Lonza Can Meet Targets Without Covid Vaccine Deal, CEO Says

(Bloomberg) --

Drugmaker and ingredient supplier Lonza Group AG said it can meet its mid-term sales growth targets even excluding contracts to produce Covid-19 vaccines for Moderna Inc.

Lonza added more than 2,000 employees last year, including staff at facilities in Visp, Switzerland, focused on ramping up production under a 10-year agreement with Moderna in which volume depends on future demand. 

The size of that contract will depend on how the pandemic progresses and the use of boosters, Lonza Chief Executive Officer Pierre-Alain Ruffieux said on a conference call Wednesday. 

“While we are very happy with the business we are doing with Moderna and are so proud to contribute to the fight against the pandemic, we don’t need Moderna to achieve our mid-term guidance,” he said.

Lonza reported 2021 results Wednesday with sales rising 20% to 5.4 billion francs ($5.9 billion) beating analysts’ estimates. Adjusted earnings reached 1.7 billion francs.

The company expects “low to mid-teens” percentage sales growth at constant exchange rates in 2022 and reiterated mid-term guidance to 2024 of mid-teens sales growth and core Ebitda margins of between 33% to 35%.

Still, the shares were 3% lower at 588.80 francs at 1:47 p.m. in Zurich on Wednesday, a fourth day of declines. 

The company said margin growth was impacted in the second half of the year by investments and an unfavorable product mix, but should improve this year.

Lonza Continues Losing Streak; Analysts Note Pressure on Margins

Ruffieux said Lonza will bring on three more production lines for Moderna’s Spikevax vaccine in Visp in the first quarter of 2022 after adding three in Switzerland last year and another line at a production facility in the Netherlands.

The collaboration with Moderna also includes different products in development in addition to Lonza’s ramp-up of production of messenger RNA vaccines. It could lead to more deals with other customers developing products using the nascent technology, the CEO said.

“We are all happy if the pandemic will come to an end, hopefully during this year,” Ruffieux said. Still, he said the virus isn’t going away. “The future will tell us what will be the need for boosters or vaccinations.”  

Lonza executives on the conference call wouldn’t disclose vaccine production numbers or what percentage of sales the Moderna supply contract accounted for in Lonza’s results. 

The company hired more than 1,400 employees in Switzerland last year in what Ruffieux said was “quite a tight market” for hires. It now has about 4,000 full-time staff in Visp. 

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