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Lonza Group AG, a leading player in the contract development and manufacturing organization (CDMO) sector with a market capitalization of $51.5 billion, held its Q3 2025 earnings call, confirming a robust outlook for the year. The company reported a 20-21% sales growth in its CDMO business at constant exchange rates, with a quarterly margin expected in the 30-31% range. Despite facing a 2.5-3.5% headwind from foreign exchange rates, Lonza anticipates higher sales in the second half of 2025 compared to the first half. The stock currently trades at $729.08, showing resilience with a beta of 0.81. According to InvestingPro analysis, the company appears slightly overvalued compared to its Fair Value, though analysts maintain a bullish stance with an average upside potential of 20%.
Key Takeaways
- Lonza confirmed a strong growth outlook for its CDMO business, with a 20-21% sales increase.
- The company expects higher sales in H2 2025 despite foreign exchange headwinds.
- Strong momentum was noted in Integrated Biologics and the Advanced Synthesis platform.
- Lonza is progressing with new product introductions and facility expansions.
Company Performance
Lonza Group continues to perform well, driven by its diversified portfolio and strategic focus on the CDMO sector. The company has maintained its strong position across various modalities, including large-scale mammalian assets and small molecules. With an EBITDA of $2.45 billion in the last twelve months and a solid Financial Health Score of "GOOD" from InvestingPro, the company demonstrates strong operational efficiency. The Capsules and Health Ingredients business is returning to positive growth, contributing to the overall positive outlook. InvestingPro subscribers can access 12 additional key insights about Lonza’s financial health and growth prospects.
Financial Highlights
- Revenue growth in the CDMO business: 20-21% at constant exchange rates
- Quarterly margin: 30-31%
- Anticipated FX headwind impact: 2.5-3.5% on sales and core EBITDA
Outlook & Guidance
Looking forward, Lonza expects low-teens percentage organic growth in its CDMO business, building on its current revenue growth of 5.93%. With projected EPS of $21.41 for FY2025 and a P/E ratio of 57.97, the market is pricing in significant growth expectations. The Capsules and Health Ingredients business is projected to achieve low to mid-single-digit growth. The company is preparing for significant product launches in 2026 and is progressing with facility expansions, including the new highly potent API facility in Visp. For detailed analysis and growth projections, investors can access the comprehensive Pro Research Report available on InvestingPro, which covers over 1,400 top stocks with expert insights and actionable intelligence.
Executive Commentary
Philippe Deecke, CFO of Lonza, emphasized the company’s strategic positioning: "Lonza is on track to deliver on its full-year 2025 outlook." He also highlighted the strong demand for Lonza’s services: "We see strong contracting demand with customers seeking Lonza services for their strategic projects."
Risks and Challenges
- Foreign exchange rate fluctuations pose a potential risk to sales and EBITDA.
- The need for continued investment in new facilities and technologies could impact cash flow.
- Market dynamics, including biotech funding trends, may affect future demand.
Lonza’s Q3 2025 earnings call underscored the company’s robust performance and strategic positioning in the CDMO market. With a focus on growth and innovation, the company is well-positioned to meet its full-year targets despite external challenges.
Full transcript - Lonza Group AG (LONN) Q3 2025:
Sandra, Call Operator: Ladies and gentlemen, welcome to the Lonza Q3 2025 qualitative update conference call and live webcast. I am Sandra, the call operator. I would like to remind you that all participants are in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. Please limit yourself to one question and then re-enter the queue in case you have a follow-up. In the webcast, we have a chat box which should only be used if your question can be heard into the phone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it’s my pleasure to hand over to Philippe Deecke, CFO. Please go ahead, sir.
Philippe Deecke, CFO, Lonza Group AG: Good morning, good afternoon, and a very warm welcome to our Q3 qualitative update. Before we go into more details, please let me remind you that we intend to provide you with a general business overview with our qualitative update. We will not be sharing figures related to our financial performance. We will do so on the 28th of January with our full-year update. Let me start with an overview of our group performance before we move to the performance of our business platforms and Capsules and Health Ingredients. Afterwards, I will provide you with an update on our business contracting and our growth project, followed by the current macroeconomic situation before I close for the Q&A session. Today, we report a strong Q3 performance across our CDMO businesses, aligned with our expected full-year trajectory.
