Lonza to exit capsule business

Wolfgang Wienand, who joined Lonza as CEO in July, has begun to put his stamp on the Swiss drug services company.

Lonza announced at an investor event that it plans to divest its Capsules and Health Ingredients (CHI) business. Although the segment is profitable, it no longer fits with Lonza’s core business as a contract development and manufacturing organization (CDMO), the company says in a presentation shared at the event. Sales in the CHI business fell 9.2% in the first half of 2024 to about $600 million.

The company got into the capsule business in 2017 when it acquired Capsugel, a manufacturer of gelatin capsules, from the investment firm Kohlberg Kravis Roberts for $5.5 billion.

Stock analysts at the investment firm William Blair say in a note to investors that the plan to divest CHI and other business restructuring “creates some moving parts in the near term, but it also rids Lonza of the main drag on the story over the last year or more and creates a much cleaner and more compelling pure-play CDMO story.”

Lonza also revealed at the event that it will streamline its CDMO businesses into three platforms: Integrated Biologics, Advanced Synthesis, and Specialized Modalities.

The Integrated Biologics platform will include the company’s mammalian and finished drug product services. The Advanced Synthesis segment will harbor small-molecule and bioconjugate manufacturing. Specialized Modalities will span cell and gene technologies, messenger RNA, and microbial and bioscience technologies.

Lonza’s stock price rose after the investor presentation. Sebastian Bray, a stock analyst at Berenberg Bank, says he thinks the shares rallied because executives disclosed that the company’s biologics business is doing better than was anticipated early in the year. “Moreover, the proceeds from the divestment of slower-growing capsules unit could be reinvested in the faster-growing biologics,” Bray says.