Company Reports

Lonza ended 2023 with solid sales of CHF 6.7 billion, representing growth of 7.9% year over year. Strong performance in the biologics and small molecules segments accounted for more than 70% of the company’s revenue and each segment delivered impressive margins of more than 30%. We maintain our fair value estimate of CHF 530 per share, and we view the stock as undervalued, currently trading in 4-star territory about 19% below our fair value estimate.

We have adjusted our mid-term forecasts to account for reduced COVID-19-related revenue due to lower post-pandemic demand, as Moderna canceled its contract with Lonza to produce its mRNA COVID-19 vaccine. As a result, we have lowered our fair value estimate to CHF 530 per share. However, we maintain our positive long-term outlook for Lonza thanks to strong demand for manufacturing biologics and cell and gene therapies. We view the stock as trading at an attractive entry point in 5-star territory about 33% below our fair value estimate.

Lonza Group has been a dominant player in the contract development and manufacturing space for decades. We think the outlook for Lonza looks bright, especially as drug manufacturing becomes more complex with biologics and cell and gene therapies playing larger roles in the overall mix.

Lonza has announced that its CEO, Pierre-Alain Ruffieux, will leave the company at the end of September by mutual agreement. Chairman Albert Baehny will take over as CEO on an interim basis until a permanent successor is appointed. Baehny has served as the Chairman of Lonza since 2018. Investors were spooked by this news and sent the stock down nearly 15%. The stock is currently trading at a 32% discount to our fair value estimate of CHF 620 per share, representing an attractive entry point for long-term investors with a high degree of risk tolerance.

Lonza Group has been a dominant player in the contract development and manufacturing space for decades. We think the outlook for Lonza looks bright, especially as drug manufacturing becomes more complex with biologics and cell and gene therapies playing larger roles in the overall mix.

Lonza trimmed its 2023 outlook to mid- to high-single-digit sales growth (from high single digits) and 28%-29% core EBITDA margin, due to slower growth in early-stage services and a decrease in demand for nutraceutical capsules. The reduction of core EBITDA margin reflected a 6.5% decrease from the midpoint of management’s previously issued guidance. Investors reacted negatively and sent shares down 11%.

Lonza Group has been a dominant player in the contract development and manufacturing space for decades. We think the outlook for Lonza looks bright, especially as drug manufacturing becomes more complex with biologics and cell and gene therapies playing larger roles in the overall mix.

Lonza provided a first-quarter 2023 qualitative update indicating positive results, and the company is tracking our expectations. Management will release additional details when it reports its half-yearly results in July. The company has benefited from strong commercial demand across its biologics and small molecules businesses, and it has experienced softer demand for pre-clinical and phase 1 services in its cell and gene segment due to biotech funding constraints given macroeconomic headwinds. Lonza’s performance is in line with its full-year trajectory, so management reiterated its 2023 outlook. We maintain our fair value estimate of CHF 620 per share and view shares as moderately undervalued, currently trading in 3-star territory about 9% below our fair value estimate. We maintain our narrow economic moat rating and stable moat trend.

Lonza reported solid year-end results driven by strong underlying performance across its biologics, small molecules, and cell & gene businesses. Fiscal 2022 revenue totaled CHF 6.2 billion, which represents a 15% increase year over year. We maintain our fair value estimate of CHF 620 per share and view shares as undervalued, currently trading in 4-star territory about 15% below our fair value estimate. We maintain our narrow economic moat rating and stable moat trend.

Our long-term outlook for Lonza looks bright as drug manufacturing continues to become more complex with biologics and cell and gene therapies playing larger roles. We maintain our fair value estimate of CHF 620 per share for narrow-moat Lonza. We view Lonza’s stock price as undervalued, currently trading 20% below our fair value estimate in 4-star territory.

Lonza reported solid half-year results driven by continued strong demand in its biologics and cell and gene segments. Revenue totaled nearly CHF 3 billion, representing a 17% increase from the prior year. Lonza’s results were in line with our expectations, and we maintain our fair value estimate of CHF 620 per share. The stock is currently trading in 3-star territory, about 6% below our fair value estimate. We maintain our narrow economic moat rating and stable moat trend.

We maintain our fair value estimate of CHF 620 per share for narrow-moat Lonza. The outlook for Lonza is bright as drug manufacturing becomes more complex with biologics and cell and gene therapies playing larger roles. We view Lonza’s share price as undervalued, currently trading 16% below our fair value estimate.

Lonza Group has been a dominant player in the contract development and manufacturing space for decades. We think the outlook for Lonza looks bright, especially as drug manufacturing becomes more complex with biologics and cell and gene therapies playing larger roles in the overall mix.

Lonza reported solid year-end results driven by continued growth in its biologics business. Fiscal 2021 revenue totaled CHF 5.4 billion, which represents a 20% increase year over year on an adjusted basis for Lonza’s continuing operations. After updating our valuation model, we maintain our fair value estimate of CHF 620 per share and view shares as fairly valued, currently trading in 3-star territory. We maintain our narrow economic moat rating and stable moat trend.

Lonza Group has been a dominant player in the contract development and manufacturing space for decades. We think the outlook for Lonza looks bright, especially as drug manufacturing becomes more complex with biologics and cell and gene therapies playing larger roles in the overall mix.

Lonza Group has been a dominant player in the contract development and manufacturing space for decades. We think the outlook for Lonza looks bright, especially as drug manufacturing becomes more complex with biologics and cell and gene therapies playing larger roles in the overall mix.

After taking a fresh look at Lonza, we’ve relaunched coverage with a fair value estimate of CHF 620 per share, a narrow economic moat rating, and a stable moat trend. Lonza has been a dominant player in the contract development and manufacturing space for decades. While the outlook for Lonza looks bright, as drug manufacturing becomes more complex with biologics and cell and gene therapies playing larger roles, we view Lonza’s current share price as overvalued.

We are dropping coverage of Lonza. We provide broad coverage of more than 1,500 companies globally and periodically adjust our coverage according to investor interest and staffing.

We are placing Lonza under review as we evaluate analyst stock coverage decisions. As a reminder, we provide broad coverage of more than 1,500 companies globally and periodically adjust our coverage according to investor interest and staffing.

Lonza reported mixed results for the first half of 2020, with strong results in the pharma, biotech, and nutrition, or PBN, segment offset by weak demand in specialty ingredients that was exacerbated by coronavirus challenges. Despite mixed top-line results, margins overall were better than we had anticipated, with preventative measures in specialty ingredients due to COVID-19 paying off and good operating leverage in PBN contributing to margin improvement. We’ve adjusted our model for stronger-than-expected top- and bottom-line growth in PBN, and we’re raising our fair value estimate to CHF 326. Lonza’s shares have appreciated materially over the last couple of months, in part due to investor enthusiasm for Moderna’s COVID-19 vaccine, which Lonza is manufacturing. While we think shares are overvalued, Lonza’s narrow moat remains intact, with strong switching costs associated with its contract manufacturing business.