Supported by this strong performance, we are confirming our 2025 outlook for the CDMO business, which we upgraded at half-year, with sales growth of 20 to 21% at constant exchange rates compared to the prior year and a quarterly margin in the range of 30 to 31%. Excluding Vacaville, which is now expected to contribute at the upper end of the range of around half a billion CHF in sales and a better than expected quarterly margin in 2025, we expect low-teens percentage organic constant rate growth and a margin improvement in our CDMO business, in line with our CDMO organic growth model. As anticipated at our half-year release in July, we confirm our expectation of higher sales in H2 2025 than in H1, with a healthy progression of our quarterly margin in line with the 2025 outlook.
Progressing well on its expected recovery path, we also confirm our full-year 2025 outlook for the Capsules and Health Ingredients business at the low to mid single-digit percentage constant rate growth and an improved quarterly margin in the mid-20s. Based on FX rates at the beginning of October, we can reiterate an anticipated year-over-year headwind of around 2.5 to 3.5% on sales and core EBITDA for full-year 2025. However, our margin is well protected due to a strong natural hedge and our hedging program in place. Moving to the performance of our business platforms, let’s start with Integrated Biologics. Integrated Biologics continues to see strong momentum with robust demand for its large-scale mammalian assets. This is further supported by Vacaville, as I just commented on.
In our small-scale mammalian assets, we see a high level of utilization, and we have a good level of visibility for the remainder of this year. Let me come back to the early-stage business later to provide further context and outlook. Overall, we are pleased to report a continued good operational execution alongside maturing growth projects as growth and margin drivers in our Integrated Biologics business. Turning to our Advanced Synthesis platform, we continue to see strong commercial demand for our small molecules and biocontrol-based capacities, as underlined by the deal mentioned in our Q3 release, planning a large multi-year supply agreement in small molecules. Growth is supported by new capacities in small molecules with our new highly potent API plant and in biocontrol-based. The business platform further benefits from a robust operating execution and the demand for complex products supporting margins, as witnessed already with our half-year results.
Our Specialized Modalities platform improved in Q3 as expected. We expect the fully performed to remain moderate in the context of the softer first half. Deliveries are weighted into Q4, and depending on the progress of key customer projects and decisions, sales may also fall into 2026. Bioscience had a good Q3 with robust growth, and we are pleased to report that Microbial returned to growth in Q3 after a softer H1 performance. In Cell and Gene, ongoing pipeline variability and complex manufacturing continue to weigh on asset utilization. While we anticipate a gradual recovery in operational performance, it will remain below the strong execution seen in 2024. Cell and Gene is a business with strategic relevance to Lonza, and it is our aim to increase resilience of the business over time, commercially and operationally. In the meantime, some business variability may persist.
Our Capsules and Health Ingredients business returned to positive CR growth in Q3, in line with the expected full-year trajectory for 2025. We are pleased to report that also the pharma capsules business is seeing improved demand trends and returned to positive volume growth in Q3. We can therefore confirm that both our nutraceutical and pharmaceutical capsules business have moved beyond the post-pandemic restocking phase. In the current geopolitical environment, our manufacturing footprint in Greenwood, South Carolina, and Puebla, Mexico is continuing to support Capsules and Health Ingredients’ customers to navigate the evolving geopolitical environment. In the U.S., recent preliminary affirmative countervailing and anti-dumping decisions continue to be in place, allowing more balanced competition for pharmaceutical and nutraceutical capsules in the U.S. In Q3, we progressed with the necessary internal carve-out measures to prepare our exit from the Capsules and Health Ingredients business.
