Genentech, Inc. has entered into an agreement with Lonza Group Ltd. for Lonza to purchase Genentech's manufacturing facility in Porriño, Spain for $150 million. Concurrently, Genentech will enter into a supply agreement for the manufacture of certain Genentech products at Lonza's facility currently under construction in Singapore, with Genentech also receiving the right to exercise an exclusive option to purchase the Lonza Singapore facility.
Under the terms of the agreement, Lonza will acquire from Genentech the FDA-licensed Porriño facility which has 40,000 liters of biologic manufacturing capacity and is currently dedicated to the production of Genentech's Avastin (bevacizumab) drug substance. Lonza plans to retain the facility's approximately 310 employees and Lonza will continue to produce Avastin for Genentech at Porriño under the terms of a supply agreement.
Under the terms of a concurrent agreement, Genentech plans to purchase Avastin and other oncology products from Lonza's planned 80,000-liter Singapore facility, and Genentech may opt to purchase the facility in the future. US Food and Drug Administration licensure for producing Avastin at the Lonza plant in Singapore is expected in 2010. The terms of the option to purchase the facility allow Genentech to acquire the facility during the period from 2007 to 2012 for a purchase price of $290 million, plus an additional $70 million in milestone payments if certain performance milestones are met.
"We believe that this transaction provides Genentech with benefits that enhance our manufacturing organization and strengthen our strategic relationship with Lonza," said Patrick Y. Yang, Ph.D., executive vice president of Genentech's product operations. "We are pleased that the FDA-licensed Porriño facility and its highly-skilled employees will continue to supply product to our patients with new Lonza ownership, and we expect that our agreements, including an option to acquire Lonza's 80,000-liter facility in Singapore, will provide Genentech with flexibility, capacity and cost effectiveness to significantly improve our manufacturing capability."
The transaction is subject to various closing conditions. If the conditions are met, the companies anticipate closing the transaction before the end of 2006. As a result of the Porriño divestiture, Genentech expects to record a loss in the range of $10 to $20 million.