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Lonza Group (LZAGY)
OTHER OTC:LZAGY
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Lonza Group
(OTC:LZAGY)
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Rating:61Neutral
Price Target:
$72.00
▲(7.93% Upside)
Action:ReiteratedDate:01/31/26
The score is driven by solid profitability and a notably upbeat earnings outlook (strong 2026 growth and margin guidance), partly offset by weak cash conversion/negative free cash flow in the financial statements and a demanding valuation; technical indicators are mixed and do not add strong support.
Positive Factors
CDMO revenue growth and contracting visibility
Sustained, high single‑ to double‑digit CDMO growth and a commercial contracting pipeline above CHF 10bn provide multi‑year revenue visibility. Long-term contracts and Vacaville integration deepen customer ties, reducing demand cyclicality and supporting durable top‑line expansion.
Margin expansion and high‑margin platforms
Improving CORE EBITDA margins, driven by scale and high‑profit platforms (ADS >40% margins), indicate sustainable operational leverage. If maintained, higher margins support stronger cash generation and reinvestment capacity, enhancing competitive positioning in outsourced biologics and synthesis.
Robust balance sheet and improving cash generation
A solid equity base and moderate leverage give Lonza financial flexibility to fund growth projects and absorb shocks. Combined with material FCF improvement in 2025, this supports disciplined capital allocation, continued investment in capacity, and resilience through biotech cycle variability.
Negative Factors
CapEx intensity and negative free cash flow pressure
Heavy capex for 23 growth projects and elevated CDMO spending (CHF 1.3bn in 2025) has driven negative free cash flow historically. Persistently high investment needs can constrain distributable cash, increase financing reliance, and delay realization of returns from new capacity.
Operational issues in Specialized Modalities (Cell & Gene)
Execution reliability in specialized modalities is critical for CDMO reputation and contract retention. Site operational failures in Cell & Gene highlight execution risk that can disrupt customer timelines, delay revenue recognition, and weaken long‑term trust in high‑value, capacity‑constrained services.
Inconsistent revenue trends and rising liabilities
Despite a strong 2025, revenue growth has been uneven and net income lags prior peaks, while total liabilities have increased. Persistent inconsistency and higher liabilities could pressure margins and ROE over time, reducing financial flexibility and complicating capital allocation choices.
Lonza Group (LZAGY) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$45.31B
Dividend Yield0.63%
Average Volume (3M)5.62K
Price to Earnings (P/E)39.3
Beta (1Y)0.69
Revenue Growth8.41%
EPS Growth33.09%
CountryUS
Employees17,995
SectorHealthcare
Sector Strength45
IndustryMedical - Diagnostics & Research
Share Statistics
EPS (TTM)1.12
Shares Outstanding702,290,200
10 Day Avg. Volume0
30 Day Avg. Volume5,617
Financial Highlights & Ratios
PEG Ratio0.74
Price to Book (P/B)4.09
Price to Sales (P/S)5.71
P/FCF Ratio-191.57
Enterprise Value/Market Cap0.89
Enterprise Value/Revenue6.18
Enterprise Value/Gross Profit17.47
Enterprise Value/Ebitda30.79
Forecast
1Y Price TargetN/A
Price Target UpsideN/A
Rating ConsensusModerate Buy
Number of Analyst Covering1
EPS Forecast (FY)2.32
Revenue Forecast (FY)$9.34B
Lonza Group Business Overview & Revenue Model
Company DescriptionLonza Group AG, together with its subsidiaries, supplies various products and services for pharmaceutical, biotech, and nutrition markets in Europe, North and Central America, Latin America, Asia, Australia and New Zealand, and internationally. It operates through Biologics, Small Molecules, Cell & Gene, and Capsules & Health Ingredients segments. The Biologics segment engages in the contract development and manufacturing of biopharmaceuticals for clinical and commercial manufacturing needs throughout the product lifecycle, including drug substance and drug product manufacturing. The Small Molecules segment operates as an integrated development and manufacturing service provider for small molecule drug substances and their intermediates. It supports customers across various aspects of design, development, and manufacturing. The Cell & Gene segment develops technologies and platforms that industrialize the manufacturing processes and production of cell and gene therapies. It also offers contract development and manufacturing services, and regulatory support for a range of allogeneic and autologous cell therapies, and exosome-based therapies, as well as viral vector gene therapies. In addition, this segment provides specialty raw materials and enabling technology solutions in cell and gene therapy, injectable drugs, vaccines, and bio-manufacturing markets. The Capsules & Health Ingredients segment offers capsules, dosage form solutions, and health ingredients for pharmaceutical and nutraceutical customers. The company was founded in 1897 and is headquartered in Basel, Switzerland.
How the Company Makes MoneyLonza generates revenue primarily through its contract development and manufacturing services (CDMO) for the pharmaceutical and biotech industries, which includes the production of APIs and biologics. The company also earns significant income from its Specialty Ingredients segment, which provides specialty chemicals and formulations for health and nutrition, personal care, and agriculture. Key revenue streams include long-term contracts with pharmaceutical companies for custom manufacturing and development services, as well as sales of specialty chemical products. Additionally, strategic partnerships with biotech firms enhance Lonza's market position and capabilities, contributing to stable and growing revenue streams.
