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Investing.com -- Shares of Lonza Group AG (SIX:LONN) fell more than 3% on Wednesday after the company reported full-year 2024 earnings that showed flat revenue growth and a dip in overall sales when adjusted for exchange rates.
Lonza’s strong core EBITDA margin and strong contract development and manufacturing organization performance were overshadowed by investor concerns.
These concerns stemmed from continued difficulties within the capsules & health ingredients (CHI) division and the company’s subsequent decision to exit this business.
The Swiss pharmaceutical manufacturer posted CHF 6.6 billion in sales, reflecting a slight decline of 0.2% in constant exchange rates and 2.1% at actual exchange rates compared to the previous year.
The company attributed the stagnation to the loss of COVID-related mRNA business, weaker demand in the capsules & health ingredients segment, and softness in its Bioscience unit.
While its contract development and manufacturing organization business saw low-teens underlying CER growth, it was not enough to offset these headwinds.
Lonza’s decision to divest its capsules & health ingredients division also weighed on investor sentiment. The company said it would transition into a pure-play contract development and manufacturing organization, citing a long-term shift under its new "One Lonza" framework.
However, the exit plan’s timeline remains unclear, with the company stating that the separation would take place "at the appropriate time and in the best interests of shareholders and stakeholders."
Meanwhile, capsules & health ingredients continued to struggle, with a 6.6% drop in sales driven by weaker demand for pharmaceutical capsules and lower prices in the nutraceuticals market.
Despite Lonza’s strong contract development and manufacturing organization performance and positive outlook for 2025—where it expects sales growth of nearly 20% in that segment—investors appeared cautious about near-term profitability.
The recently acquired Genentech facility in Vacaville, California, is expected to generate CHF 0.5 billion in revenue for Lonza in 2025. However, the company acknowledges that this revenue will come at a lower margin, negatively impacting overall profitability.
The results also reflected the impact of Lonza’s capital expenditures, which stood at CHF 1.4 billion in 2024, or 22% of sales.