The good business momentum highlights the attractiveness of the Capsules and Health Ingredients business as a leader in its markets, and we are confident in the business’s ability to return to its historical Capsules and Health Ingredients sales growth in the low to mid single-digit % and a quarterly margin of about 30%. We are therefore confident to exit the business in the best interests of our customers, employees, and shareholders, and we will do so at the appropriate time. Before turning to our growth projects, let me say a few words on contracting. For 2025, we expect again a healthy level of contract signings across technologies and sites. Recently, we were able to sign several significant contracts, including a further strategic long-term contract for integrated drug substance and drug product supply of bioconjugates.
In our Small Molecules technology platform, we signed a large multi-year commercial supply agreement, and in Integrated Biologics, we were able to secure a fourth significant long-term supply agreement for our Vacaville site. In Vacaville, we expect further contract signings in the coming months, and we continue to see strong customer interest for large-scale U.S. capacity. Let me say a few more words about Vacaville. One year after closing the acquisition, we are very pleased with the site’s integration into Lonza Group AG’s network, which is progressing in line with plan. The site continues to demonstrate robust operational execution in support of Roche and is maintaining an excellent quality track record, which is also reflected in our expectations of Vacaville contributing at the higher edge of our initial estimates for 2025.
The site is also preparing new product introductions for 2026, and the first phase of CapEx is progressing as planned to operate the site’s automation system and smart intelligence capabilities. Ramp-up of our new highly potent API facility in Visp is progressing well, and we commence full commercial operation in July 2025. Our large-scale mammalian facility also in Visp showed good progress in ramp-up activity in Q3. GMP operations are underway, and commercial production is expected to ramp up gradually from 2023 onwards. Ramp-up activity for both facilities are progressing in line with plans. Before closing my remarks and opening for the Q&A session, let me reiterate our expectations of no material financial impact on Lonza from the currently announced official U.S. trade policies. The so far announced U.S. tariffs do not include tariffs on API, intermediates, and raw materials, as described in Annex II of the Executive Order.
We further remain confident that our well-diversified global manufacturing footprint with large capacities in the U.S., Europe, and Singapore will enable us to support our customers’ global manufacturing requirements today and in the future. We, of course, remain vigilant to the continued evolution of the situation and potential impact on our businesses. We also continue to closely monitor biotech funding trends, and recent fluctuations in funding levels are expected to have only a minimal impact on Lonza’s growth momentum in 2025 and beyond, with early-stage activities representing only approximately 10% of the CDMO business and only a portion of that business originating from companies requiring funding. To close, let me provide some final remarks. Lonza is on track to deliver on its full-year 2025 outlook. We see strong contracting demand with customers seeking Lonza services for their strategic projects.
Our growth projects are on track and are contributing to our growth this year and will continue to do so also in the years to come. In the current geopolitical environment, our large commercial business provides stability and our global asset propositions as well to support our customers with their complex manufacturing needs. With that, I would like to thank you for your time and hand over to you, Sandra.
Sandra, Call Operator: We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the telephone. You will hear a tone to confirm that you have entered the queue. Kindly limit yourself to one question. You can get back in the line again for any follow-up question. If you wish to remove yourself from the question queue, you may press star and two. Questions on the phone are requested to use only handsets when asking a question. In case of difficulties with understanding your question on the phone line, we will ask you to submit your question via the chat box in the webcast. Anyone with a question may press star and one at this time. Our first question comes from Zain Ebrahim from JPMorgan Chase & Co. Please go ahead.
Zain Ebrahim, Analyst, JPMorgan Chase & Co.: Hello. Hopefully, you can hear me okay. This is Zain Ebrahim from JPMorgan Chase & Co. I’ll stick to one question, which is on Vacaville. Just on the significant contract you announced this morning, how should we think about the timing of tech transfer for the contract and when can it start contributing to revenues? Related to that, just based on this contract, where are you with respect to your target to being able to maintain Vacaville sales stable over the midterm?
