Lonza Aktie

Ladies and gentlemen, welcome to the Lonza Q1 2026 Qualitative Update Conference Call and Live Webcast. I am Sandra, the Chorus Call operator. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it is my pleasure to hand over to Philippe Deecke, CFO. Please go ahead, sir.

Thank you, Sandra. Good afternoon, and good morning to those of you joining us from the U.S. Welcome to our Q1 2026 qualitative update. Before we go into the details, please let me remind you that our qualitative updates are intended to provide you with a general business overview, and we will not be sharing figures related to our financial performance. We will do so on the 22nd of July with our half year update. All contents unless otherwise specified, refers to our CDMO business, which excludes Capsules & Health Ingredients.

I'll start with an overview of our group performance before we move to the performance of our business platforms, our business contracting and growth projects. Afterwards, I will provide you with an update on our One Lonza journey, followed by a few comments on the current macroeconomic environment before I close for the Q&A session.

Today, we reported a strong Q1 performance across our CDMO business platforms, entirely aligned with our expected full year 2026 trajectory. As already communicated in January, we confirmed that CER sales growth and CORE EBITDA margin will be notably stronger in the first half of 2026 than in the second half. This is primarily due to the prior year base, which was much stronger in H2 than in H1 as well as the following 3 drivers: Advanced Synthesis with the contribution of different growth projects and a favorable batch release phasing; second, some revenues in Specialized Modalities moving from late 2025 into the first half of 2026; and third, a strong sales contribution of Vacaville in H1 '26 due to planned shutdowns in the second half as the site drives ahead the CapEx investment program and introduces new molecules.

These drivers also positively impact core EBITDA margin in H1. Absolute sales, therefore, should be more balanced than in the past between the 2 halves of 2026. In the first quarter, we saw a strong operating performance across business platforms. We are, therefore, confirming our 2026 outlook with sales growth of 11% to 12% at constant exchange rates compared to the prior year and a further CORE EBITDA margin expansion reaching a level above 32%.

Before focusing on our CDMO CORE business, a short word about CHI, which continues to see the robust demand trends already reported in the second half of 2025. We, therefore, continue to expect mid-single-digit percentage CER sales growth as an improving core EBITDA margin. I will comment on the exit process later in my update.

Finally, finishing on the group overview, based on FX rates of early May, we anticipate a year-over-year growth headwind of around minus 3% on sales for full year 2026 with the first half being more impacted than the second due to last year's U.S. dollar trading pattern. However, our margins remain well protected through a strong natural hedge and our financial hedging program.

Moving to the performance of our business platforms. Let's start with Integrated Biologics. Integrated Biologics continues to see good momentum driven by increasing utilization with the maturing of growth projects in mammalian and drug product. We see healthy demand for our small-scale and large-scale mammalian assets, which includes Vacaville, for which we confirm our expectation to reach peak sales in the early 2030s. We also see our more mature base business as an additional growth driver in 2026. This is supported by good operational execution and a favorable mix. We are, therefore, pleased to report that Integrated Biologics is performing in line with our expectations.

Turning to our Advanced Synthesis platform. We continue to see strong growth in our Small Molecules and Bioconjugates businesses. Growth is supported by the rapid and simultaneous ramp-up of growth projects added in 2025, which are primarily contributing to growth in the first half of 2026, reaching a high level of utilization and lapping the ramp-up from last year in the second half, leading to a lower growth contribution.

Furthermore, we see a strong operating execution and an attractive product mix with Advanced Synthesis additionally benefiting in Q1 from a favorable batch release timing. We, therefore, expect stronger growth in the first half than in the second and are confident that Advanced Synthesis can continue to deliver strong margin levels in 2026.

For our Specialized Modalities platform, we are pleased to report that the business saw significant growth against the lower prior year base. This strong performance is mainly explained by our Microbial business with growth further supported by sustained momentum in Bioscience.

Cell & Gene made further progress in strengthening its operational performance and is on track for Q2 normalization. We, therefore, expect growth in 2026 to be driven by all 3 business platforms as already predicted with our business outlook for 2026.

Let me say a few words on the progress of our different CapEx projects and the business momentum that we see. Our large-scale mammalian site in Visp continued its ramp-up process with the production of different GMP batches. Commercial operations will commence in mid-2026, in line with the previously communicated time lines. Revenue growth contribution is expected to start in the second half of 2026 as part of the multiyear ramp-up of commercial output.

We also see good progress at our large-scale drug product fill and finish facility in Stein, with production expected to start in 2027, while we expect our large-scale bioconjugation site in Visp to start production latest in 2028, also in line with the latest time lines.

At our large-scale mammalian site in Vacaville, we are making good progress in upgrading the sites to increase the operational flexibility needed to operate as a CDMO site with additional upgrade measures requiring targeted shutdowns taking place in the second half of 2026. This will lead to lower sales contribution in the second half. However, on a full year basis, we confirm our expectations that sales in 2026 will be broadly in line with 2025.

Operational execution remained strong, and we have successfully transferred the first non-Roche product and produced the first GMP batches. The team is already preparing the site for the introduction of the next non-Roche product. In Q1 2026, we saw sustained business momentum across sites and technologies. We secured multiple drug substance, drug product deals, which highlights our strong offering as one of the only few CDMOs that can provide such integrated offerings.

Our Cell & Gene business signed an extended commercial manufacturing agreement for Genetix's ZYNTEGLO, further strengthening our positioning as the leading commercial Cell & Gene CDMO. Customer interest in Vacaville remains high, and we expect additional contract signings over the course of the year in addition to the 5 contracts reported to you in January 2026.

As announced in early March, we made strong progress in our One Lonza journey to become a pure-play CDMO with the announced divestment of a 60% stake in our Capsules & Health Ingredients business to Lone Star, including divestment of other non-core businesses [indiscernible] a total of 4 divestments since the announcement of our One Lonza strategy at the Investor Day in December 2024.

The remaining CDMO businesses are powered by the Lonza engine and its unique set of strengths and capabilities. With CHF 1.7 billion immediate proceeds from the CHI divestment and additional future proceeded full exit, we have significant firepower for value-creating bolt-on M&A, while maintaining our commitment to BBB+ rating.

In line with our One Lonza strategy, we are proactively building a funnel of public and private M&A opportunities, and we are confident in our ability to pursue some of these over the midterm. Focus remains on delivering capacity, technology and portfolio expansions.

To rebalance our short-term capital surplus with our balance sheet strength, with a net debt-to-EBITDA ratio below 2 today, we have decided to return CHF 500 million of surplus capital to investors through an expedited share buyback upon receipt of the upfront CHI exit proceeds at the close of the transaction. The close is expected to take place in Q3 2026.

Before closing my remarks and opening the Q&A session, let me briefly address the geopolitical developments we are observing. Against the backdrop of recent development in the Middle East, we currently do not anticipate any material financial impact on Lonza.

Supported by proactive risk management and in line with our well-established hedging policy, we have secured almost our entire energy needs for 2026 and also a sizable share of our 2027 needs. In addition, our long-term customer contracts include, as you know, price adjustments clause, providing an additional layer of protection against energy-related inflation.

Further, Lonza has no manufacturing footprint in the Middle East, sources almost no raw materials from the region and has very limited revenue and customer exposure. We can also reiterate that we expect no material financial impact on Lonza from the U.S. trade and tariff policies. This includes the outcome of the latest Section 232 investigation.

Based on our understanding of the published outcome of this investigation, we also do not anticipate that our customers are materially affected. Nevertheless, we continue to expect a gradual shift towards more regionalized drug manufacturing with regional demand increasingly being served regionally. In this context, we remain confident that our well-diversified global manufacturing footprint with large capacities in the U.S., in Europe and in Singapore will enable us to support our customers' global manufacturing requirements today and in the future.

In light of the significant recent U.S. investment announcements from large pharmaceutical company, with only a small part of investments going into manufacturing assets, outsourcing decisions may take time -- may at times take a bit longer to conclude, but demand for CDMO solutions remains healthy in 2026.

