On his 200th day as Lonza's new CEO, Wolfgang Wienand discussed the company's plans to exit the capsules and health ingredients (CHI) business and focus on core contract manufacturing at the 43rd Annual JPMorgan Healthcare Conference.
Some in the audience at Wienand's presentation on Jan. 14 expressed concern about the future loss of shareholder value following a CHI spinoff. When asked about the financial rationale and future performance of the CHI business, Wienand confirmed that Lonza was not under pressure to sell and that the company had "reasons to expect strong interest in the business... (the business is an) attractive market leader" Space...will also be able to return to previous levels of profit and growth. He added that the company "will take the necessary time to find good solutions that add value for shareholders and stakeholders." ” Lonza first announced its decision to exit the CHI business on December 12, 2024, in order to focus on CDMO services.
At JPMorgan, Wienander emphasized that the new operating model, initially announced in the fourth quarter of 2024, is currently being finalized and will be implemented in the second quarter of 2025. Wienand explains the reorganization: “It’s about transforming three very autonomous divisions into building integrated business platforms in different ways: (integrated biologics, advanced synthesis, specialty models).
Wienand added that Lonza "eliminates a level of management to speed up decision-making and (reduce) complexity. Ultimately, (the company) translates divisional strategies into a unified Lonza strategy."
Wienand reports that looking back to 2024, Lonza's organic growth is ahead of the market by 2-3%, with capex as a percentage of sales in the mid-to-high range over time. These positive results resulted in sales growth averaging around 10% over time on a constant currency (CER) basis and core EBITDA margins of 27-29% leading the way. to other companies. Sales growth itself. The CEO explained that success in the CDMO business was offset by lower-than-planned performance in the capsules and health ingredients (CHI) business.
Looking ahead to the CDMO business in 2025, the company expects CER sales growth of close to 20%, including approximately $500 million from the acquisition of the Vacaville, California facility from Roche, and core EBITDA margins of close to 30%.
The Vacaville site had signed a letter of intent before closing, making it the site's first hard commitment. Wienander also noted a second strong manufacturing commitment from another customer to the Vacaville facility. “The overall acceptance and interest in capacity in Vacaville is actually very promising, and (they) look forward to taking full advantage of the additional potential that’s available,” Wienander said.
Asked about the potential impact of the U.S. biosecurity bill, Wienand noted that Lonza's current 22 capacity-growth projects "are all located in the Western Hemisphere." But ultimately, (Lonza) will always look for opportunities in a global way. Our footprint (in Asia) and existing facilities (there) are very significant in our current network. However, currently our investments...are flowing into Western markets (based on) what we are currently doing. "
In the day-to-day business development of Lonza's early-stage services offering, Wienand noted that the company has seen a resurgence in biotech venture capital funding, including "absorbing early-stage biotech opportunities." Wienand expects Lonza to "be able to absorb more molecules by 2025 than it did during the trough of (funded) development."
Wienand predicts that by 2029, the cell and gene therapy, biologics and small molecule drug markets will grow by 9%, 6% and 4%, plus outsourcing is expected to grow by 20% from 2019-29, the CDMO market will grow by 8- 10%. With $6 billion in revenue generated last fiscal year, Lonza is well-positioned to capitalize on these market segments, the CEO claimed.
"JPM 2025: Lonza Shares Outlook on CHI's Exit and Acquisition Strategy" was originally created and published by Pharmaceutical Technology, a brand of GlobalData.
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