Lonza Announces Closure of Chinese Plant
Lonza has announced the closure of one of its plants in Guangzhou, China, closely following the news that its Hayward, California, facility will suffer the same fate. Despite these closures, Lonza has reported a strong financial quarter that exceeded expectations, with shares surging by 14% even amongst the uncertainty whilst the company searches for a new CEO.
The following article originally appeared in ECHEMI.
Lonza, a leading contract development and manufacturing organization (CDMO), recently announced the closure of one of its factories in Guangzhou, China. This strategic decision is part of Lonza's efforts to adjust its production capacity and align with market demands. The closure of the Guangzhou facility follows the company's plan to shut down another production site in Hayward, California. Lonza's actions reflect its commitment to optimizing its global manufacturing network and adapting to evolving industry trends.
Lonza, founded in 1897 and headquartered in Basel, Switzerland, operates multiple research and production facilities across Europe, North America, and Asia. As the largest global pharmaceutical CDMO and manufacturing supplier, Lonza has established a significant presence in the Chinese market since entering in 1995. The company has production bases and offices in Guangzhou, Suzhou, Shanghai, and other cities in China.
The Guangzhou factory that Lonza is closing is a large molecule facility located in the Guangzhou Knowledge City. This facility, which began operations in 2021, spans an area of 17,000 square meters and represents an investment of over $100 million. The factory employs 400 staff members and focuses on drug formulation, as well as clinical and commercial production. Lonza also operates another facility in Guangzhou's Nansha district, offering small molecule CDMO and active pharmaceutical ingredient services. Additionally, Lonza has a 25,000-square-meter facility in Suzhou, China, with 400 employees, specializing in pharmaceutical capsules and microbial control solutions.
Lonza's decision to close the Guangzhou facility is part of its global production capacity realignment strategy. In its 2023 annual report, Lonza reported total revenue of 6.7 billion Swiss francs, a 7.9% increase compared to the previous year. The biologics division accounted for 3.719 billion Swiss francs, reflecting a 13.6% growth, while the cell and gene therapy division generated 696 million Swiss francs, a 0.4% increase, and the small molecule division saw a 10% increase in revenue to 901 million Swiss francs.
The closure of the Guangzhou factory is not an isolated event. Lonza also recently announced plans to downsize its production facility in Hayward, California, resulting in the layoff of 218 employees. Lonza explained that the decision was driven by the limited growth opportunities for the Hayward site, as the market demand for CDMO services primarily focuses on the combination of clinical and commercial products.
Lonza's management has also undergone changes, with Chairman Albert Baehny set to step down in May, proposing Jean-Marc Huet as his successor. These developments, coupled with Lonza's restructuring efforts, have garnered market attention, leading to a 14% increase in the company's stock price.
Lonza's decision to close its Guangzhou factory and the Hayward facility in California forms part of the company's strategy to optimize its global manufacturing network. By aligning its production capacity with market demand, Lonza aims to reduce fixed costs without compromising its long-term growth prospects. These strategic adjustments reflect the dynamic nature of the CDMO industry and highlight the importance of adaptability in a rapidly evolving pharmaceutical landscape.
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