January 27, 2009 / 6:30 AM / 11 years ago

UPDATE 2-Lonza FY profit rises 39 pct, confirms target

* Lonza FY net profit 419 mln Swiss francs

* Average estimate in Reuters poll 403 mln francs

* Confirms mid-term operating profit growth target * Shares rise nearly 5 percent (Adds conference call comments, shares, analyst comment)

By Katie Reid

ZURICH, Jan 26 (Reuters) - Swiss drugs industry supplier Lonza Group Ltd LONN.VX posted a 39 percent rise in full-year profit on Tuesday, helped by a one-off gain, and confirmed its mid-term operating growth target, boosting shares.

Net profit rose to 419 million Swiss francs ($365.9 million) thanks to a 91 million-franc gain from the sale of its remaining stake in Polynt SpA, beating the average estimate of 403 million francs in a Reuters survey of seven analysts.

Operating profit rose 12 percent on a comparable basis to 441 million Swiss francs, while sales rose 2.3 percent to 2.937 billion francs and its cash position was 566 million francs.

“Lonza’s second-half results are exceeding our expectations on the sales and net profit levels,” said Vontobel analyst Carla Baenziger, pointing to particularly strong performances in the Exclusive Synthesis and Biopharmaceuticals and Bioscience units.

“It seems that the outlook for 2009 is now looking slightly better than anticipated after the third-quarter results,” she said.

By 0957 GMT, shares in the group had risen 4 percent to 103.70 francs, compared to a 1.4 percent drop in the European healthcare index .SXDP. Investors said Lonza had beaten even high expectations and was well prepared to weather the economic slowdown.

CONFIRMS TARGET

Lonza, which has moved away from specialty chemicals to refocus on high-margin pharmaceutical ingredients, confirmed its target of average operating profit growth of 15 to 20 percent until 2013.

“The strong balance sheet and conservative financing further improve flexibility and the ability to generate sustainable growth, while minimising the effects of the ongoing financial crisis,” Lonza said in a statement.

Chief Executive Stefan Borgas said in a conference call he was slightly more positive about the outlook for 2009, but he still believes the group could fall short of its mid-term earnings before interest and tax (EBIT) as uncertainty amongst clients persists.

Large pharmaceutical clients were reducing inventories and small biotech companies were facing financing difficulties, but the group sees less downside for 2009 than it did after its third quarter, a spokesman for Lonza said.

Last week, Lonza said it was joining forces with Israel’s Teva Pharmaceutical Industries TEVA.O, the world’s biggest maker of generic drugs, to exploit the emerging market for so-called biosimilar medicines.

“The recently signed agreement to develop a selected number of biosimilars represents a new strategic initiative for the development of our group,” Lonza said.

But the group is not likely to see significant revenue until 2014 when patents start to expire.

Biosimilars are viewed as a promising new market, given the pent-up demand for cheaper versions of extremely expensive biotech drugs, some of which are coming to the end of their patent life.

The group was also on the look out for small to mid-sized acquisitions for technology-based buys in Biocscience and product-driven acquisitions in nutrition and was in negotiations, Borgas said.

“Lonza has room on its (1-billion-franc) credit line to go for buys, said Chief Financial Officer Toralf Haag. ($1=1.145 Swiss francs) (Reporting by Katie Reid; Editing by Mike Nesbit and Rupert Winchester)

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