Lonza cites biotech funding slowdown as it lowers sales outlook for the year

Contract manufacturer Lonza tempered its sales outlook for the rest of the year due in part to lower-than-expected growth in the services it provides to biotechs amid a slowdown in funding.

Lonza on Friday reported sales of CHF 3.1 billion ($3.5 billion) in the first half of the year, up 3.2% compared to CHF 2.98 billion ($3.4 billion) in the first half of last year. The company attributed the growth to its commercial CDMO services, its biologics division and small molecule production. But sales were also challenged by a decline in demand for nutraceutical capsules and “biotech funding constraints” that negatively affected its early-stage business.

Philippe Deecke

“Cell and gene technologies was impacted by weak demand due to the current biotech funding environment and some clinical-stage customer failures,” Lonza CFO Philippe Deecke said Friday during a call with analysts.

CEO Pierre-Alain Ruffieux said the waning demand in nutraceutical capsules is the result of “customers destocking post-Covid alongside a slowdown in end-consumer demand” in the current economy.

Lonza now expects annual sales in the “mid-to-high single-digit” range. It previously said it expects sales in the “high single-digit(s)” for the year.

Lonza’s stock price fell 10% on Friday morning after sharing its financial results.

Pierre-Alain Ruffieux

As for the second half of the year, Ruffieux said Lonza will focus on “the ramping-up of new commercial assets and optimizing all capacity with the focus on the early-stage business.”

“Looking more widely at our business, we are well-placed for success with the leading commercial offering and continuing commitment to growth,” he said.

Lonza had an active first half, announcing two major deals. It paid around $107 million (€100 million) in cash to acquire Dutch biotech Synaffix and expand its antibody-drug conjugate offerings, and it inked a deal with Vertex to build a facility in New Hampshire to manufacture the company’s experimental type 1 diabetes cell therapies.

biologics
biotech