life sciences industry of intermediates and APIs for the pharmaceutical and agrochemical sectors has become increasingly competitive over the last two years, the company says, as a result of existing overproduction capacities among drug manufacturers and the declining number of approvals for new products.

The main restructuring initiative involves the closure of Lonza's production site in Los Angeles, California, by the end of this year. Production will be transferred to the two remaining facilities at Conshohocken in Pennsylvania and Visp in Switzerland, which together account for 85% of the group's current reactor capacity of the exclusive synthesis activities in custom manufacturing.

As well as the 100 employees in Los Angeles who will be directly affected by the closure, a further 75 jobs in Visp and 50 in Conshohocken will also be lost as a result of additional organisational measures to balance current supply and demand. The total number of jobs affected represent some 3.5% of the total Lonza Group workforce. The initiatives will have no impact on Lonza's biotechnology businesses, nor on the current expansion projects in Visp. The small scale production plant and the production facility for microbial biopharmaceuticals are progressing according to schedule, says Lonza, and will not be affected.

The restructuring will create a one-time exceptional pre-tax charge of approximately SFr100m (€68m) in 2002, but the expected cost savings are put at Sfr40m (€27m) a year, giving a payback period of two and a half years.