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Financials

UPDATE 1-Lonza shores up investment budget to capitalise on biotech boom

(Releads on investments)

ZURICH, Oct 12 (Reuters) - Swiss drug contract manufacturer Lonza is boosting investments in production sites over the next few years, banking on growth in new mRNA vaccines and on medical advances against diseases such as COVID-19 and cancer.

The company reaffirmed that capital expenditures this year would rise to about 25% of sales, or more than 1 billion Swiss francs ($1.1 billion), up from 16.5% in 2019, adding that this would “remain elevated at current levels for the next few years”.

Not before 2025 would the rate of investment over sales return to a “high-teens” percentage, it added.

“Lonza is accelerating its de-risked long-term investment program to ensure it can capture increasing market demand and capitalize on future opportunities,” said the company, which is holding a capital markets day on Tuesday.

Growth drivers include therapeutics made from bioengineered living cells, cell and gene therapy and cancer drugs known as ADCs that combine antibody proteins with chemotherapeutic chemicals, it said.

Its fastest growing site is in Visp, Switzerland, where Lonza is investing to produce mRNA vaccines for Moderna , among other projects.

Sales would grow by a “low-teens” percentage per year through 2024, adjusted for currency swings. It had previously predicted double-digit sales growth through 2023.

Lonza, whose clients include biotech firm Genmab, pharma giants Roche and AstraZeneca, said it was still targeting medium-term margin of adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) over sales of 33%-35%. The margin was 33.4% last year.

In its capital markets day presentation here posted on its website, the group also said it plans to keep paying a dividend of 25-40% of net income. It saw no extraordinary return of capital after a major divestment in July. ($1 = 0.9278 Swiss francs) (Reporting by Michael Shields and Ludwig Burger, editing by Ed Osmond)

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