Lonza Earnings: Solid 2024 Results With Strong CDMO Growth and Strategic Restructuring Ahead

Narrow-moat Lonza delivered solid performance in its core contract development and manufacturing organization business, but softer results from its capsules and health ingredients division, which faced market headwinds. Lonza's sales for 2024 were CHF 6.6 billion, which is virtually flat compared to the prior year at constant exchange rates. Sales were impacted by the loss of covid-related mRNA revenue from the termination of Moderna’s contract. However, after adjusting for this impact, underlying sales grew around 7% at constant exchange rates. Lonza's narrow-moat is underscored by the resilience of its CDMO business, which continues to perform well despite the loss of covid-related sales. We think Lonza is well positioned to deliver strong performance, particularly in the fast-growing biologics and cell and gene divisions. After updating our model, we slightly raised our fair value estimate to CHF 550 per share from CHF 530.