We see the CDMO industry as part of the solution in this gradual shift towards regionalized supply chains, and biotech and large pharma companies continue to outsource. These investments are likely more a shift in global CapEx spend towards the U.S. rather than a change in outsourcing strategy with an overall increase in capital investment into manufacturing. Biotechs, which are approximately half of our revenue, are an important customer group for Lonza, will continue to rely heavily on CDMOs to minimize capital requirements into manufacturing.

To close, let me share a few final remarks. Against the backdrop of ongoing geopolitical uncertainty, Lonza has continued in the first few months of 2026 to demonstrate the resilience of a CDMO business model, which supports effective risk diversification. We are on track to deliver on our strong full year 2026 outlook. We see sustained customer demand, and we are making good progress across our diversified CapEx program. With the divestment of CHI, Lonza is becoming a pure-play CDMO, and we remain confident in our ability to pursue value-creative M&A opportunities alongside the initiation of our CHF 500 million share buyback, following the closing of the CHI transaction. The Lonza Engine is firing on all cylinders, and we are well positioned to deliver strong shareholder value.

With that, I would like to thank you for your time. Sandra, over to you for the Q&A.

[Operator Instructions] Our first question from today comes from James Quigley from Goldman Sachs.

So I have a question on bioconjugates. So Daiichi Sankyo today highlighted provisions for overbooking capacity at CDMOs and in the approval documents, Lonza is listed as a manufacturer for ENHERTU and DATROWAY. So is there any impact here for Lonza in the short or medium term? To what extent of the guidance would account for cancellation fees? Again, I appreciate that's difficult to predict, but is there anything that's already in the guidance to take this into account? And then aligned to that as well, can you talk to the demand growth you're seeing in bioconjugates? In a recent interview, Christian said that 70% to 80% of all ADCs are outsourced. So where does Lonza fit in this -- in the production chain? And do you continue to see strong growth in this area?

Yes. Thank you. Thanks for your question. So obviously, we have also read the announcement issued by Daiichi Sankyo this morning. I'm not going to comment specifically on Daiichi Sankyo. But I think we are -- we continue -- we have always been a leader in the ADC space. This is a category that is showing significant growth. There is a projected growth of over 20% a year for the next 5 years. So this is a very interesting space. We are certainly the largest commercial manufacturer for ADCs and recognized as a very secure source for this very complex modality.

I think I can confirm that today, as of today, there is no cancellation fees planned for this year. I mean, there's nothing sizable. We always have small cancellation fees here and there, but there's nothing significant that I would have to mention to you. And so I think for us, this is a continued area of high interest.

Christian mentioned that, in his interview, we continuously build capacity to expand our footprint on conjugation. And this is a business area that is going really well, and you'll see this once we publish our numbers in the half year.

The next question comes from Zain Ebrahim from JPMorgan.

Zain Ebrahim, JPMorgan. We'll stick to one question, which is on contracting momentum, which you talked about in the prepared remarks. But maybe if you could elaborate in terms of what you've seen from customers in Q1 because it's indicated customers are taking longer or may take longer to sign contracts amid the U.S. investments. So have you seen any change in customer behavior in Q1 specifically? And tied to that, your confidence level in Vacaville seems to be unchanged and you're reiterating peak early 2030. So what you're seeing from customers that continues to underpin that confidence?

Yes. Thank you, Zain. So look, I think Q1 was a good contracting quarter for us. I think given the uncertainty in the market around tariffs, around geopolitical situations, around investments in the U.S., et cetera, I think it's understandable that companies are maybe taking a few months longer to take decisions. Remember, these are anyway quite long negotiations if you're talking about commercial contracting. So I think what we wanted to say is that we continue to see strong demand and strong requests for our capacities in the small-scale area as well as in the large-scale area.

But yes, I think discussions tend to take longer. Remember, we sit on a high backlog of contracts. So this is not worrisome, but I think it's a fair reflection of what we see when discussing with large companies, which we wanted to share with you. So I wouldn't read into this a change in strategy for pharma. I've mentioned this in my script before. The interest for pharma companies, both large pharma as well as biotech, remains unchanged. There is still a significant need for outsourcing.

Remember what is driving outsourcing, one, of course, is an attractive pricing, which we always need to provide, but second, it's derisking the capital investments of pharma and thereby creating a true economic value in the industry. So this has not changed. And so we are not worried about contracting in general.

If you want to talk about Vacaville, I think, again, not sharing details on a site-by-site level, but people are obviously continuing to be interested in U.S. capacities, and Vacaville is a very strong, high-quality capacity available in the U.S. And so we see -- continue to see good interest for the site.

The next question comes from Charles Pitman-King from Barclays.

Just -- my key question just relates to the comment you made around the base business, being able to support growth based on improving execution. I'm just wondering if you can speak a little bit more around the potential delta that's available to you from improved yields as a result of AI. That seems to be an area where investors kind of see a great opportunity for the CDMO space. I'm just wondering if you see that as an opportunity as well for yourself. And just a very quick clarification on backlog contracting, can you just confirm that you're not going to be talking about backlog contracts going forward? Just to clarify your messaging earlier in your prepared statement.

Thank you, Charles, for your questions. So on the base business, I think, I'm happy to address AI in a second. But this is a lot -- I would say a lot lower tech than what you may be reading to this comment. I think our base -- when we talk about our base business, these are assets that have been online for a while. And I think we have renewed our intensity in improving operations, debottlenecking, some of these assets, really driving what we call value stream mapping. So employing all kinds of Six Sigma and Lean methods. And so you're basically creating capacity in older or more mature assets.

And this capacity can be sold, and therefore, we are generating, if you want, growth out of older assets and not only relying on new assets to create growth. So this is all possible to be done without AI. This is -- these are our engineers and technicians and operators that are working together to debottleneck assets. So this is how we improved it. Of course, the other thing, which takes longer, which is what we call portfolio management, where we are replacing all the contracts with more attractive contracts. But I would say this is something that has been ongoing. But I think that the renewed push on debottlenecking is what is creating the help on the base business.

Now AI, I think we see as a positive tool for us in the future. I think the specific use cases of AI in terms of what probably people now understand is large language models is probably still early stage. But we've been using AI in terms of machine learning for a while. And this is used -- we at Lonza are sitting on a wealth of data from the decades of work we've done with many different molecules. And this data can be, of course, used to improve yields or improve how we synthesize certain molecules. So I would kind of say that AI in terms of large language model, early stage, but we have applications in the back office, in quality, et cetera, where we are using that. I wouldn't say that we're using that extensively yet for yield.

And any comments on the Vacaville contract announcement?

Yes, yes, yes. Sorry, Charles, this was not my intention. But you're right. I think as we said in January, we have now fully integrated Vacaville into our mammalian network. And so I think contracts for specific site will not be shared unless these contracts represent something very special, which we've done in the past. So large strategic contracts or integrated contracts that we will continue to share with you as long as the customer is also okay with that. But we will not be counting contracts with you on Vacaville anymore.

The next question comes from Charles Weston from RBC Europe.

My question is on the Specialized Modalities division, please. First of all, you talked about Cell & Gene therapy normalizing in H2. I guess, those operational issues have been going on for over a year or maybe now. So can you just talk about the journey there and perhaps any phasing we should be thinking of in terms of weak or strong comps half-to-half? And on that same division, just how core is bioscience because that's not what we would normally think of as a CDMO business model?

Yes. Thank you, Charles. So on SPM, I think we're pleased with the start of the year for the platform. Again, if you remember last year, we had a weak first half and a better second half. And I think the first half has proven to be now much stronger versus that low base. Also, some of the phasing that we had at the end of 2025 moved successfully, if you want, into the first half. So I think we were right in kind of that phasing forecast. And so I think the first half was strong at the microbial side, was strong on bioscience, and also, our Cell & Gene improved. I think Cell & Gene would be probably a further improvement over the course of the year to go.