Philippe Deecke, CFO, Lonza Group AG: Yes, hi Zain and thank you very much for the question. As we’ve stated in the past, I think large commercial contracts are usually not for immediate use of batches. It takes time to take transfers, as you say. All the contracts we are announcing for Vacaville are part of the plan to offset the reduced need for batches from the initial Roche contract. This new contract is part of that plan and reconfirms that our stated trajectory for Vacaville of more or less flat sales in the next few years is exactly on track. This contract will start creating work for the site next year to contribute to revenue over the next two to three years.
Sandra, Call Operator: The next question comes from Charles Pitman-King from Barclays PLC. Please go ahead.
Hi guys, Charles from Barclays PLC. Hopefully, you can hear me okay. Just a question, please, on guidance. Just wondering, given you kind of raised the Vacaville outlook to the upper end of your around $500 million range this year, but you ran the top line guide, I’m just wanting to confirm if there’s one portion of your business that you think has kind of deteriorated such that you are just kind of reiterating that top line guide. Maybe whilst we’re on guidance, I was wondering if you could provide commentary on your thoughts on FY2026 guidance next year, which is currently looking for low double-digit growth. I know you don’t typically comment, but worth asking. Thank you.
Philippe Deecke, CFO, Lonza Group AG: Thank you, Charles. I thank you for offering the answer to your second question. More seriously, on guidance for this year, we gave you a range. There are always things that move up and down. We are pleased with the Vacaville progress this year and continue to be pleased with it. That is helping us. On the other hand, there is, as we mentioned, some uncertainty on SPM. Within that range, these are what the pros and takes are. For 2025, we are three months away, so we have good visibility on what is going to happen for the rest of the year. For 2026, as you know, we usually guide in January when we report full-year numbers. We will stick with that for 2026. We talked about early stage, which is not going to have material impact on our numbers no matter what the funding level is.
We are very pleased with the contracting, as we said, for 2025, which will also help in 2026. Everything is in line for 2026. So far, not much to say.
Sandra, Call Operator: The next question comes from Charles Weston from RBC Capital Markets. Please go ahead.
Hello. Thank you for taking the question. I wanted to stick on 2026, please. I’m not asking for a number, but since the large mammalian VISP asset will be ramping in 2026, which could presumably be a bit dilutive to margin, with a relatively high base in Advanced Synthesis and in Vacaville, there might be some headwinds to margin improvement year on year in 2026, perhaps a bit offset by the Advanced Synthesis improvements. Are there any other moving parts that I sort of haven’t mentioned that could drive an improvement next year?
Philippe Deecke, CFO, Lonza Group AG: Yeah, Charles. You summarized very well, which is great to hear. I think, again, yes, we have large growth assets that start dilutive, as is very normal. Vacaville, I think, is probably more of a top line headwind because this is going to be more or less flat for next year. That’s a big block of sales that you want that does not contribute to growth next year. Nevertheless, I think our organic growth model is looking at low teens growth and margin year over year. That’s, I think, for now, your best assumption for next year.
Okay, thank you.
Sandra, Call Operator: The next question comes from Theodora Robiel from Goldman Sachs. Please go ahead.
Theodora Robiel, Analyst, Goldman Sachs: Hi. Thank you for taking my question. Just on the separation of the Capsules and Health Ingredients business, is the process of carving out this business now complete? Are you able to share with us anything in terms of the timing of separation or when you’ll be able to communicate the decision? Thank you.
Philippe Deecke, CFO, Lonza Group AG: Thank you for the question on CHI. I think the progress on the internal separation, which contains a lot of legal entity work, systems work, etc., as I said in my speech before, is progressing well. I think we’re nearing completion of that. I think the rest of the process is really an internal process that’s going to be between us and the other parties and will inform when things are decided.
Sandra, Call Operator: The next question comes from James Vane-Tempest from Jefferies Group LLC. Please go ahead.
Yes, hi. Thanks for taking my question. On Vacaville, please. I mean, you’ve announced you want a new contract and there’s potentially some in the coming months. Just to clarify, should we understand that there could be some by year-end, but we’re not going to find that out until full year in January if you don’t plan to disclose more in real time like your peers? I’m asking this because some of them have been more visible to the market in terms of the number of contracts they’ve signed, which suggests a much more competitive environment. Perhaps I can also ask what you’re seeing on that front. Many thanks.
