Lonza Group AG warned it faces another hit to earnings as the Swiss pharmaceutical supplier continues to reel from dwindling demand for Covid vaccines.
(Bloomberg) — Lonza Group AG warned it faces another hit to earnings as the Swiss pharmaceutical supplier continues to reel from dwindling demand for Covid vaccines.
The company expects 2024 margins to fall to at least 25% from above 29% this year, after Moderna Inc. scrapped its agreement for the production of Covid shots, according to a statement Tuesday ahead of its capital markets day. Lonza also provided an outlook for the 2024-2028 period that disappointed investors.
Shares dipped as much as 12% to the lowest level since March 2020, erasing about 2.9 billion Swiss francs ($3.2 billion) in market value. Lonza has halved in size since its 2021 peak during the Covid pandemic.
Today’s is the latest in a series of warnings that the company issued in recent months.
During the pandemic, Lonza expanded aggressively, adding staff in order to fulfill a supply agreement with Moderna to produce its Covid vaccine. As demand for shots waned, the Swiss company cut its earnings guidance in July, and announced in September that Moderna was terminating its agreement.
Earlier in September, Lonza’s former Chief Executive Officer Pierre-Alain Ruffieux announced he would leave at the end of the month, the third surprise CEO departure in about five years. He has been temporarily replaced by Chairman Albert M. Baehny.
Downgrades in Sight
On Tuesday, Lonza also said it sees risks of a smaller deal with Kodiak Sciences Inc. to manufacture its retinal drug, currently in clinical trial phase.
Analysts expect downgrades to come in the long term. Citigroup’s Vineet Agrawal said Lonza’s mid-term targets suggest a 7% cut to 2028 consensus sales estimates and around 10% for earnings.
Sentiment around the sector was also hit on Monday after Moderna had an extended selloff which touched a three-year low, even as the drugmaker reaffirmed its Covid-19 vaccine revenue forecast for the full year. The biotech’s decline started late Friday after rival, Pfizer Inc., slashed its profit outlook amid waning demand for Covid treatments.
Lonza sees the earnings margin rising to a range of 32% to 34% in the 2024-2028 period, with annual sales growth of as much as 13%. The company raised its dividend commitment to 35% to 45% of profits, from the previous 25%-40% range.
(Updates with context, more details, comments)
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