Lonza Scraps Generic Drug Venture With Teva

ZURICH/LONDON (Reuters) -

Specialty chemicals maker Lonza posted a bigger than expected fall in first-half profit and said it was ending a generic drugs venture with Israel’s Teva Pharmaceutical Industries by mutual agreement after misjudging how much it would cost.

The end to the alliance on the development, manufacturing and marketing of biosimilar drugs — copycat versions of injectable biotech medicines that have gone off patent — is not a complete surprise. Lonza said in March it was reviewing the venture.

Biosimilars have long been eyed as a major opportunity for large makers of generic drugs, such as Teva and Novartis’s Sandoz unit, but developing them is far more complicated than making generic copies of traditional pills.

The phase-down of Lonza’s U.S. Hopkinton plant led to a 69 million Swiss franc ($73.78 million) impairment charge and a reduction in headcount, while the temporary shutdown of a Swiss plant also hit revenue, Lonza said in a statement on Thursday.

Its net profit fell by half to 41 million francs in the first half of 2013, while sales were down 11 percent at 1.744 billion francs, missing a consensus forecast for a 5.3 percent drop in a Reuters poll.

Faced with low-cost competition, a strong Swiss franc and higher raw material prices, Chief Executive Richard Ridinger is leading a review of Lonza’s structure and strategy.

Ridinger said reorganization at three different production sites would lead to a reduction in headcount of about 250 full-time equivalents by the end of the year and the company’s cost base should be reduced by 100 million francs by the end of 2016.

He announced Lonza planned to consider strategic options for its wood treatment business and said ending the joint venture with Teva would reduce its investments by 150 million francs.

“We think this restructuring is necessary in order to show growth in the future as the business as it is today would continue to decline,” Vontobel analyst Carla Baenziger said, adding that ending the Teva venture should help reduce debt.