Very pleased as well to be recognized by other customers to give us their commercial products. So you saw that we signed one more commercial product, which is helping to stabilize, of course, the production and the manufacturing for Cell & Gene. So overall, I think SPM looking at a much better year than last year. And this is also driving our stronger first half because the first half in SPM would be better than the second half, in terms of growth.

In terms of bioscience, I think we've -- you saw that we've cleaned up a little bioscience by selling our software business within bioscience. And we're now really focused on the areas of this business that we want to maintain and keep because they're actually very closely related to our CDMO business being at around testing or being around media. So these are really things that are integral part of our CDMO manufacturing offering. So from that point of view, I think this is core to us. And I think we believe that we have now reached a level of businesses that are fit. We have actually done a small acquisition as well called Redberry in the high-speed testing. We believe this is a place where we can help our customers, but we can also significantly benefit in our own manufacturing.

The next question comes from Charlie Haywood from Bank of America.

Charlie Haywood, Bank of America. Just on the phasing commentary, which was helpful, you've inserted notable into the commentary along with, I guess, how you're more committed on first half or second half margin phasing. I imagine some of the '25 batches that were delayed would have been the base case to come in first half '26. So I wanted to understand if anything had changed in the second half, i.e., a pull forward or different batch phasing or if first half is maybe just trending better than expected?

And then just on that, if you could provide a bit more color on the Vacaville sort of first half versus second half phasing and this sort of shutdown or sort of commentary on the second half that you alluded to? Just a bit more color there would be helpful.

Yes. Thanks, Charlie. I'm not sure I fully, fully understood acoustically the very start of your question. So if I'm not answering properly, just ask again. I think I understood that you were asking more about the phasing of '25 into '26 and then H1 and H2 dynamic. So I think indeed, remember at the -- during the summer of '25 last year, we said that some of the batches and some of the business in specialized modalities could be very late in '25 or could move into early '26. This has happened, which is, of course, helping the first half of 2026. So this, in that sense, has been developing the way we had expected, so no change on that.

And then, in general, I think our first half was always expected to be stronger than the second. We've mentioned that in January. This is not accentuated, if you want. This has not become more than what we were expecting. We're just confirming to you now that this is the case. And I provided you a few of the drivers, which is really across the platforms where each platform actually sees a little bit of benefit in the first half versus the second half.

For Integrated Biologics, this is really around Vacaville as well. I think, remember as well, we were talking about Vacaville having a simple year in 2025, where we were basically continuing to produce what site had done before. '26, we said would be a more complicated year, if you want, because the site has to do manufacturing for our important customer, Roche. We have to do CapEx construction work, and we have to introduce new products. So it's a much more busy year for the site. However, we can confirm now that the sales will be roughly in line with what we did last year, so will the margin for the site. But yes, we will have a stronger first half because we have a planned shutdown in the second half to implement some of these productivity investments into the site or upgrade. And, therefore, this is expected to have an impact on the revenue and the margin for the second half.

The next question comes from Paul Knight from KeyBanc.

The China market is becoming a top or second largest originator of biologics. How do you see this playing out? Will they manufacture those ex China? Or will it also be in China? And will you participate in China? Or will you select the ex China? I love your vision on what happens in that market.

Yes. Thank you, Paul. Indeed, I think if you look at the statistics, it's quite impressive how much of the innovation is coming out of China. I think we -- our view on this is that most of the China innovation will need to go broader than China to be successful and financially viable. The Chinese market at the price level of China will not be sufficient for this company to become economically viable. So yes, they will need to spread beyond China. Some may do this alone. Others are doing this through collaborations and licensing like we've seen several occasions over the last few months and quarters.

So we are strong believers that once they do this step, either through another pharma company, a Western company or themselves, they will need a Western partner to do that with them. And here, Lonza is very well positioned to be the partner of choice for Chinese biotech companies wanting to expand the reach of their products.

We are working with China today already. I think our cell line -- our Lonza cell line is being used in China in several occasions by several biotech companies. So the Lonza name is known in China, and it's a well-respected name. So I think on the one hand, we have this type of work, so the cell line, and this is then a more natural fit for these companies to come to us for manufacturing and development.

And we also have seen at different occasions that the buyer or the in-licenser of such molecules are actually relatively quickly reaching out to Lonza to support them in expanding the reach of the molecules. I think what we hear also from PE companies is that, of course, having a PE or a pharma company, having Lonza in your supply chain is usually making due diligence much easier. So I think it's a big difference if you have Lonza in your supply chain or if you have no name Chinese CDMOs. And so this is also helping making these molecules more attractive for partnering.

The next question comes from James Vane-Tempest from Jefferies International.

I've got one clarification just on the prepared remarks, just in 2 points, actually. You mentioned in your phasing commentary about first half, second half about a notably stronger second half, similar to how that was viewed in January. And I know we had a question on this already, but the word notably was introduced today compared to the full year. So I was just wondering what changed for you to update that language?

And then the second clarification is, I know you don't want to share individual site level contracts, but on Vacaville, you mentioned additional signed contracts over the course of the year in addition to those announced in January. So that reside none have been signed since January. So I was just wondering if you can clarify the prepared remarks.

Yes. Thank you, James. Yes, I think the word notably is probably introduced because when we look at the collective consensus of all of you on the call, I think it was more of a timid reaction to our comment in January. So we want to make sure that we were probably thinking about slightly higher difference between H1 and H2. So that's maybe the hint we're giving today.

Second -- so I hope that answers your question, nothing has changed in terms of our underlying view of the 2 halves. In terms of Vacaville, I think I would not get into that discussion. I think we are not commenting on additional contracts for Vacaville. The only thing I would like to reiterate and reconfirm is that we just continue to see high interest in the site. We continue to have very strong commercial discussions and negotiations with customers. So all this is really on track for Vacaville. We've reconfirmed today the midterm outlook. We have reconfirmed today the outlook for 2026. So Vacaville continues to be a success story and a very good opportunity for us and for customers.

We will now take the last question from Max Smock from William Blair.

Maybe just a quick one on some of the language here in the press release around M&A. You talked about building out a funnel of M&A opportunities. Just wondering if you can give more color on where exactly you're prioritizing in terms of your focus? And just when we can expect any sort of update around adding additional capabilities to the platform moving forward?

Max, look, M&A will remain opportunistic, obviously. But I think the big difference from where we are today versus where we were 1 year ago is that we have truly created an attractive pipeline of opportunities that will be triggered when they become available. And I think what we are really doing is, I think, looking beyond probably what everybody gets offered and really reaching out to companies that have assets we like or that have part of the business we like and really actively approaching to see if there is a business combination that makes sense.

So I think the discussions are much more intense, if you want, or developed, but I think the timing remains opportunistic and will happen when it happens. So the priorities on this remain the same. I think we are highly interested in capacities of high-quality. Why? Because they basically accelerate the ability to offer more capacity to our customers. And usually, you get a team that is used to operate that assets like we've seen in Vacaville, people with high experience running an asset just generate more high-quality business. And so these are things that are really interested.

Second, obviously, I think the U.S. is an interesting location in general given I think the shift in the supply chains to be more regionalized. We have a lot of sites in the U.S. We have a lot of our capacity in the U.S., but we don't have all modalities in the U.S. And so this is also something that we are trying to see if we can accelerate that.

With that, thank you very much for all your questions. I hope this Q1 update was helpful to you. And we will close the call for today. And back to you, Sandra.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

Ladies and gentlemen, welcome to the Lonza Investor Conference Call. I am Sandra, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it is my pleasure to hand over to Wolfgang Wienand, CEO. Please go ahead, sir.

Yes. Thank you, Sandra, and hello, welcome to this short update call. I'm Wolfgang Wienand, the CEO of Lonza and together with me in the room is our CFO, Philippe Deecke. This actually is the second edition of this investor call and somewhat unusual setup, but we wanted to make sure that we share news in a timely manner, news of our agreement to divest our Capsules & Health Ingredients business to Lone Star Funds and make sure that actually everyone has an opportunity to join and to listen to our thoughts.

