The author is an analyst for NH Investment & Securities. He can be reached at pk.park@nhqv.com -- Ed.
Lonza presents disappointing earnings guidance at Capital Markets Day event
At its Capital Markets Day event on Oct 17 (local time), Samsung Biologics’ peer Lonza presented its mid/long-term growth projection. As the first such event following the resignation of the firm’s CEO in September, the event drew intense attention.
Lonza presented a 2024E EBITDA margin of 25% in light of an expiring contract with Moderna for Covid-19 vaccines. During its 1H23 earnings conference, the firm slashed 2023E core EBITDA margin guidance from 30~31% to 28~29%. With the company booking a 30% margin for 1H23, the market predicted a steep margin decline (to 26~27%) in 2H23, and its share price dropped sharply following the earnings call.
Despite the completion of Lonza’s Covid-19 vaccine contract with Moderna, the market was disappointed at its EBITDA margin guidance of 25%, as the figure is below its 2H23E level.
At the Capital Markets Day, Lonza also announced a 2024~2028 sales CAGR target of 11~13% and 2028 core EBITDA margin of 32~34%. As the figures are 8% and 10% below 2028 sales and EBITDA margin consensus, respectively, the market was further disappointed, sending Lonza’s share price down by 16% on Oct 17.
Samsung Biologics unaffected by Lonza’s sluggish earnings
No relevance to Samsung Biologics: Lonza’s likely sluggish earnings next year is mainly due to the end of its Covid-19 contract with Moderna, an event that signals no signs of an industry-wide slowdown. Indeed, at the Morgan Stanley Global Healthcare Conference 2023 in September, Thermo Fisher commented that it expects virtually no sales generation next year from the production of Covid-19 vaccines and drugs (vs US$1.2bn in 2022 and US$500mn in 2023).
Biologics division to fare well: Lonza’s guidance for its mid/long-term growth (11~13%) slightly fell short of expectations. That said, the company suggested hopeful guidance for the biologics business, including antibody drugs—the mid-10% mid/long-term sales growth is higher than the market average, and core EBITDA margin of 35%, while lower than that for Samsung Biologics, is higher than that for Lonza’s other businesses.