Lonza: New Organizational Structure for CDMO Business; Positive Long-Term Outlook

Narrow-Moat Lonza restructured its contract development and manufacturing organization business to provide a more simplified model by shifting it from three divisions with nine underlying business units to three CDMO business platforms: integrated biologics, advanced synthesis, and specialized modalities. The capsules and health ingredients business will continue to operate in its existing structure, but management intends to exit this business and evolve into a pure-play CDMO. This simplified organizational structure should allow management to improve its execution capabilities in each business platform. We maintain our fair value estimate of CHF 550 per share, and we view shares as fairly valued.