Profit warning punished by stock market: Lonza boss Baehny admits mistakes

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The corona pandemic was a profitable side hustle for the Basel-based pharmaceutical supplier. In the last financial year, Lonza generated sales of 6.22 billion francs thanks to an order for Moderna’s vaccine. As Lonza CFO Philippe Deecke explained at today’s investor day, the Moderna order contributed nearly half a billion francs.

But the pandemic ended and Moderna canceled Lonza’s vaccine production order at Visp VS. Lonza now wants to negotiate compensation of around 200 million francs as compensation for the early termination of the contract.

Profit warning caught investors off guard

Still, Moderna’s jump is a problem for the company. Lonza was forced to cut its 2024 earnings forecast for the second time in three months today. Following the dismissal of Chairman Albert Baehny and also CEO Pierre-Alain Ruffieux, the interim CEO scared investors with a profit warning for 2023 and significantly lowered growth targets for the next two years.

The stock market immediately punished this: By mid-afternoon shares were down more than 16 percent at 356 francs. At the height of the “corona boom” the price of newspapers was still 785 francs; This was more than twice as much.

The 2024 “transition year” promised by Lonza intimidated investors. Various special effects mean operating margins will be in the “high 20 percent range” for the coming years, rather than in the 32 to 34 percent range as promised.

CEO loss and poor prospects

The loss of a CEO at the company may also have played a role. Long-time boss Richard Ridinger left at the beginning of 2019, Marc Funk left just nine months later and Ruffieux four weeks ago. Baehny practiced “self-criticism with reservations” and explained: “We had made mistakes twice in the past. We thought that a good COO could also be a good CEO.”

At the same time, the environment has deteriorated significantly after the “Corona boom”, when almost unlimited money was flowing into pharmaceutical research. Rising interest rates, in particular, are slowing down many research-based companies. Biotech startups can no longer easily get money to fund new projects. Therefore, potential large customers need to limit themselves.

And consumers’ wallets aren’t so loose anymore. Lonza feels this with its capsules for nutritional supplements.

We are growing even without Moderna

As the world’s leading contract manufacturer and developer for the pharmaceutical industry (CDMO), Lonza continues to focus on growth. To achieve this, the company has invested billions in expanding its capabilities in recent years. Lonza targets sales growth of 11 to 13 percent in local currency between 2024 and 2028. This is only slightly less than the 15 percent increase in 2022. According to Lonza management, CDMOs are becoming increasingly important for the successful development of drugs. (SDA/rae)

Source :Blick