Philippe Deecke, CFO, Lonza Group AG: Yeah, thank you, James. We usually do not communicate all the contracts we’re signing. This would be issuing a lot of releases. If you remember, our signing in 2023 was about $12 billion. Last year was about $9 billion, if I recollect right. These are a lot of contracts being signed. We do not have a history and we do not mention every single contract we’re signing. We decided to do so on Vacaville to provide you more visibility into our confidence to fill the assets over time. This is the reason why we’re providing you the Vacaville contracts on a more regular basis. Usually, our customers also have no interest for us to publicly announce their contracts, so we don’t do so. If we were to sign further contracts this year, you’ll probably hear about it at the end of January when we report our full-year numbers.
As stated as well, we should get off the rhythm of announcing contracts for a single site. Probably we won’t do so in 2026. Let’s see. The contracting situation is very strong. We are also very pleased with the interest in Vacaville. We have a lot of concurrent negotiations ongoing. Some will finalize over the next few months. Others may take longer. These are very large contracts. These are usually also complex multi-year contracts that need time to be negotiated. In terms of the competitiveness and what our peers are doing, you would have to ask them. For now, we are very pleased to have a very strong footprint in the U.S. with attractive capacities available in the U.S., but also our sites in Europe and Asia see good demand. You saw that some of the contracts that I mentioned today also include some of our non-U.S. assets.
On the contracting side, we’re very pleased with the progress and with the interest of companies, large and small, to contract with Lonza.
Sandra, Call Operator: The next question comes from Patrick Rafaisz from UBS Group AG. Please go ahead.
Thanks, Zain. Good afternoon, everybody. Just a follow-up on the large contract wins. For Vacaville, is there any chance you could add a bit of color on size and types of capacities, amount of capacity required? The same for the large bioconjugate contracts. For which site was that specifically? Can you add some color on what types of services from your end did this include?
Philippe Deecke, CFO, Lonza Group AG: Yes, hi Patrick. I’m happy to take your question. On the Vacaville contract, I’m not going to directly answer your question, but maybe give some more color about the contracts that we have signed so far. All of these contracts, including the latest one, are multi-year contracts that are significant for the site as well, and which are very important for us to offset the declining revenue coming from Roche. These are very helpful projects because they start contributing very soon, helping us to maintain flat sales for Vacaville. It is important also to note that we see great interest for both assets within Vacaville. As you know, we have a 12,000L asset and a 25,000L asset. Also coming from the market, there were certainly question marks around the market still requiring such large reactors like the 25,000L we have.
We’re very pleased to say that, yes, indeed, there is big demand for such large reactors. We see contracting for both our 12,000L reactor and our 25,000L reactor. Vacaville for us is tracking very well along the plan that we had. This confirms our outlook for kind of flat sales to 2028 and then increasing sales further on as we ramp up the utilization of the site. For the integrated offer contracts that we also mentioned today, here we are offering several services, including producing the protein, the conjugation, and the drug product. The reason why we mentioned this contract to you is because this shows the interest from pharma companies, large and small, to ask us for integrated business, which covers more than one modality.
More and more we get asked to do not just the protein or not just the conjugation or not just the drug product, but the combination of several modalities across our platforms. We believe that this is something where Lonza can clearly differentiate, of course, in the areas of ADC, but not only.
Sandra, Call Operator: The next question comes from Thibaut Beauterand from Morgan Stanley. Please go ahead.
Yes, thank you. My question is just on tariffs and the CapEx announcements in the U.S. by large pharma players. Clearly, there is a push from the U.S. administration to bring more manufacturing to the U.S. Did you have a discussion with the administration and confirmation that investing through CDMOs such as Lonza meets the administration goals for locating manufacturing in the U.S.? It would make sense that it does, but just wondering if you had an explicit confirmation that it would fit what they’re looking for.
