Key points from this report:
- Buy Lonza. The stock broke out of a 15-week cup-with-handle base in heavy volume.
- Leading position in biologics outsourcing. Lonza is the global leader in biologics outsourcing with 7% share. It has announced a $940M expansion plan for its next-generation mammalian manufacturing facilities for biologics.
- Capacity expansion for COVID-19 vaccine. The company has expanded its partnership with Moderna (MRNA) to increase COVID-19 vaccine production. Consensus expects $275M+ (5% of the total expected revenue) from vaccine production in 2022.
- Biogen. Aduhelm, Biogen’s Alzheimer’s drug, was approved by the FDA this week. This drug requires a high dosage which has led to speculation that Lonza may be involved with production given few companies can handle the capacity required. There is nothing confirmed yet, though a partnership makes sense.
- Lonza to become a pure-play CDMO. The company has divested its specialty ingredients (27% of total revenue) business to private equity players for $4.7B. The divestment will enable Lonza to be a leading pure-play pharma and biotech-focused CDMO partner.
- Double-digit growth through 2023. The company is set to outpace market growth with the company expecting low double-digit revenue growth through 2023, at a core EBITDA margin of 33-35%.
- Next catalyst: The company will announce H1 results on July 23.