Lonza Group Earnings Call Summary
Earnings Call Date:Jan 28, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:Jul 29, 2026
Earnings Call Sentiment Positive
The call communicated a strong operational and financial performance for FY2025 with robust revenue growth (+21.7% ccy), margin expansion (CORE EBITDA 31.6%, +1.4pp) and material free cash flow improvement. Management provided clear evidence of successful Vacaville integration, high contracting activity, and an optimistic 2026 outlook (11%–12% ccy growth and margin above 32%). Key challenges include softness in Specialized Modalities (notably Cell & Gene operational issues), mix-related dilution in Integrated Biologics, FX headwinds and continued high but normalizing CapEx and working capital requirements. On balance, the positive metrics, guidance upgrade to earlier-than-expected margin corridor, strong cash generation and successful integration evidence significantly outweigh the operational and market risks noted.Q4-2025 Updates
Positive Updates
Strong Revenue Growth
Continuing Lonza CDMO sales of CHF 6.5 billion in FY2025, up CHF 1.0 billion versus FY2024 and +21.7% in constant currency, ahead of upgraded guidance of 20%–21%.
Expanded Profitability and Margin Expansion
CORE EBITDA margin increased to 31.6%, up 1.4 percentage points versus prior year and ahead of the guided 30%–31% range; management expects margin >32% in 2026 and entry into the 32%–34% corridor earlier than previously forecast.
Vacaville Acquisition Performing Above Expectations
Vacaville contributed roughly CHF 0.6 billion of sales in 2025 (above the CHF 0.5 billion forecast); post-merger integration completed mid-2025; first FDA inspection under new ownership resulted in only minor observations that were closed quickly.
Strong Contracting Pipeline
Commercial contracting well above CHF 10 billion signed in 2025, supporting multi-year revenue visibility; Vacaville already has five significant long-term contracts and additional late-stage negotiations.
High-Performing Platforms and Notable ADS Performance
Advanced Synthesis (ADS) grew ~22% organically in 2025 with exceptional profitability (margins above 40%, reported ~42%); Integrated Biologics grew ~32% supported by Vacaville contribution.
CapEx and Growth Project Footprint
Lonza executed 23 large growth CapEx projects worth CHF 7 billion (90% commercial, 100% in Europe and the U.S.); CDMO CapEx spend in 2025 was ~CHF 1.3 billion with peak CapEx behind and normalization to high teens expected.
Improved Cash Generation
Continuing-business free cash flow of CHF 545 million in 2025, almost double 2024; trade working capital increased by CHF 200 million but trade working capital as a percent of sales declined by ~5 percentage points and inventory coverage fell by almost one week.
Progress on ESG and Corporate Governance
GHG emission intensity and waste intensity targets achieved 5 years ahead of schedule; renewable electricity across U.S., Europe and China as of January 2026; awarded EcoVadis Gold and named by Ethisphere as one of the world’s most ethical companies.
Shareholder Returns and Capital Allocation
Board proposed a 25% dividend increase to CHF 5 per share; capital allocation priorities reiterated (maintenance/infrastructure, progressive dividend, disciplined discretionary investments including bolt-on M&A).
Positive Market Positioning and Long-term Growth Model
Management reiterated low-teens selected market growth opportunity (10%–13%) for Lonza, driven by market growth (6%–7%), outsourcing tailwinds (1%–2%), active market selection (1%–2%) and Lonza Engine advantage (2%–3%), plus stated ability to outgrow market.
Negative Updates
Specialized Modalities Softness
Specialized Modalities (including Cell & Gene and microbial) underperformed in 2025 with platform revenue down ~3%; Cell & Gene experienced operational issues that constrained performance during the year.
Operational Issues in Cell & Gene
Operational challenges at a Cell & Gene site in 2025 held back growth; management indicated issues are resolved and expects improved performance in 2026 but did not quantify the drag.
Unfavorable Mix and Growth-Project Dilution in Integrated Biologics
Integrated Biologics showed margin dilution: platform grew ~32% (partly from Vacaville) but experienced a slight margin decline of 0.9 percentage points driven by unfavorable product mix and the dilutionary effect of new growth projects.
FX Headwinds and Volatility
Foreign exchange weakness (notably a weaker USD in early 2025) created an approximately 2.5 percentage point negative impact on both top-line and bottom-line results; management hedging mitigates but volatility remains a risk to 2026 guidance.
Working Capital and CapEx Intensity
Although trade working capital as a percent of sales improved, trade working capital increased by CHF 200 million and CapEx remains sizeable (CHF 1.3 billion in CDMO 2025), with continued material spend required for growth projects (23 projects valued at CHF 7 billion).
Uncertainty on CHI Exit Proceeds
CHI is being reported as discontinued operations and the exit process is advancing, but proceeds are not guaranteed and future capital allocation plans note uncertainty about CHI proceeds.