In this call, we will share further details of the divestment and then take some time to answer your questions. Before we move on, please take a few moments to review our safe harbor statement. I'm sure you are all already aware of its terms, and I encourage you to ensure they are observed.

Let me start with a short set of highlights relating to the transaction and our high-speed progress to create a pure-play One Lonza CDMO over the last 1.5 years. Our agreement to sell 60% of CHI to Lone Star is the most significant and indeed the final major step in our transformation journey to a pure-play CDMO.

For context, since we presented the One Lonza strategy at our investor update in December 2024, we have now executed a total of 4 divestments to support our transformation alongside a number of integrations of newly acquired assets over the last 2 years that will strengthen our world-leading CDMO business.

The enterprise value for CHI at closing is CHF 2.3 billion, and the transaction is structured to yield total expected proceeds at or above the nominal value of CHF 3 billion at full exit, equaling around USD 4 billion. Proceeds will become part of our discretionary cash pool within our clearly defined capital allocation framework and will be deployed with a focus on bolt-on M&A, alongside a CHF 500 million share buyback starting after closing.

From now on, our sole focus can and will be on strong and sustained value creation within our CDMO organic growth model, driven by the Lonza Engine and further supported by value-creating bolt-on M&A. More on all of this later in the presentation.

To commence, let me remind you of why we committed to exiting the CHI business in the first place. At the end of 2024, we set out our new vision to be the pioneer and market leader in the CDMO industry and by doing so, committed to creating outstanding value for our customers and for our shareholders.

In order to deliver on such a promise, a company needs 3 things: Firstly, an attractive underlying market that offers opportunity, which is obviously true for the pharma market. Secondly, a business model which delivers sustainable value to its customers. In our case, the CDMO model, which for me is a beautiful business model and was, by the way, invented by Lonza in the late '70s and early '80s. But thirdly, to deliver outstanding value, you need to be special. You need to have an edge over competition. This, in our case, is the Lonza Engine, the unique set of strengths that only Lonza can offer.

When pressure testing our business portfolio at the time, it became clear that CHI doesn't benefit from the Lonza Engine to the same degree as our other businesses and that we are not the best owner to fully capture the value of this leading business. Moreover, it might even have distracted our organization from focusing on its true core, the CDMO business. This was why we informed you then that we would exit the Capsules & Health Ingredients business at the right point in time. And now we have delivered on this promise made only a little more than a year ago.

Having said this, let's now take a moment to look at Lonza's updated portfolio following today's or Friday's announcement. While the CHI divestment is the most significant part in our portfolio transformation, we have also agreed to divest 3 smaller non-CDMO and less attractive CDMO offerings, 2 of them just the week before last week.

These are the personalized medicines business, including the Cocoon platform and the MODA software platform, both from our specialized modalities business platform alongside the small molecules micronization site in Monteggio from Advanced Synthesis. These divestments will enable us to further optimize and exploit the full potential of our CDMO business platforms in line with our One Lonza strategy and our future growth ambitions.

Looking at our streamlined and simplified One Lonza organization, we now have a highly focused business with a world-leading and most comprehensive and sophisticated set of CDMO offerings, which is ready to meet our customers' unique needs and the high expectations to make the medicines of tomorrow.

You may have seen this slide before, but it is worth briefly recapping the overall market and how we have mindfully chosen where to play in terms of technologies, value chain and life cycle of pharmaceutical products. We have selected those segments offering above-average growth dynamics and the best opportunities to differentiate against competition.

Having done the heavy work around finding good homes for our divested businesses and people, we can now laser focus on our target market segments worth around USD 100 billion and underlying growth of 8% to 10% alongside the 7,400 molecules in the clinical pipeline growing at 9%. Based on our setup, Lonza can take shots on goal for more than 90% of them to create a successful future for the company.

You may also remember the Lonza Engine as a metaphor for the unique set of strengths, which make us special and the leading CDMO in the world, and which is the reason for our confidence to outpace market growth at low teens in constant exchange rates on average over time, in line with our organic growth model.

Now having outlined our different portfolio activities within the overall context of the One Lonza strategy, Philippe will take you through the financial details of the CHI divestment and the value considerations around it. Over to you, Philippe.

Thank you, Wolfgang. Let me share with you some more details on the transaction structure and deal terms. On closing, Lone Star will become the 60% majority owner of CHI in exchange for upfront cash proceeds of CHF 1.7 billion to Lonza, while Lonza will retain a 40% stake without management control. On top of this, Lonza will benefit from a preferential participation in the value created at exit if a certain return threshold is achieved. We, therefore, expect the total proceeds for Lonza, including upfront and all future proceeds at full exit, to be at or above CHF 3 billion.

Based on the transaction structure, there are 3 drivers for future value creation and our expectation for future proceeds: first, the strong market position of CHI and its attractive outlook in line with our previous guidance; second, the business turnaround, which materialized in 2025 with an improved market environment and supported by the antidumping and countervailing duties ruling in the U.S.; and third, the value-creation track record of Lone Star in similar transactions.

Turning to accounting implications. The transaction will be fully reflected in our 2026 financials. The announcement of the CHI divestment deal today, however, triggers an estimated CHF 1.3 billion noncash impairment that will be booked in our 2025 financials as a subsequent event to the unaudited financial statements shared in January 2026. There is no impact on our CDMO financials.

This bridge visualizes the deal structure and underlying proceeds. There are 2 elements at play, the proceeds at closing and the future upside upon full exit. To provide more color, at closing, based on an enterprise value of CHF 2.3 billion and adjusting for customary estimated cash, debt and debt-like items, we expect to receive upfront cash proceeds of CHF 1.7 billion and retain a stake of 40% with a fair market value today of somewhat above CHF 0.3 billion.

After closing, our retained stake is expected to deliver significant upside based on the assumption of a typical private equity return pattern alongside delivering on our business case over a typical holding period. This upside potential includes our preferential participation rights in value creation. So to bring this all together, the expected total proceeds, including upfront cash at closing and expected future proceeds at full exit, is expected to be at or above CHF 3 billion undiscounted.

With that, I hand over back to you, Wolfgang.

Yes. Thank you, Philippe. Now we will refocus on the future and consider how we intend to redeploy the proceeds from CHI to support our core CDMO business at One Lonza and create value for our shareholders.

At our investor update in December 2024, we committed to focus fully on high value creation within our organic growth model, operating in a clearly defined capital allocation framework. The proceeds from the CHI exit will become part of our discretionary cash pool, which we use to fund targeted organic growth opportunities and bolt-on M&A acquisitions with a strong strategic fit and attractive return profiles. This includes adding capacities, technologies and expanding our business portfolio in line with the One Lonza strategy and delivering competitive differentiation driven by the Lonza Engine. At the same time, we also committed to remain focused on the generation and highly efficient deployment of cash into growth opportunities as well as returning surplus capital, if any.

Looking at where we stand today and with our commitment to maintain our BBB+ credit rating, Lonza's leverage will be materially below target levels after the sale of CHI. We will, therefore, balance the position of near-term surplus capital with our conviction that attractive investment opportunities can be identified and pursued over the midterm by returning CHF 500 million to shareholders by way of a share buyback.

Following an accelerated time frame, we envisage that the share buyback will be executed within a year or less of closing of the transaction. The balance of the proceeds will be retained to invest where and when attractive opportunities arise.

Going forward, on a periodic basis, Lonza will review the outlook for strategically and financially attractive investment opportunities to determine whether the level of capital maintained is appropriate for likely requirements. Any capital deemed to be surplus will be returned to shareholders.

Our capital allocation will focus on markets with sustainable above-average growth where, firstly, the CDMO business model creates benefits for our customers. And secondly, the Lonza Engine as a unique set of our strength delivers advantage over competition.

