Swiss Contract Service Provider Lonza Exits Capsules Business To Focus On Drug Development

European pharma service provider Lonza Group Ltd LZAGY LZAGF announced plans to exit its Capsules & Health Ingredients (CHI) business.

Full implementation is expected by second quarter of 2025.

The decision coincides with the company’s strategy to focus on contract development and manufacturing organization (CDMO). Lonza expects EBITDA margins exceeding 30% for its CDMO segment beyond 2025.

William Blair writes that the decision to divest its CHI business and reorganize the CDMO business “rids Lonza of the main drag” and “creates a much cleaner and more compelling pure-play CDMO story.”

The new structure aims to simplify operations by transitioning from three divisions and nine business units to three integrated business platforms: Integrated Biologics, Advanced Synthesis, and Specialized Modalities.

The Integrated Biologics platform will consolidate Mammalian and Drug Product Services, while Advanced Synthesis merges hybrid chemistry and biology solutions, incorporating the Small Molecules division and Bioconjugates.

Specialized Modalities will be focused on cell and gene therapies, mRNA, and microbial solutions.

2024 and Beyond: Growth Outlook

• Lonza maintained its 2024 guidance of flat constant exchange rate (CER) sales growth and a CORE EBITDA margin between 27% and 29%, with CDMO performance offsetting softness in the CHI segment.
• For 2025, Lonza projects CER sales growth approaching 20%, supported by the acquisition of the Vacaville site and organic growth in the low teens.
• Beyond 2025, the company anticipates low-teen percentage CER sales growth.
• For CHI, Lonza expects modest growth and a gradual return to higher margins post-2025.
• Lonza reaffirmed its commitment to a dividend policy with a payout ratio of 35-45%.

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