Lonza Earnings: Strong Demand for Biologics and Cell and Gene Therapies Should Drive Long-Term Sales

Narrow-moat Lonza provided a third-quarter qualitative update, and the company is tracking our 2024 expectations. We forecast flat sales growth in 2024, which reflects the impact of Moderna's canceled contract for its covid vaccine. Lonza’s capsules and health ingredients division, which accounted for 17% of 2023 sales, has experienced soft performance this year in line with the market due to continued destocking of pharma hard capsules. Despite these near-term challenges, we maintain our positive long-term outlook for Lonza thanks to strong demand for outsourced manufacturing of biologics and cell and gene therapies. We maintain our fair value estimate of CHF 530 per share and view the stock as fairly valued, currently trading in 3-star territory.