Lonza seeks deals as it exits health and ingredients to focus on contract development

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By Isabel Demetz

(Reuters) -Swiss contract drugmaker Lonza plans to simplify its structure and exit its capsules and health ingredients (CHI) business after a decline in demand for pharmaceutical supplies since the end of the COVID-19 pandemic.

“We need to come to the conclusion that Lonza is not the best owner at this point in time,” CFO Philippe Deecke told reporters on Thursday, citing a mismatch between Lonza’s core skills and the CHI business.

Shares in the Basel-based company were up 6.7% at 1148 GMT, on track for their best day since July, with RBC analysts describing Lonza’s update as “overall positive”.

The planned CHI exit should remove a drag on Lonza’s growth and strengthen its balance sheet, even if it will cause non-cash writedowns, the analysts said.

The company told investors it would determine its next steps in relation to CHI in 2025 as it focuses on its contract development and manufacturing organization (CDMO) business, which makes drugs for pharmaceuticals companies.

Lonza is the world’s largest contract manufacturer of monoclonal antibodies, the technology behind a new class of Alzheimer’s drugs such as Eli Lilly’s donemab.

CDMO will be restructured into three business platforms – Integrated Biologics, Advanced Synthesis and Specialized Modalities – from the second quarter of 2025, from three divisions and nine underlying businesses currently, the company said.

Lonza will also focus more on mergers and acquisitions, looking for deals offering “great opportunities for technologies or capacities”, finance chief Deecke told reporters.

CDMO sales growth is expected to approach 20% in constant exchange rates next year, the company said, adding that organic growth expectations at the CDMO business were in line with medium-term guidance for 2028.

($1 = 0.8838 Swiss francs)

(Reporting by Isabel DemetzEditing by Kirsten Donovan and David Goodman)