"In 2017, Lonza made the largest acquisition in its history and acquired Capsugel for US$5.5 billion. From there, we moved even further into a different type of modality, adding particle engineering to our existing modalities of chemicals, biologics, cell therapy, gene therapy and viral therapy."

Joseph Colleluori

SENIOR VICE PRESIDENT CORPORATE DEVELOPMENT, LONZA GROUP

April 04, 2018

Lonza is a leading global CDMO. How has the company developed to assume its current market position?

From its initial focus on carbon rods at the end of the 19th century, Lonza moved into basic chemicals, building the world’s smallest cracker on its main site in Switzerland. From that chemical base, Lonza became the first company to establish contract manufacturing. In the 1980s, we built a fine chemical complex (FCC) and turned our attention to large companies like Merck and BMS that were beginning to move from chemicals into pharmaceuticals. Although many of these companies considered manufacturing to be at the core of their activities, we were able to convince some of them that we could manufacture the APIs and intermediates for them. Rather than covering all bases, this would allow them to stick to core competencies such as research, development, regulatory processes and marketing.

The business continued to grow with the establishment of a facility in China, where we were able to do some additional chemical small-molecule manufacturing for big pharma companies. In 1996, Lonza became the first biologics CDMO. With the exception of vaccines, there had previously not been many biologics in the market. We bought a company called Celltech Biologics with an operation in Slough, U.K., which was in the process of finishing a large biologics operation in Portsmouth, New Hampshire. This became our biologics division, which has grown to be a prominent component of Lonza’s business.

What have been the major recent advances in technological capability?

In 2017, Lonza made the largest acquisition in its history and acquired Capsugel for US$5.5 billion. From there, we moved even further into a different type of modality, adding particle engineering to our existing modalities of chemicals, biologics, cell therapy, gene therapy and viral therapy. Whilst Capsugel is widely known as the world’s largest manufacturer of hard capsules, the company also had capabilities that supported not only encapsulation but also drug formulation.

How can Lonza effectively fill the knowledge and infrastructure gap for smaller companies with limited resources?

Our ability to support companies not only with a core service, but also to handle FDA requirements and make sure that facilities are ready for launch and scale up is a very valuable proposition. The objective for these companies is to get their product to market as soon as possible, especially since cash flow is a big issue for many. They therefore rely on us for our experience, knowledge and reliability to ensure that their products are launched on time.

What is the significance of Lonza’s recently-announced partnership with Denali Therapeutics?

The partnership deal with Denali Therapeutics stemmed from the company’s focus in the neurodegenerative space. One of the challenges in the neurodegenerative space is that, once a product is approved, high demand will likely cause a huge jump in required quantities overnight. The population size for a disease area like Alzheimer’s is huge. In the instance that a company lined up its own manufacturing facility and their drug then failed to get approval, they would be faced with wasted capacity following a significant investment. Lonza’s capacity support around the world helps to balance risk that a company would otherwise take on itself and to scale up rapidly in the right territory, when needed. It is also worth noting that Denali’s pipeline includes a range of potential therapeutics from small molecules to complex biologics. Our experience across these modalities is a clear advantage.

What are the plans for further addition of capabilities and capacity expansion?

Lonza has a very balanced perspective on organic and inorganic growth. We invest heavily in our operations globally, with CHF 450 million in 2017, plus five acquisitions. With our Capsugel acquisition, we are moving up the value chain and will continue to look for acquisitions and partnerships to extend our technological capabilities and geographic footprint where it makes sense. We have also recently expanded our parenteral drug product services for difficult-to-formulate sterile products at new laboratories we opened up in Switzerland last year.

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