Pharmaceuticals Lonza puts capsule business up for sale
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 capsules and food supplements business is being discontinued.
12.12.2024, 07:01
12.12.2024, 12:10
SDA
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, the management has not yet communicated too many details, as 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 the 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 Chemicals division, which was also less profitable and contributed a quarter of sales, was put up for sale.
The deal was then finalized in summer 2021, with the chemicals division going to two financial investors for CHF 4.2 billion. Lonza thus finally parted with its roots.
And Lonza Specialty Ingredients also needed a new CEO to make the move. At the time, it was Albert Baehny, Chairman of the Board of Directors and interim CEO, who took the plunge.
Core business is a growth area
With this final step, Lonza is now also drawing a line under the largest takeover in the company's history. At the end of 2016, the Basel-based company bought the American capsule manufacturer Capsugel for 5.5 billion dollars. The business is now back in the spotlight.
As soon as the division is gone, Lonza will only be a pharmaceutical supplier. And the remaining core business is 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 the new CEO took up his post in the summer, he 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 somewhat firmer overall market. The planned spin-off was also well received by analysts.
