By Ludwig Burger and Paul Arnold
BASEL (Reuters) - Lonza's chairman has ruled out plans to use its capacity to fill syringes and provide final production steps for new obesity drugs even as rivals scramble for a share of the booming weight-loss market.
That marks a climb down from remarks at an investor event a month ago, when Albert Baehny said that Lonza would participate in the obesity therapy market thanks to its growing fill and finish capacity.
The new obesity drugs, based on a class of peptides known as glucagon-like peptide-1 (GLP-1) receptor agonists, would not feature in Lonza's growth plans, despite the Swiss company producing a secondary ingredient for one such drug, Baehny said in an interview.
A new 500 million Swiss franc ($563 million) site for the final production steps and bottling of drugs, known as fill and finish, being built in Switzerland would not be available for obesity drugs, contrary to Baehny's previous remarks.
The broader drug industry will absorb Lonza's new capacity but "that does not pertain to GLP-1," said Baehny, who has taken on the interim CEO role after the surprise departure of CEO Pierre-Alain Ruffieux in September amid uncertainty over the group's longer-term earnings prospects.
Denmark's Novo Nordisk (CSE:NOVOb) and U.S. rival Eli Lilly (NYSE:LLY) are ahead in a race to grab a slice of the obesity market which analysts estimate could be worth $100 billion by the end of the decade. But Novo has said that the industry is far from producing enough to meet demand.
Novo has hired Lonza's rivals Catalent and Thermo Fisher to help with fill and finish work on its Wegovy weight-loss injection pens.
Baehny said that because Lonza would have to "start from scratch" to produce the peptides that make up the main active ingredient in GLP-1 drugs, it made little sense to enter the market, saying that the company would instead focus on its other high-tech pharmaceuticals technologies.
"We are not participating in this business because we don't produce peptides," said Baehny.
Reuters has reported that other contractors are already spending billions of dollars on factories that fill the injection pens used by patients.
ALZHEIMER'S BARRIERS
Baehny also warned pharmaceutical companies that a new generation of Alzheimer's drugs, in which Eli Lilly is among the pioneers, will face production bottlenecks if the therapies fulfil their expected blockbuster market potential.
According to analysts, Lonza is set to produce Lilly's donanemab for commercial use, although the Swiss company has declined to comment on the plans.
Lilly has said it expects a U.S. regulatory decision on whether to approve the drug in the first quarter of 2024.
Lonza is the world's largest contract manufacturer of monoclonal antibodies, produced from genetically modified mammalian cells. The technology is behind a new class of promising Alzheimer's drugs such as donanemab by Lilly and Leqembi by partners Eisai and Biogen (NASDAQ:BIIB).
"If Alzheimer's therapies develop to become blockbusters, the capacity for mammalian fermentation will become even tighter, including capacity bottlenecks," said Baehny.
If pharmaceuticals companies do not reserve more capacity now, they will face tough allocation choices as drugs will likely compete for limited resources, said Baehny.
Analysts on average expect annual donanemab sales of well over $1 billion from 2025, LSEG data show.
Market research firm GlobalData said in June it expects the global Alzheimer's disease (AD) market to reach $13.7 billion in 2030.
Lonza's shares have been hit hard this year as higher interest rates have dampened investor appetite for risky biotech drug ventures among its customers, compounding a decline from the loss of coronavirus-related activities.
Baehny reaffirmed margin targets through 2028, laid out last month, saying the industry would continue to outsource production to specialists, including Lonza.
($1 = 0.8875 Swiss francs)