Lonza Group (LONN) 44th Annual J.P. Morgan Healthcare Conference summary

Strategic direction, vision, and leadership priorities

• Clear strategy for value creation, capital allocation, and leveraging the proprietary Lonza Engine to outgrow attractive markets, with a unified vision and robust business model for long-term value.

• New CEO introduced a three-step plan: establish a unified vision, assemble the Lonza Engine, and tune operations for efficiency and growth, supported by four key initiatives: Reshape, Elevate, Focus, and Expand.

• High-performing teams, strong leadership engagement, and a culture recognized for expertise and impact, with ~1,500 PhDs and a focus on operational excellence.

• Announcement of a simplified operating model to be implemented in Q2 2025, moving from three divisions to three integrated business platforms.

• Exit from CHI business is well underway, with legal and IT separation completed and the process progressing as planned to align with core CDMO strategy.

Market positioning, customer base, and global network

• Leading global CDMO network supports customer regionalization and supply chain needs, with balanced revenue streams from both small/mid-size and large pharma clients, and 95% of top 100 pharma companies as clients.

• Operates in a non-cyclical, high-growth CDMO market with strong customer loyalty, significant barriers to entry, and a diversified customer base.

• Holds the broadest set of modalities and technologies among CDMOs, enabling risk diversification and global reach.

• Global network spans three continents, with 22-23 ongoing growth projects and a strong record of capacity expansion and successful acquisitions.

• High customer retention rate (99%+) through all clinical phases, with strong pull-through from early to commercial stages.

Financial model, growth drivers, and outlook

• Financial model is based on a compounding defensive growth approach, emphasizing strong top-line growth, margin expansion, and cash generation.

• CDMO market addressable by Lonza is estimated at $100 billion, growing 8-10% annually, with Lonza targeting 10-13% growth through market selection and the Lonza Engine.

• Organic and inorganic investments aligned with the Lonza Engine, targeting low teens organic growth, 2-3% ahead of the market, with CapEx to normalize at mid-to-high teens as a percentage of sales.

• Upgraded 2025 guidance: 20-21% constant exchange rate sales growth, including CHF 500 million from Vacaville, and a core EBITDA margin of 30-31%.

• 2024 outlook confirmed at flat sales growth and high twenties CORE EBITDA margin; 2025 expects strong CDMO growth with sales growth approaching 20% and margin near 30%.