Company Guidance
Management guided 2026 for continued strong, profitable growth: constant‑currency sales growth of 11–12% and CORE EBITDA margin expanding to a level well above 32% (entering the 32–34% corridor two years ahead of prior expectations). They expect 2026 CapEx to be in the high‑teens % of sales (mid‑ to high‑teens over the midterm) after 2025 CDMO CapEx of CHF 1.3bn (19.6% of sales) and CHF 7bn of active growth projects across 23 programs; free cash flow momentum should continue after CHF 545m of CDMO FCF in 2025 (nearly double 2024). Other metrics/assumptions: Vacaville contributed ~CHF 0.6bn in 2025 and should broadly substitute Roche volumes through 2028, contracting exceeded CHF 10bn in 2025, trade working capital fell ~5 percentage points and inventory cover dropped ~1 week, and management assumes an FX headwind of roughly 2% for the 2026 guide (mid‑January rates basis).Lonza Group Financial Statement Overview
Summary
Profitability is solid with improved margins and higher earnings, and leverage remains manageable, but cash generation is a major concern given weak operating cash conversion and persistently negative free cash flow.Income Statement
Profitability is solid and has improved in the latest year: 2025 revenue was down ~12%, but margins strengthened (gross margin ~37%, operating margin ~20%, net margin ~15%) and net income rose versus 2024. That said, growth has turned negative after earlier expansion (2022–2023), and profitability remains below the peak levels seen in 2021–2022, indicating a less favorable top-line trajectory despite better cost control.72
Positive
Balance Sheet
Leverage looks manageable with equity still sizable, but the balance sheet has become more debt-heavy versus the 2022–2023 period. Debt relative to equity increased to ~0.46 in 2025 (improving from ~0.55 in 2024 but above ~0.24–0.33 in 2022–2023). Returns on shareholder capital improved to ~10% in 2025 from ~7% in 2023–2024, yet remain below the unusually strong 2021 level, suggesting decent but not exceptional balance-sheet-driven efficiency.67
Positive
Cash Flow
Cash conversion is the main weak spot. Operating cash flow is positive, but it is consistently low relative to reported earnings (about 0.31–0.51x across the period, and ~0.31x in 2025). Free cash flow is negative in every year since 2021, including 2025, and also negative relative to net income, indicating ongoing reinvestment or working-capital pressure that is limiting cash available for debt reduction, buybacks, or dividends.38
Negative
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 6.53B | 6.57B | 6.72B | 6.22B | 5.41B |
| Gross Profit | 2.31B | 2.16B | 1.95B | 2.44B | 2.11B |
| EBITDA | 1.31B | 1.54B | 1.53B | 1.98B | 1.31B |
| Net Income | 949.00M | 636.00M | 654.00M | 1.22B | 2.94B |
Balance Sheet | |||||
| Total Assets | 18.97B | 19.73B | 16.85B | 17.36B | 16.46B |
| Cash, Cash Equivalents and Short-Term Investments | 719.00M | 1.71B | 1.67B | 2.22B | 3.18B |
| Total Debt | 4.18B | 5.12B | 3.13B | 2.59B | 2.75B |
| Total Liabilities | 9.78B | 10.35B | 7.34B | 6.69B | 6.64B |
| Stockholders Equity | 9.13B | 9.33B | 9.45B | 10.60B | 9.75B |
Cash Flow | |||||
| Free Cash Flow | -194.83M | -143.00M | -263.00M | -833.00M | -126.00M |
| Operating Cash Flow | 1.12B | 1.27B | 1.39B | 1.04B | 1.22B |
| Investing Cash Flow | -699.09M | -2.92B | -1.10B | -991.00M | 1.02B |
| Financing Cash Flow | -721.06M | 1.28B | -152.00M | -286.00M | -1.28B |
Lonza Group Technical Analysis
Negative
66.71
Price Trends
68.45
Negative
68.19
Negative
68.85
Negative
Market Momentum
-0.18
Positive
41.47
Neutral
42.58
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For LZAGY, the sentiment is Negative. The current price of 66.71 is below the 20-day moving average (MA) of 67.69, below the 50-day MA of 68.45, and below the 200-day MA of 68.85, indicating a bearish trend. The MACD of -0.18 indicates Positive momentum. The RSI at 41.47 is Neutral, neither overbought nor oversold. The STOCH value of 42.58 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for LZAGY.
Lonza Group Peers Comparison
UnderperformOutperform
Sector (51)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
67 Neutral | $144.26B | 44.80 | 7.05% | 0.53% | 2.90% | -4.81% | |
66 Neutral | $26.76B | 33.06 | ― | ― | 4.77% | 7.93% | |
64 Neutral | $34.06B | 31.05 | 19.95% | 0.72% | 6.73% | 3.34% | |
61 Neutral | $45.31B | 39.33 | 7.97% | 0.63% | 8.41% | 33.09% | |
61 Neutral | $188.75B | 32.34 | 13.14% | 0.30% | 3.91% | 7.09% | |
59 Neutral | $29.52B | 22.14 | 21.64% | ― | 3.85% | -4.74% | |
51 Neutral | $7.86B | -0.30 | -43.30% | 2.27% | 22.53% | -2.21% |
* Healthcare Sector Average
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Lonza Group
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3.93%
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Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.