In growth CapEx, we seek opportunities that can deliver returns significantly above the cost of capital, can be secured via either a rich opportunity pipeline or anchor customers. And we are committed to remain a well-diversified multi-modality CDMO, meaning that we will invest across our existing business platforms and in emerging technologies to manufacture the medicines of tomorrow.

Taking an impartial view on organic and inorganic growth, we are also ready to execute bolt-on acquisitions as opportunities arise to deliver capacity, technology and portfolio expansion, with a particular interest in high-quality assets that both diversify our offering and synergize with our existing activities.

Between now and 2030 and in line with our organic growth model, we intend to invest CHF 7 billion in organic growth with additional funds available for bolt-on M&A. While Lonza already today operates a well-diversified global manufacturing network, the U.S. will remain a focus for future investments.

On this slide, we share some more detail about our directional preferences for organic growth and bolt-on M&A within each business platform. In Integrated Biologics, we seek to expand in a capacity-constrained market and to drive innovation by investing organically and inorganically into our capacities and technologies, alongside organically expanding our portfolio through our unparalleled customer partnerships.

In Advanced Synthesis, our priority is to diversify our footprint and double down on attractive niches, with an impartial approach to capacity expansion, a preference for bolt-on technology acquisitions and the focus on organic portfolio expansion. And in Specialized Modalities, we seek organic and inorganic opportunities to extend our tech offering and create larger product portfolios, while expanding capacity is not a priority right now because the CGT market is currently not seeing capacity limitations.

Recent M&As across platforms showcase our approach in action. Most significant of these for its size and financial contribution is our newly acquired commercial-scale biologics manufacturing site in Vacaville, California, which has been successfully integrated into our business already midyear 2025. The site has captured sustained high customer interest, including the signing of significant long-term commercial supply agreements.

To secure long-term growth, we are also looking beyond today and are ready to add new technologies and assets that complement our existing offering and constantly renew our portfolio to be able to manufacture the medicines of tomorrow.

Looking to our future. Now as a pure-play CDMO and the global market leader in this industry, we are confident that the Lonza Engine, together with disciplined investments will drive our business within our organic growth model in 2026 and beyond. We see that the Lonza Engine adds an incremental 2% to 3% to the underlying markets targeted by Lonza of 8% to 10%. To turn those opportunities into value, we need to invest in our systems, maintenance, infrastructure and inorganic growth.

2026, our CDMO outlook remains unchanged at constant exchange rates, sales growth of 11% to 12% and further core EBITDA margin expansion to a level above 32% of sales.

To conclude, the CHI divestment represents the successful completion of our transformation into a pure-play CDMO, delivering on the promise we made at our investor update in December 2024 in less than 2 years. This is a well-structured divestment, which brings Lonza a significant value upside and in our expectation, will deliver future cash for redeployment into growth.

Our plans for the proceeds are fully aligned with our capital allocation framework and strategy for value creation. And we remain disciplined in how we deploy funds and return excess capital to shareholders as we will do now with the CHF 500 million share buyback.

Future cash generation and remaining proceeds from the sale of CHI will support our long-term growth ambitions in line with our One Lonza strategy. We are One Lonza, the pioneer and global CDMO market leader, manufacturing the medicines of tomorrow for our customers and their patients worldwide. And we are well set up for the future.

With that, I thank you for your time, and we will now be pleased to take your questions on the specific transaction and the topics shared during the presentation.

Sandra, over to you.

[Operator Instructions] Our first question comes from Charles Weston from RBC Europe.

Can I just ask about the required rate of return, please? You talked about typical PE rates of return. Can you just give us a range as to what you think those are, please? And if there's any color around whether you have to exceed that to get your preferential exit bonus, that would be helpful if there's any color around that.

Yes. Charles, let me take that one, if you mind. So starting at the end, probably, there's no limit to start getting returns from a Lonza point of view. I think the only thing that I mentioned during the call is that Lone Star would have to return their initial investment -- their initial equity investment. After that, we basically have a tiered payout, which is in line with our shareholding, except for a portion of the payout, which would be preferential to us. But that's the only limitation, if you want.

In terms of expected returns, I think you can look that up probably, but a regular PE return would be probably around or above 20% a year, right? So that's what probably PE would expect in such a transaction. Does that answer the question?

It does.

[Operator Instructions] We have a follow-up question from Charles Weston from RBC Europe.

We were counting on you Charles, that's actually great.

I was on holiday on Friday. So can you perhaps comment on how competitive the process was, please? There were a number of different parties mentioned and speculated in the press. So was it a very -- was there a lot of interest for the assets?

Actually, won't -- cannot answer to that question, of course. However, what I can tell is that we have been busy with that process for more than a year and really went through a very rigorous process in order to secure essentially 4 things we wanted to optimize for. One in the end was, of course, execution speed to really get this deal done in a good way in order for us to be able to really -- I mean, put 100% of our attention to what really matters to Lonza. So it was about execution speed.

Then deal certainty was important to us. So looking at interested parties, their ability to execute a deal and later on deliver on the business case was an important criteria for us as well. And lastly, of course, value and deal terms. And I actually said it's 4. So the fourth dimension for us was also that we actually hand over this valuable business and its people who work for Lonza for almost 10 years into good ownership.

And in order to achieve that, we took our time without being -- without actually wasting time either and have been able to identify a strong new owner with deal terms, which overall will deliver a value to us and will actually provide significant funds for us to redeploy into what really matters for Lonza and our shareholders, which is our world-leading CDMO business. So that's what I can comment and share.

Okay. And perhaps if I can just follow up on a different point given the lack of people in the queue. The -- one of the things you mentioned was on organic CapEx. And I think historically, you said that you would always prefer to have an anchor customer for any large programs that you wanted to invest in. Today, you said secured by a strong pipeline, all anchor customers. And I wondered whether there was any slight modification in the way that you're approaching organic CapEx or becoming perhaps slightly more aggressive or whether I'm just overinterpreting that?

Yes. Happy to take that question. So I probably wouldn't spend too much time on thinking about differences to a past, which I don't know, right? But what is true, first of all, we don't take the same approach for each and every technology and asset, firstly. But in general, you probably want considering that these are significant investments in terms of CapEx amounts, you want a certain level of certainty, which you can actually achieve through anchor customers. And typically, we are able to do that because what we do at Lonza is in high demand.

Secondly, when I say -- when I said the pipeline, I mean, this is not a fluffy a pipeline of anything, but I would ask my people to be able to really point at customers, point at molecules and give me -- give us reasons to believe why we should be able to win those molecules.

And lastly, and that's probably more a general approach. I mean in a growing market with our ambition being to grow on average over time at low-teens percentages year-over-year, actually, you shouldn't -- you can't build just for the capacity and for the demand that you just see today. But for efficiency reasons, you should always add a certain headroom that you're not yet fully exploited after a few years only. So it's probably, in the end, a different mix depending on technology and specific market segment of anchor customers, specific tangible real pipeline and some headroom for future business that you can't point your finger at today.

Okay. That's very clear. Last one for me, please. You mentioned sort of typical exit time frame. Again, can you just provide a bit of color perhaps about what those range of expectations in terms of full exit from CHI, please?

Yes. I think in the end, first of all, to also use that opportunity to make that clear. We are a 40% shareholder, which is good because we believe in that business and we believe in the ability of the CHI team together with Lone Star to actually make our business case happen. However, we are actually not in the driver's seat anymore. So this decision on timing, timing of exit and all that really is with Lone Star.

Our -- let's say, our expectation in terms of overall proceeds to Lonza at full exit, including upfront proceeds being at or above CHF 3 billion, that is actually based on our knowledge of the business, our knowledge of the business case, our impressions from the discussions with the new owner and their ambitions. And in terms of, I mean, typical PE perspectives on such a deal, this is not built on anything that Lone Star would have told us, but us concluding from what we hear and know and the typical returns that Philippe just mentioned before, above 20%, maybe 25% and typical holding periods of maybe 5 to 7 years, that's just what you typically see and what an industrial asset like CHI probably will need to be fully exploited in terms of value creation. So it's just us kind of almost outside in assessing what we see, heard from Lone Star and what we know about the business and our business case that we solved.

