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CEO Dialogue Series

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Thrust into the public spotlight

5 October 2021 in CEO Dialogue Series

How Lonza has combined the Covid-19 vaccine challenge with repurposing its business...

Most people outside of the pharma and biotech industry had probably never heard of Lonza, until May 2020 when it featured in an announcement at the height of the COVID-19 pandemic.

U.S. biotech company Moderna — another unfamiliar name — said it would develop a new vaccine against the coronavirus and tapped Lonza, a Swiss-based contract manufacturer, to produce the shot as part of a decade-long strategic collaboration. Very quickly, the name Lonza regularly featured in news bulletins around the world alongside “COVID-19 Vaccine Moderna”, the name of the vaccine that Lonza would be manufacturing at its facilities in Switzerland and the US.

Sudden name recognition like this is rare in the corporate world — and rarer still for a company that its chief executive, Pierre-Alain Ruffieux, admits was “not really a known entity” pre-Covid. Founded in 1897 in the Valais region of Switzerland to produce electricity for use in the manufacture of calcium carbide and acetylene, Lonza takes its name from a nearby river. Over time it expanded into chemicals and other areas and, by 2006, had become a leading global player in pharmaceutical ingredients, biopharmaceuticals and the healthcare and life-science industries.

Its expertise in these areas, and in particular a decision a quarter of a century ago to move into contract manufacturing, meant it was sufficiently well-known in industry circles for Moderna to approach the company with a request for help with vaccine production.

“They were looking for capability to scale up the process, to manufacture it and not only for this product, but also for other future products. Because it usually takes a long time from idea to completion, we invested some time ago in creating a shell, preparing in advance all we need for pharma production,” Ruffieux explained.

“So, when the customer comes calling, we can turn the key on and move very fast. We were able to start producing for them in 6-10 months compared with normal timelines, which are usually around two to three years. This is really the advantage we can offer.”

Even though this model existed when Moderna came knocking, producing the vaccine at speed was still tough, Ruffieux said. “We needed people, hundreds of people, at very short notice. We had to train them. But while the vaccine is highly visible given its public profile, it’s actually a small proportion of our business so we were able to bring resources from other parts of the business to support the effort. I would be lying if I said it wasn’t a challenge but it’s our core business.”

Focusing on that core business more broadly has meant that 2020 was an even bigger year for Lonza than the high-profile work of producing a vaccine for the world. It also meant a bulging inbox for Ruffieux, who was appointed chief executive in June that year after a 20-year career, first at Swiss drugmaker Novartis and then at cross-town rival Roche.

That’s because, barely three months after he started in the role in November, Lonza announced it was selling its speciality ingredients business (LSI) to Bain Capital and private equity firm Cinven for CHF4.2 billion (US$4.6bn). It was the biggest deal so far in a recent wave of mergers and acquisitions in the chemicals sector, driven by strong interest in hygiene-related businesses due to the COVID-19 pandemic.

LSI is a leading provider of microbial control solutions for professional hygiene and personal care products and offers custom development and manufacturing of specialty chemicals and composites to support the electronics, aerospace, food and agrochemical industries.

The move allows Lonza to focus on its pharma business including biologics, which uses cells to produce antibodies; gene and cell therapy, which engineers cells to deal with difficult-to-treat diseases; and oncology.

In its new form, the pharma-focused Lonza and its approximately 15,000 employees generated sales of CHF 2.5 billion in the first half of 2021.

Ruffieux explained that by selling its chemicals business, Lonza is also able to refocus on its purpose and bring it to life in practical ways — not something that all companies can claim to get right. “It was very important in the company for management to be able to speak with one voice. In the past, the pharma people really focused on that part and the chemical people focused on the other part. Divesting one part of the business allow us to focus on pharma.”

“Also, one of the passions we have is using technology, using science, using the energy of people, to solve technical issues. This has really resonated with our employees. So, putting this vision together made sense,” said Ruffieux. “I believe what we have demonstrated during COVID-19 underscores the value of these messages.”

For any pharma company, regulation is a key part of life as a business. Ruffieux, who spent some years in quality assurance at Roche believes that regulations are part of purpose, if they are not treated as a limitation.

“I’ve learned that if you see regulations like constraints, you develop the wrong behavior. Or you will try to find solutions to avoid them. You will go for the short cut. I see it as the opposite. Regulation is a great purpose.

“This means making sure that as a company you must ensure that when a customer buys your drug, they get the right product, and it’s going to be safe and effective. What’s important for a company in meeting this goal is not only following regulation, but exceeding regulation. If all employees understand this, they will follow the regulation, which is really great. But if something strange is happening, they will understand what is the purpose and they will take even additional action.”

Ruffieux also believes it is important to act in a way that anticipates what future regulation may bring. Actions or behaviours that may be legal now may be prohibited in the future, he explained, citing a memory from his childhood when, in the village in the Swiss Alps where he spent time during vacations, one of the residents would routinely burn his household waste rather than placing it in a designated waste facility.

“Today we would be shocked by that, but it was standard practice at the time. And I think this is really a question of society. What do we need to do to protect the world we are in? Because there is only one, and I’m sure in 20 years from now, we will be shocked by some of the practices we still see.”

Ruffieux cited a recent proposal by the European Union for measures to cut emissions from new cars by 100% by 2035, which effectively means moving to all-electric vehicles by then. “What will our grandchildren think — that we were crazy to burn oil to power cars for mobility? So, for me, it’s our responsibility to anticipate this and do the right things.

“At Lonza, we are developing a very strong set of targets to make sure we can protect the environment we live in across many dimensions: people, resources, behaviour in society. And clearly, like many other companies, we have a responsibility to work on that as it’s becoming more and more important.

“At the same time, it’s difficult to align behavior and current activity. I have three kids in their 20s, and yes, we are very concerned about the environment. Yet at the same time we enjoy from time to time taking a plane to enjoy a weekend in a city. How do you reconcile this? I think we should ask ourselves what the consequences of our behavior today are on the long term.”

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