Lonza shares gain on plan to divest CHI unit and focus on drug development

Investing.com -- Lonza’s shares rose over 6% on Thursday following the company’s announcement of plans to divest its Capsules & Health Ingredients (CHI) unit as part of a strategy to sharpen its focus on drug development and manufacturing. 

The company said that the divestment is aligned with its "One Lonza" strategy, designed to streamline operations and enhance shareholder value. 

By exiting the CHI business, Lonza aims to concentrate resources on areas of higher therapeutic and commercial value, such as its CDMO offerings. 

The CHI unit, which has faced market challenges, will be guided toward a gradual exit by 2025. This decision is expected to benefit not only shareholders but also customers and employees, with detailed next steps to be announced later. 

While CHI's sales outlook for 2025 remains modest, the CDMO segment is projected to achieve significant growth, targeting a 20% increase in sales at constant exchange rates.

Under its new organizational structure, Lonza’s CDMO operations will be consolidated into three integrated platforms: Integrated Biologics, Advanced Synthesis, and Specialized Modalities. 

This simplification is intended to improve scalability, execution, and customer service. The full operational shift is expected by Q2 2025.

By reaffirming its dividend policy with a commitment to increase payouts year-on-year, Lonza signaled its confidence in the strategic direction. 

“In the mid-term, we think that a perpetual low teens organic growth guide makes sense at mid-to-high teens capex, although the withdrawal of a specific margin target (profit growth now to exceed revenue growth) is a shame,” said analysts at RBC.

The company’s emphasis on its CDMO core reflects a commitment to leveraging its industry reputation, long-term customer relationships, and cutting-edge technological expertise to drive sustainable growth.

Source: Investing.com