Thank you, Charles. And if there's any further desire in the call for -- so it's not the case. So thank you very much for attending this call and joining us this morning. And we wish you a great start into the week and looking forward to further engage with you in the future. Bye-bye.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

Also a warm welcome from my side to all the ladies and gentlemen here in the room, of course, also to the ladies and gentlemen joining us online to our full year 2025 conference. And before we actually dive into the presentation, please take a look at our safe harbor statement, take note and feel bound to it.

Quickly, we prepared a rich agenda for you today. And Philippe, myself, I guess, are very much looking forward to present this strong set of numbers to you and later on in the Q&A, discuss with you about what 2025 was to us at One Lonza and actually what 2026 in the future will bring. So One Lonza full year 2025 performance, kind of diving a little bit deeper into the business platforms, then the outlook 2026 and afterwards, you shooting questions at us and us providing useful answers.

So my 5 key messages for you today. First of all, the One Lonza team delivered strong profitable growth in 2024, top line growth in constant exchange rates of above 21% and an expanding margin to 31.6%, plus 1.4 percentage points ahead of our upgraded CDMO outlook of July 2025. This business, of course, was driven by Vacaville, but not only. The underlying business actually expanded very nicely as well and at low teens constant exchange rate sales and also in line with our CDMO organic growth model.

We successfully launched our new operating model 1st of April to introduce new ways of working in a new way, how we actually present ourselves to the outside world, to our customers and increase elevate the customer experience within One Lonza across all technologies and all business platforms. We actually saw and continue to see strong underlying business momentum. And considering the things that actually happened last year in terms of how the future supply chains in the pharmaceutical industry will look like, we, at Lonza actually are very well positioned to also support our clients on that journey, and I'll speak to that later in much more detail.

Then the outlook for 2026. We expect our top line to grow at 11% to 12% in constant exchange rates and the CORE EBITDA margin to further expand, reaching a level well above 32%, which means actually that we, in 2026, will already enter the corridor of 32% to 34% that 2 years ago was given to you as a midterm guidance for 2028.

Briefly on the CHI business, which developed well as planned and has shown growth, again, in line with the outlook that we provided to you a year ago and will from now on, considering that we intend to exit that business be accounted for as a discontinued operation. The exit process is advancing as planned.

And with that, briefly, as a reminder for you our vision, which kind of states our ambition, which is we are the pioneer and the world leader in the CDMO industry with cutting-edge science, smart technology and lean manufacturing. In short, what it says actually Lonza is in a position to outgrow the underlying market and create outstanding value. What does it take to create outstanding value? First of all, an attractive underlying market. That is the case in the pharmaceutical industry. It takes a strong business model, the CDMO business model. But in order to outgrow and create superior value, we need something special, which actually is what we introduced to you a year ago, a little bit more than a year ago in December 2024, our unique One Lonza Engine, consisting of 5 elements, high-performance teams, leading scientific, technological and digital ecosystem, unparalleled customer partnerships, end-to-end execution excellence and plug-and-play investment and integration capabilities. While these are broad claims, highly abstract, I actually decided and want to share a number of evidence and proof points for our claims.

First of all, high-performance teams. We continuously try to hold ourselves true in terms of that what is in my mind as a CEO and in the minds of the executive leadership teams actually is in line with reality for which we actually do voice of employee surveys every 6 months. And among the top 200 leaders of Lonza, 95% of them strongly support the new mission and purpose of Lonza. In terms of engagement index, also above 80%, which is really an outstanding value. So full support of high-performing teams.

In terms of scientific support to our clients, Lonza and its GS system supported more than 100 commercial products. It is the leading cell line in the industry, unparalleled customer partnerships with a new operating model and creating an elevated customer experience, we actually have been able from an already industry-leading level in 2024 to further increase Net Promoter Scores, I mean, twice, 100% for big pharma and 50% for small biotech within just 12 months.

Our integrated offering is gaining momentum, significantly increasing in terms of us offering Drug Substances and Drug Product services. And last but not least, in terms of our ability to continuously add people, technologies and acquisitions. Synaffix is a great example, acquired in 2023 and integration already done in the first quarter of 2024 and more notably, the integration of Vacaville mid of 2025. I'll speak to that in much more detail later.

So in terms of, I mean, outgrowing our market, I mean, what are the components, which in the end lead to our ability as proven in the past 2025 and as we expect it to continue over the next year and years to come. First of all, it's the underlying market growth, 6% to 7% available to everyone. Then there is the increase of outsourcing. So pharmaceutical companies deciding not to manufacture everything in-house, but rather go to trusted partners like Lonza and have their products developed and manufactured. They are adding 1% to 2% growth increment.

Then there is active market selection. So us deciding where to play, which are the high-growth, high-value market segments in the underlying pharmaceutical market, adding another 1% to 2%, leading to an underlying, I mean, selected market growth of 8% to 10%. And then there is the Lonza Engine. What makes us special, which is why people come to us, which provides for an additional upside, 2% to 3%. So overall yielding an underlying growth potential for Lonza of low teens, 10% to 13%.

So I talked about market and us taking conscious decisions in terms of where to play, where not to play. Let's briefly break it down. The overall underlying pharma market is probably USD 1.2 trillion, growing at 7%. clinical pipeline, more than 7,000 molecules. Based on the technologies that we have chosen for ourselves, and based on the positioning in the value chain, in the product life cycle from early phase development down to commercial manufacturing, we at Lonza are able and operate within a USD 100 billion market growing at 8% to 10%. And we, in terms of future potential, are able to cover more than 90% of the innovative pharmaceutical pipeline to fuel future growth.

Quickly on outsourcing because there was a lot of discussion in the last year in terms of, I mean, will the world change? And if so, how? And what does that change? Would that change mean for the CDMO business model? First of all, and we should never forget that the CDMO business model is a beautiful business model. It's a sustainable business model because it adds tangible value and creates efficient global pharmaceutical supply. This has been true over the last 15 years and will be true in the next 15 years to come as well.

But let's be more specific with all the big numbers and the big headlines out there about large pharmaceutical companies investing in the U.S., we kind of just took from actually historic figures and also Bloomberg consensus forecast what actually the world and the pharmaceutical companies themselves expect going forward in terms of their own CapEx behavior. And the outcome actually is in absolute terms, CapEx of the top 20 large pharma companies between 2015 and 2025 grew at a CAGR of 3%, and it's expected to grow at a same CAGR between 2025 and 2030. So no change.

Kind of normalizing it for CapEx -- sorry, for sales, same outcome. We will not leave the corridor of 4.5%, maybe 5% of revenues. So no real change in terms of the CapEx behavior of large pharmaceutical companies. What will most likely change though, is where that CapEx will be spent. And it's just likely that more of it, which would have otherwise been spent 1 or 2 years ago around the world might rather go to the [ S ] to a larger extent. So no change when it comes to large pharmaceutical customers.

I mean for small and midsized biotechs, actually, there has not been the option anyway to spend a lot of money into own captive manufacturing. They shouldn't, they can't and they won't. And those small and midsized biotech companies are actually gaining traction. And we shared here for 2015, the share of innovation, so new clinical assets becoming available for small pharma, 60% versus 40% of large pharma. This increasing to 75% in 2025 and 25% for large pharma. So those companies will spend every dollar they have on the true value driver of their business, which is innovation. They will continue to rely on reliable partners like Lonza to make their products happen to turn their breakthrough innovation into viable therapies and true products.

However, regionalization is most likely to stay with us and to further evolve going forward. And here, Lonza as the one global CDMO being able and having a track record to build and operate all around the world is very well positioned to support our clients on that journey as well. So here is some evidence what it specifically means when I speak about the largest global manufacturing network in the whole industry.

