Lonza puts capsule business up for sale
Published: Thursday, Dec 12th 2024, 13:10
Updated At: Friday, Dec 13th 2024, 00:59
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New brooms sweep well. Under the new Group CEO Wolfgang Wienand, Lonza is taking the very last step towards becoming a pure contract manufacturer for the pharmaceutical industry. The business with capsules and food supplements is abandoned.
The Group intends to divest the Capsules & Health division (CHI) "in due course", Lonza announced on Thursday. At just under 1.2 billion Swiss francs, it accounted for 17 percent of Group sales in 2023. However, management has not yet communicated too many details on this; the next steps will not be determined until 2025.
Chief Financial Officer Philippe Deecke explained the decision: "Although the capsule business is the market leader, it has a different business model to the other parts of the company and offers few synergies." Therefore, "others would probably be the better owner".
What Deecke did not say was that the capsule business has shrunk recently and generated less profit than other Lonza divisions. Above all, the commercial production of active ingredients on behalf of pharmaceutical customers generates significantly higher margins.
Second step after chemicals division
This is strongly reminiscent of the last major step towards a so-called Contract Development and Manufacturing Organization (CDMO), which Lonza initiated four years ago. At that time, the equally less profitable chemicals division, which accounted for a quarter of sales, was put up for sale.
The deal was then finalized in the summer of 2021, with the chemicals division going to two financial investors for CHF 4.2 billion. This also marked the final separation of Lonza from its roots.
And it also took a new CEO at Lonza Specialty Ingredients to make the move. At the time, it was the interim Chairman of the Board of Directors, Albert Baehny, who took the plunge.
Core business is growth area
With this final step, Lonza is now also drawing a line under the largest acquisition in the company's history. At the end of 2016, the Basel-based company acquired the American capsule manufacturer Capsugel for 5.5 billion dollars. The business is now back on the shop window.
As soon as the division is gone, Lonza will only be a pharmaceutical supplier. And the remaining core business will be a growth area, said CEO Wolfgang Wienand.
According to Wienand, Lonza expects the CDMO market to grow by 8 to 10 percent annually by the end of the decade. And Lonza wants to exceed this figure by 2 to 3 percent.
When he took up his post in the summer, the new CEO found a company that he says is "excellently positioned", but still sees room for improvement here and there. For example, the current Lonza is too complex and organized too "silo-like".
Simpler organization
Wienand is therefore giving the company a new, simplified and flatter organization. The whole thing will be called "One Lonza" and should be implemented by the middle of next year.
His idea behind it: Lonza should absorb the growth expected in the future "in a structured way". "We will one day be a 10 billion company," Wienand reminded us.
There was applause from the stock market: shortly before midday, Lonza shares rose by 6.4 percent in a slightly firmer overall market. The planned spin-off was also well received by analysts.
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