Lonza Group (LONN) Investor update summary

Strategic transformation and divestments

• Announced agreement to divest 60% of Capsules & Health Ingredients (CHI) business to Lone Star, valued at CHF 2.3 billion, with CHF 1.7 billion upfront and a retained 40% stake plus future exit participation, marking the final major step in the transformation to a pure-play CDMO.

• Four divestments executed since December 2024, including Personalized Medicines (Cocoon® Platform), MODA® software platform, and Monteggio micronization site, to streamline the portfolio.

• Transformation completes shift to a pure-play CDMO, focusing on high-growth, high-margin pharmaceutical services and leveraging the Lonza Engine.

• Transaction structured to provide significant cash upfront and future value, with Lone Star Funds as majority owner and Lonza retaining a 40% stake with preferential participation in value creation if certain return thresholds are met.

• CHI transaction expected to close in H2 2026, subject to regulatory approvals and legal separation.

Financial impact and capital allocation

• Total proceeds from CHI exit expected to reach or exceed CHF 3 billion, with CHF 1.7 billion in upfront cash and a CHF 500 million share buyback planned after receipt of proceeds.

• Proceeds will fund organic growth, targeted bolt-on M&A, and progressive dividends, with capital allocation prioritizing high-growth markets and maintaining a BBB+ credit rating.

• Plans to invest over CHF 7 billion in organic growth by 2030, focusing on high-quality assets and synergies.

• Extraordinary non-cash impairment of around CHF 1.3 billion to be recognized in FY2025, allocated to discontinued operations and not impacting CORE EBITDA or CDMO financials.

• Anticipates leverage to fall materially below target levels, with ongoing review of capital allocation and surplus returns.

Operational focus, market positioning, and outlook

• Now operates three integrated CDMO business platforms: Integrated Biologics, Advanced Synthesis, and Specialized Modalities, powered by the Lonza Engine®.

• Focused on fast-growing pharma market segments, with an addressable CDMO market of ~$100 billion and 8-10% CAGR (2025-2030), and over 90% of the innovative clinical pipeline accessible by current technology platforms.

• CDMO outlook for 2026: CER sales growth of 11-12% and CORE EBITDA margin above 32% of sales, with organic growth model targeting low teens % CER sales growth and EBITDA growth ahead of sales.

• Streamlined organization now offers a comprehensive CDMO platform ready to meet evolving customer needs, with capital returns and disciplined investment approach aligned with long-term growth ambitions.

• Committed to progressive dividend policy and maintaining investment grade credit profile.