First of all, demand is kind of distributed 1/3, 1/3, 1/3 across the U.S., Europe and Asia, rest of world. And we actually have significant presence, significant capacities in all those key regions in the U.S., 5 sites and in Europe, 6 sites, 2 in Asia. Looking back in terms of how we have built that global manufacturing network from 2020 to 2025, we as Lonza spent CHF 10 billion in terms of CapEx, out of which CHF 3 billion went into U.S. capacities. With Vacaville and all those investments in the past, we have created the largest mammalian CDMO business in the U.S., very well positioned like no one else to actually help our clients for U.S. supply for U.S. demand.

And all that leads to an active business portfolio of more than 1,000 molecules at a certain -- at a given point in time, approximately 10% of our revenue is related to early phase business, so preclinical Phase I, 20% Phase II and the remaining 70% for Phase III on commercial assets, which leads to strong revenue visibility. We have a very low concentration in terms of risk and us being exposed to individual products, and we have a high level of diversification by technology, indication and company type.

And with that, I actually continue with sharing what we believe have been the business highlights in 2025. Three topics. First of all, a robust sales momentum across all our key modalities, technologies, so mammalian, small molecule, bioconjugates, drug product and also the Bioscience technology platform had significant growth again in 2025, driven by mammalian small-scale assets and maturing growth projects across different technologies.

We actually saw sustained high commercial contracting, again, across technologies and sites, altogether, well above CHF 10 billion signed in 2025, of course, materializing over the years to come, including a fifth significant long-term contract for Vacaville with further contracts, sorry, for Vacaville being in late-stage negotiations.

So thirdly, on CHI, we saw as planned, as predicted, the recovery of the business returning back to growth, almost 4% and the margin expanding as planned. The exit process is also advancing as planned. And as I said before, we will actually report CHI as a discontinued operations as we should for a business that we will not keep within our portfolio.

So this is actually what we are currently doing to not only deliver the business as promised today, but to also prepare the company for future growth. Currently, the teams are managing 23 CapEx -- growth CapEx projects around the world. Again, no other CDMO actually can do it, has proven to be able to do it. Lonza can do it. Currently, 23 large CapEx growth projects worth CHF 7 billion. 90% of it for commercial and mixed assets, so highly profitable and 100% in Europe and the U.S.

A few examples to point at. In Visp, a large-samammalian started GMP production in 2025 and will be ramped up with a tilt towards the second half 2026. Going forward, a large important project for Lonza and for our clients. Commercial bioconjugation, it's a medium-sized CapEx project will actually start stepwise from 2029 and then reach peak sales in the mid-2030s, large-scale fill/finish and Stein ongoing, start expected for '27 peak sales also in the early 2030s. Type 1 diabetes cell therapy, cool technology science, CRISPR/Cas together with Vertex in Portsmouth, start expected in 2027 and peak sales around 2030.

And Vacaville, I mean, I thought about the headline, make it as crisp and as clear as possible. A great fit to Lonza coming at a great point in time, creating the largest CDMO mammalian network in the U.S. in one go. So remember, we paid in 2024, CHF 1.1 billion for that asset. Closing was 1st of October, and we expect the site to fully deliver to its full potential in the early 2030s. Some evidence why we are so happy and so confident and so optimistic for what we will be doing with that site and already start to do with that site.

First of all, a very stable and strong team. I've been there after JPMorgan, doing town halls, taking investors there and also talking to people. We have attrition rate of 99 -- I mean, actually retention rate of 99-point something, so essentially 100%. Great people willing to work for us and embracing the opportunity that Lonza actually gives to them.

It's a high-quality asset, as you can expect from Roche and the investment that we have started to do of up to CHF 500 million is into the flexibility of the site so that we can even further increase operational efficiency. Customer interest is very high, remains high, as evidenced by now altogether 5 large commercial contracts for the site, which will, by the way, be able to already now kind of substitute the Roche volumes going out by 2028 and will make the site deliver at the stable level that we have seen today, plus/minus. So very good outcome also in terms of the commercial development and the selling of that capacity.

Also important, the first U.S. FDA inspection under the new ownership in Q4 last year was a very strong outcome, only minor observations, which could be resolved almost immediately. First successful tech transfer. So a site which actually didn't receive so many products over the past years had to prove that. And we have been able to execute that tech transfer in a seamless way, and the team actually lived up to the challenge of now operating within a CDMO business model, and I actually included a quote of the responsible external manufacturing head of that large pharmaceutical company, "A truly seamless tech transfer into Vacaville execution at a level I have rarely experienced in my career." And I can tell you, this gentleman is not 21 years old. He has seen a lot. right?

Last but not least, post-merger integration finalized successfully mid of 2025. So what we can actually say now and announce to you today is that this site is now a regular part of our global manufacturing network and will be managed as such and will start to contribute and continue to contribute over the next years. As a heads up, now that we actually can tell you that already with those 5 contracts in our business portfolio, we can actually substitute the Roche business and deliver stable revenue plus/minus at the current level until 2028. We will not further comment and report on individual contracts for that site as we don't do it for any other site in our overall manufacturing network.

And with that, I hand over to Philippe, who will take you through our financial figures for 2025.

Thanks, Wolfgang. Good afternoon, and good morning to people joining from the U.S. also from my side. Before I start, let me just give you 1 or 2 disclaimers. All numbers that I will present are for the Lonza continuing business, which means that they all exclude our CHI business. The CHI business, as was mentioned by Wolfgang, is now reported as discontinued operation according to the definition in IFRS 5. Further, as usual, our sales growth rates are in constant currencies. All other growth rates are in actual currencies.

With that, let me go to the key financials. I need to click myself. So first of all, the Lonza business delivered CHF 6.5 billion in 2025. This is CHF 1 billion more sales than we did back in 2024. So CHF 1 billion growth, 21.7% of constant currency growth. This is ahead of the upgraded guidance of 20% to 21% that we communicated back in July last year. This includes roughly CHF 0.6 billion of sales from our Vacaville site, so slightly at the upper end of the CHF 0.5 billion that we had forecasted. We're very pleased, obviously, operationally, Wolfgang mentioned that we're very pleased with the site operationally. We are also very pleased financially with the contribution of Vacaville. Organically, the organic business, excluding Vacaville, contributed or grow at low teens, which is fully aligned with our CDMO organic growth model.

Going to the margin. We delivered a margin of 31.6%, up 1.4 percentage points, also very pleased about that. And this as well is ahead of the guided range of 30% to 31%. Three main contributors to the margin. One is, of course, operating leverage. When you grow the top line at that rate, of course, we are not growing our cost at the same rate. So administration costs, sales and marketing costs, research costs are growing at a much lower rate, providing leverage.

Second, the maturing of our growth projects. Some of our projects are now getting close to higher utilization and therefore, increasing their margin. And number three, several targeted productivity initiatives across the organization.

One word on FX. You see that we had an FX impact of roughly 2.5 points on both the top line and the bottom line. This is coming mainly from the weakening of the U.S. dollar back in the early part of 2025. Luckily, we have a very strong natural hedge. We are selling and having costs in roughly the same currencies. We're helping that as well with additional financial hedging program to protect our margins.

With that, let's go to the sales evolution. As you can see on this page, we had good performance from 2 of our large platforms. Let me start with the exceptional performance of our ADS business, Advanced Synthesis, with very strong contribution from both bioconjugates as well as small molecule assets, the platform growing 22% organically. We had very -- we had several assets in both platforms growing and ramping up simultaneously and growing at a fast pace.

On the I&B, in Integrated Biologics, you see a growth of 32%, a large chunk of that obviously coming from the Vacaville side, but also the other organic assets ramping up nicely.

Going to Specialized Modalities. This was probably or is the soft point of our performance in 2025. We had discussed that in the first half last year and in Q3. We saw soft operational performance from the Cell & Gene business that actually continued during the year, but we're looking forward to a much better year in 2026. And then on the microbial side, where we experienced a phasing towards the end of 2025 into 2026. Also here, a better '26 is expected. The platform ended up with a small decline of minus 3%.

