Lonza swings to pharma

Lonza has announced results for 2019, in which its growth was entirely driven by the Pharma Biotech & Nutrition division on which it will base its future. The company also revealed that it will be seeking a new CEO specifically from the pharma and biotech arena.

In 2019, sales were 6.8% up on 2018 at CHF 5.9 billion and core EBITDA was CHF 1.6 billion, a 27.4% margin, despite heavy ongoing investment in growth projects. Within this Pharma Biotech & Nutrition had 11.0% growth to CHF 4.2 billion and achieved a core EBITDA of CHF 1.4 billion, with a margin of 32.9%.

Among many other highlights, Lonza noted that the small molecules business “continued to benefit from innovative business models, formulation and encapsulation capabilities”. The highly potent APIs “made a positive contribution”, with customers including AstraZeneca signing new long-term contracts and another contract being signed for drug substance payloads ADCs. Mammalian and microbial activity “saw ongoing strong momentum for its clinical and commercial offerings”, the company said, while its integrated clinical service offerings “gained traction”.

There are a large number of investment projects going on. In 2019, the company spent 13.3% of group sales, CHF 786 million, on capex in areas including HPAPIs and bioconjugates, clinical and commercial biologics, mid-scale and clinical-scale mammalian, cell and gene and drug product services. A similar level of capex is expected in 2020, with at least more significant projects scheduled to start operations by the end of the year.

By contrast, said chairman Albert Baehny, Lonza Specialty Ingredients (LSI) had a “soft full-year performance after headwinds”. It sales fell 3.2% fall in sales to CHF 1.7 billion although the core EBITDA improved to CHF 302 million and the margin improved to 17.8%, thanks to productivity gains, cost control measures and price increases. Lonza is carving out LSI under the Outlook 2020 project and this is on schedule to be completed in mid-2020.

Performance for LSI in 2019 was very mixed. Overall demand for its core microbial control offer was said to be “solid” but demand fluctuated from mark to market. Home care disinfection and professional hygiene were strong, while personal care ended the year soft after an uptick in 2H, thanks to increasing demand for Lonza's anti-dandruff platform for hair care in Europe.

Wood protection, oil and gas, and paints and coatings were also strong, but the polymer and textile sector was hit by weak automotive industry demand and supply disruption for a key BIT intermediate. Crop protection faced many headwinds and the speciality chemicals business was particularly hit by such headwinds as the impact of the US-China trade war on the already difficult consumer electronics market.

It was also revealed in the results presentation that the Nomination & Compensation Committee is searching for a new CEO, Marc Funk having resigned in March after only eight months at the helm. Christoph Mäder will remain as ‘lead independent director’ until this process is completed, which is expected to be during 2020. Baehny has suggested that the new CEO should be someone with at least two decades of experience in pharma or biotech, including bioprocesses, to bioproducts. According to Reuters, inteviews with six shortlisted candidates should begin shortly.