Lonza Group ($LONN) gained 6% in Thursday's midmorning trade as it proposed to offload its capsules and health ingredients business and restructure the organization to solely focus on its core contract development and manufacturing operations. Under a new "One Lonza" strategy, the Swiss pharmaceutical manufacturing company will reorganize its contract manufacturing business into three new business platforms, namely integrated biologics, advanced synthesis, and specialized modalities.
The core unit will transition from three divisions with nine underlying business units, effective from the second quarter of 2025. The market softness in the capsules and health ingredients arm is expected to neutralize the strong performance of the contract manufacturing business, leading Lonza to reiterate its expectations for flat sales year over year in 2024, at constant exchange rates. For the full-year 2025, the Swiss group anticipates a 20% jump in contract manufacturing sales, at constant exchange rates, including a sales contribution of 500 million francs from the Vacaville site acquisition. "The new organizational structure will further enable Lonza to capture growth opportunities through the empowerment of key group functions and improved execution capabilities, including a unified go-to-market approach and an increased focus on excellence in asset construction and operation," said the company.
"Lonza will also elevate the importance of bolt-on M&A and take an impartial view on organic and inorganic opportunities for future growth." Moreover, the new Lonza contract development and manufacturing organic growth model is expected to deliver low teens sales growth on average over time, with core EBITDA growth ahead of sales growth.
The guidance is consistent with the previous mid-term outlook for 2028. "The strategy reflects our ambition to become a pure-play CDMO business. This will allow us to achieve and maintain leadership across modalities with high therapeutic and commercial value, while pioneering the manufacturing technologies of the future," said Chief Executive Officer Wolfgang Wienand. RBC Capital Markets took the investor update 2024 positively, saying, "Exit of the capsules business (in due course) will remove a drag on group growth and strengthen the balance sheet (although will possibly lead to non-cash write-downs) - this will provide firepower to execute on a more dynamic M&A strategy." RBC added that 2024 outlook confirmation "minimises near-term financial risk, and the new 2025 guide helps set expectations and address investors' current concerns.
A reorg of divisions is neutral, but shows that the new CEO is stamping his mark on the group.".