Philippe Deecke, CFO, Lonza Group AG: Yes, thanks, Thibaut. I think there are multiple discussions happening with the U.S. government. Certainly, pharma companies are talking directly. The Swiss government is talking directly. We also have contacts that we use. I wouldn’t go into more details of what’s happening in these discussions until there’s a result. This would be premature. I think we’ll wait until something is official and is being communicated. Overall, I reiterate that also we at Lonza are investing significantly in the U.S. Of course, if you compare this with the numbers of big pharma, this is a different magnitude. I think as an industry leader, we are investing significantly in the U.S. in multiple sites. You know of our investments in Portsmouth. Of course, you know of our large investment in California and Vacaville. There are other sites that are seeing further investments.
I think we feel very confident to also here be very much in line with the intention of the government, but more importantly, the intention of our customers to have capacity and strong capacity in the U.S. We will continue to offer increased capacity in the U.S., and if our pharma customers can leverage this, then even better. In any case, having a footprint in the U.S. is helpful to our customers.
Sandra, Call Operator: The next question comes from Odysseas Manesiotis from BNP Paribas. Please go ahead.
Hi. Thanks for taking my questions. First one is, Philippe, I wanted to follow up on the detail you provided on the contracting between Vacaville or bioreactors. Is it fair to interpret the details you provided there as that you’ve landed in these four contracts? At least one of them has to do with the 25,000L. On top of that, within these four contracts, you also have contracts for more than one bioreactor. That’s the first one. Secondly, could you remind us the pace of the new VISP mammalian capacity ramp? Is this still expected to run at full utilization by 2028, 2029? Has there been any plans changed given the recent push to reshore capacity in the U.S.? Thanks.
Philippe Deecke, CFO, Lonza Group AG: Yes. Let me reconfirm what I wanted to say just before on the Vacaville contract. Indeed, I think we have been able to contract for both assets, for the 25,000L and for the 12,000L. I think there’s a different mix in the contracts. I’m not sure I understand what you meant with contracts for more than one reactor. I can confirm that the new contracts that we have signed are involving both 25,000L and 12,000L assets. On our VISP large-scale mammalian facility, we mentioned a while back how the profile of such large-scale facilities looks. Indeed, it usually takes two to three years also to ramp. Since we started late this year, you can do the math as to when we would expect utilization to be high and contributing favorably to our bottom line, to our margins. This asset is a typical large-scale asset that will follow this path.
Everything is in line. We started GMP processing this quarter. Progress is in line with our plans.
Sandra, Call Operator: The next question comes from Max Schmock from William Blair. Please go ahead.
Good evening. Thanks for taking our questions. Maybe just a quick one here on Vacaville. I appreciate the fact that revenue is going to be flat next year in 2026. In the past, you’ve talked about margins at that facility ramping up as you replace some of that Roche revenue with additional third-party customers. Can you just talk about how you expect Vacaville margins specifically to trend next year?
Philippe Deecke, CFO, Lonza Group AG: Yes, Max. I think on Vacaville, again, we said two things. One, I think revenue will be more or less flat to 2028, and margins will progress over time to basically be neutral to group by 2028. I think this continues to hold true. I think margins this year were a bit better or better than we expected, as we mentioned in our first half call. This was also an easier year. 2025 was an easier year for Vacaville since they were basically continuing to produce the products that they knew from before for Roche with not a lot of new tech transfers to do, etc.
2026 will be a more challenging year for Vacaville because they have not only the implementation or the execution of the CapEx investments to do, but they also need to start to onboard and tech transfer new programs while still delivering the batches for Roche. It is a more complex year. Nevertheless, I think we believe that our goal for 2028 is confirmed, and we’ll have to see closer to next year how the margin exactly behaves versus what they do this year. I think we had before the question from Charles around the dilutive effect in terms of growth for the company. In terms of growth, yes, this is a dilution. In terms of margin, we’ll have to see if we can replicate this year’s margin or not.
Got it.
The progression over the next three years is confirmed.
Sandra, Call Operator: The next question comes from Falco Friedrich from Deutsche Bank. Please go ahead.
