Lonza talks recovery, CAPEX, and BIOSECURE as it eyes 2024 growth

While the contract development and manufacturing organization (CDMO) does not release quarterly numbers, the firm reported flat year-on-year sales with slightly high EBITDA.

During its Q1 call, Lonza CEO Albert Baehny highlighted the return to normalization aligning with the firm’s full year trajectory with solid sales expected in the second half of 2024.

“Biotech funding challenges have impacted the number of early-stage customer signings, but we are seeing signs of recovery. There is good momentum across the biologics division despite a slower start in Q1 which was impacted by high deliveries. However, we should note that these early signs of recovery may take six to nine months to impact our revenues,” said Baehny.

“[The] funding environment has started to improve from Q4 of 2023 and continues to improve in Q1 2024, with a very high level of funding at around $23 billion. Nevertheless, we see that biotech customers are more cautious about spending their cash at hand.”

While the CDMO reported a soft Q1 group performance, the CEO emphasized cost discipline and increasing production capacity to align with its outlook for 2024. This includes continued capital expenditure (CAPEX) projects in Visp, and Stein (both Switzerland), and the recent planned acquisition of the Vacaville, California facility from Roche’s Genentech.

“We're on track with the construction of our large-scale commercial drug product facility [and] are on track to commence operations with our large-scale mammalian drug substance plants,” said Baehny.

“Vacaville is a large-scale facility, and going through the due diligence process made us confident that there's enough demand in the market for us to ultimately utilize the site. We have capacity [to be] able to produce high-quality drugs in the US, and this is a big selling proposition that we have once we close the deal,” added Philippe Deecke, CFO of Lonza.

Lonza acquired the large-scale biologics manufacturing facility in Vacaville in March 2024 for $1.2 billion and plans to invest $561 million to renew the facility and increase capabilities once the deal closes.

BIOSECURE Act and Lonza

During the call, Lonza was asked if it is upping capacity to meet rising demand due to a potential capacity vacuum created by the US BIOSECURE Act.

The Act, if passed, is likely to give US biopharma firms until 2032 to sever ties with Chinese suppliers and names rival CDMO WuXi Biologics among the companies of concern.

Deecke denied claims of “stealing business away from others” in light of recent expansions and acquisitions. Furthermore, the firm’s stance on the Act is “highly uncertain and speculative,” he confirmed.

Baehny, meanwhile, added: “There is a lot of noise in general. The implementation of the Act remains unknown and uncertain. And in this context, we are not willing to speculate and are not prepared to determine the magnitude and the timing of any potential impact on our business. It means that there is no BIOSECURE Act top line impact in our guidance today.”

Introduced in January 2024 by the bipartisan Select Committee on the Chinese Communist Party, the updated version clearly states after 60 days of the Act passing US firms would be unable to “procure, obtain, or use any biotechnology equipment or services produced or provided by a biotechnology company of concern,” or extend or renew a contract with one of the named companies.