Lonza closes plant in China but CDMO’s sales signal an uptick in industry

Lonza, a Swiss contract development and manufacturing organization (CDMO), has recently decided to close a manufacturing facility in Guangzhou, China, and another plant in Hayward, California. The Guangzhou plant, which opened in 2021 and employs 400 people, handles drug substances, clinical, and commercial manufacturing. The closures are part of Lonza's plan to optimize its global Biologics network in light of current market dynamics.

Despite these closures, Lonza's sales signal an uptick in the industry. The company reported sales of CHF 6.7 billion in 2023, up 11% from the previous year at a constant exchange rate. Additionally, Lonza's shares experienced a boost after Samsung Biologics, a South Korean CDMO, reported sales growth of 23%. These turnarounds indicate a positive outlook for the contract manufacturing industry, which had struggled to match the revenue boom that came with the COVID pandemic.

Lonza's decision to close the plants comes amid a restructuring effort, which includes impairment losses of CHF 183 million and restructuring-related costs of CHF 50 million (including inventory write-downs). The company plans to maintain strong underlying CDMO business performance, with an outlook of flat sales growth at constant exchange rates and a CORE EBITDA margin in the high twenties for 2024.