Thank you. My question is on your Cell and Gene Therapies business. Now that we are in the middle of your fourth quarter, can you speak a little bit more about your level of visibility into this year-end pickup and what exactly is driving that?
Philippe Deecke, CFO, Lonza Group AG: Yeah. I think if you talk only about the Cell and Gene Therapies business, I think there we mentioned each one that we had also operation issues. I think remember this is a much more manual and very complex manufacturing process. There, I think we see improvement in the second half, and that business certainly improved versus the first half. I think we’re still managing the complexities. Overall, for the year, we don’t expect this to be as good of a year as we had in 2024. If you talk about Specialized Modalities as a platform, I think there also we saw better performance in the third quarter. We remain with several customer decisions and customer projects that are happening late this year in Q4. These are the ones that could still move between 2025 and 2026. This we will only know probably late this year.
Microbial, which is the second large business in this platform, is performing well and is usually a very stable and strong business. We explained the first half in our July call with mainly a very high base and some construction in our assets in Microbial. Otherwise, this is a kind of a stable and nice business. Overall, we see Specialized Modalities better in the second half, but for the full year, certainly, it would be difficult to offset what happened in the first half.
Sandra, Call Operator: The next question comes from Sebastian Bray from Berenberg. Please go ahead.
Hello. Good afternoon, and thank you for taking my question. It’s on the early-stage fraction of the portfolio. It was mentioned earlier in the call that it looks relatively robust, at least on a few months’ view. How far does the visibility extend in this area? If conventional biotech funding measures, which suggest that this business faces a funding squeeze in 2026, are no longer a reliable guide, where is the money for these end customers coming from? When they go and sign the contract and if research funding is not there anymore, where is it coming from instead? Thank you.
Philippe Deecke, CFO, Lonza Group AG: Sebastian, let me first reconfirm what you said very quickly. I think the early-stage business is strategic for us because it allows us to look very early into the pipeline of pharma companies as to what services and technologies will be needed in the future and also contributes clearly to our future commercial utilization. I think this is an important business for us. This is not a very large business for us given the sizable commercial contracts and commercial assets that we have. This early-stage work is about 10% of our CDMO revenues. Also for us, the funding in biotech is only a portion of what drives this early-stage work for us because many of our customers do not require external funding. This can be large pharma, large biotechs, mid-sized companies that have their own revenue and own funding.
Only a portion of these 10% is actually really relying on external funding, being from IPOs, follow-ons, venture capital, etc. I think what we wanted to make clear is that the funding levels that we’ve seen today, and I come to this in a second, will not play a major role in the Lonza Group AG performance. We have visibility of roughly six to nine months in that business. That’s usually the delta that you see between any movement of funding and then these smaller companies relying on funding being able to deploy the capital they received or having to reduce their spending because of the lack of funding. This is usually the visibility that we have. For now, we would see roughly into the first half of 2026. For there, I think we see good levels of utilization, certainly for 2025 and early 2026.
The inquiries that we’re seeing have reduced slightly throughout 2025, but not dramatically. On the funding side, actually, it’s good news. Q3 was actually better than Q3 last year. This is not only bad news there. We saw a great increase in PIPE funding, which is one of the other mechanisms for these companies to get money. VC, I think, was holding well at a similar level as the previous quarter. This is still something that’s volatile, but the decline that you’ve seen since early 2025 at least has been put on hold for Q3. That’s at least what we see, but that’s probably the same data that you are all looking at. I would say we’re happy with the progress certainly in 2025.
We’re confident that we can manage 2026 and that we will continue to see interest for early-stage work to then be retained within the Lonza Group AG networks over the years to come.
Sandra, Call Operator: Ladies and gentlemen, this concludes today’s question and answer session. I would now like to turn the conference back over to Philippe Deecke for any closing remarks.
Philippe Deecke, CFO, Lonza Group AG: Thank you, everybody, for the question and the interest in Lonza. Again, a strong Q3 and confirming our outlook for this year. I think good news from our end, and I wish you a great end of your day. Talk to you in January.
Sandra, Call Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing CORUS Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
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