Moving on to our CORE EBITDA performance. Here, again, very pleased with the progress, reaching 31.6%, close to the 32%, but we'll do that in 2026 and beyond. So the 3 key reasons why we grew our margin. I mentioned that before, but maybe a little bit more detail, again, operating leverage where we have very strong cost discipline across the organization now, both at headquarters level, but as well in the different sites.

We have several maturing assets, especially in mammalian bioconjugates and small molecules that are allowing us to offset the dilution from the newer assets. And last but not least, operational excellence and high utilization in our commercial sites allow us to offset a slightly negative mix versus 2024.

Maybe a few words to the platforms. I'll start with ADS, again, an exceptional margin improvement of 5 points, reaching margins of 42%. This is even slightly above the margins that we delivered in the first half of 2025. So here as well, again, very pleased. However, this is an exceptional year, and we will probably look at the normalization into '26.

Looking at Integrated Biologics, a slight margin decline here of 0.9%, mainly due to unfavorable product mix and as well some new assets that have been coming online and growing in 2025. And then this is also the platform where we have the highest U.S. dollar exposure. And so while we have hedging, there is some impact from the weaker dollar. On SPM, I think very pleased that the platform could almost hold their margin at 17%, only down 0.5% despite the lower performance. This is due to some profitable mix and as well some very high cost discipline across the platform.

Moving over to our CapEx details. You see here that we spent roughly CHF 1.3 billion in our CDMO business. Again, CapEx is a key enabler for Lonza's future growth and also a key focus for the organization now and going forward. The CHF 1.3 billion was spent most of it on gross assets, 60% of the spend was for growth. This includes a diversified portfolio of the 23 projects that Wolfgang mentioned earlier.

You see as well that the peak of CapEx is behind us. This was in the past year. You see in the middle of the page that we are on a slope to actually normalize our CapEx spend. This -- in 2025, we reached 19.6% of CapEx, slightly below the guided range of low 20s, mainly due to some higher sales and some more discipline in maintenance spend. We're looking at high teens for 2026. And then over the midterm, normalizing in what we call our CDMO organic growth model for CapEx in the mid- to high teens.

The normalizing CapEx also allow us to do great progress on our free cash flow. You see for this year that for our continuing business, we delivered CHF 0.5 billion of free cash flow, CHF 545 million, almost double the amount we delivered back in 2024. One of the key reasons, obviously, CapEx, which has been stable while the business has been growing, but also actually very strong management of inventories and trade working capital in general. You see that our trade working capital grew CHF 200 million. This is much less than what obviously our business has been growing in '25. And so you see that our trade working capital in percent of sales has actually declined by almost 5 points. Our inventories -- inventory coverage is also declining almost by a week, and this is something that we will focus a lot more to continuously drive down inventories to the right amount for our business.

Moving from cash to our capital allocation framework. This is not new. We have not changed anything on that slide. This is more of a reminder for you, obviously, because a lot of people are asking us the questions about what will we do with the CHI proceeds. Well, first of all, it's not sure that there will be CHI proceeds depending on the exit route that will actually happen. But let me take you through our priorities in terms of capital allocation.

Priority #1 is the investment into maintenance, infrastructure and systems. Why? Because we need to make sure that our base assets and our growing base assets are future-proof and are well maintained and will contribute to the future growth of the company. Priority #2, our progressive dividend policy, very important to us as well, and I'll get to that on the next page, which lead us to our discretionary cash. This is the cash that is available for investment into growth. This discretionary cash may be increased by proceeds from the CHI exit, should it be leading to proceeds. These proceeds as well will flow into what we call discretionary cash, will be invested into organic or inorganic bolt-on M&A investments.

Now rest assured that we will be very disciplined in the way we allocate this capital. You know that for internal organic CapEx projects, we use very strict financial thresholds, 15%, 1-5 of internal rate of return and a ROIC at peak of 30%. This is for the organic investments. For bolt-on and M&A, it's not that easy to put a formal threshold, but we will remain very disciplined and basically look at 2 things: one, attractive returns; and second, is there a strategic fit with our Lonza Engine. And if you look back at the last 2 acquisitions being Synaffix and Vacaville that Wolfgang also shared with you, you can see that these were very disciplined and very attractive acquisitions.

Looking at our dividend. As you can see, this dividend policy fully in line with our capital allocation framework. The Board of Lonza is actually proposing to increase the dividend by 25% to an amount of CHF 5 per share. This reflects obviously the strong earnings performance and will let shareholders benefit directly from our growth of earnings. Our progressive dividend, just to be very clear, means that we will maintain or grow our dividend per share on a year-by-year basis. And you can see on the chart that we have proven this over the last 10 years.

Now let me finish with a quick update on our ESG performance before handing back to Wolfgang. We've made strong progress in 2025 on our ESG agenda. I'd like to drive your attention to the top 2 pie charts. One is the greenhouse gas emission intensity and on the right, the waste intensity. Both of these targets have actually been met in 2025, 5 years ahead of schedule. We are planning to have the intensity by 2030, and we have achieved that already in 2025. We are, therefore, deciding to rebase and to now looking at cutting by 50% the 2021 base, which is in line with the Science Based Target initiative. So great progress on greenhouse gas and on waste intensity.

Also great progress on actually renewable energy. As of January 2026, all our electricity in the U.S., in Europe and in China will be renewable sources. Our progress is also well recognized externally, and we've been, for the first time, awarded the EcoVadis Gold rating and have been named again by Ethisphere as one of the world's most ethical companies. So again, great internal progress and great external progress.

And with that, I'd like to hand back to Wolfgang, who will take you through the business platform performance and our outlook for 2026. Thank you very much.

Thank you, Philippe. And indeed, let's take a brief look at the 3 business platforms before then turning our heads towards the future. So Integrated Biologics, robust sales and margins driven by strong demand and operational execution. Here, Vacaville, as discussed before, kind of contributed more than we expected at the beginning of last year. We also saw a margin accretion from strong operational execution, however, was kind of more than offset by growth project dilution and unfavorable portfolio mix, as already mentioned before by Philippe. And also here, it's kind of clear. I mean, the significant amount of contracted business of above CHF 10 billion, a major part of it comes from our Integrated Biologics business platform.

So ADS, our Advanced Synthesis business, an exceptional year in terms of sales growth driven by rapid and at the same time, occurring ramp-up of growth assets, which was great to see and actually great to see how well the teams in small molecules and also bioconjugates actually made it work and delivered according to the expectation of our clients, outstanding profitability above 40%, which is probably plus/minus what we can expect going forward from that business in terms of profitability.

Our Specialized Modalities business, which is in terms of strategic importance, relevance to us, and an area from which we expect significant future growth over the next years to come and also significant contributions to our profitability. However, it's still suffering from this whole universe being small and limited. And as a consequence of that, also our own business portfolio being much smaller than for the other modalities and as a consequence of that, also more volatile. However, we are one of the very few CDMOs actually having 5 commercial assets in our network. And essentially, each of our manufacturing sites now has one commercial asset.

So Bioscience briefly on that, which is our media business plus some other smaller businesses also returned on a very attractive growth trajectory, which supported that business platform. And with that, I actually turn our heads towards the future outlook 2026. What can you expect from us? What do we expect from us in 2026.

First of all, continued high demand for the services of One Lonza. So stronger in constant exchange rates, stronger relative growth in the second half as compared to -- sorry, in the first half as compared to the second half. However, in absolute terms, the year will be balanced, and it's more a baseline effect how 2025 look like. Regionalization of supply chains will be with us also going forward. However, will not apply to existing businesses, to existing products in existing assets because typically, no one actually changes a winning team and changes an existing well-functioning supply chain. It's more about where will we allocate new business going forward. And this will be in line with the expectation and the desires and preferences of our clients, probably much more supporting regional demand by regional supply, which will then, in turn, also help -- further help our already strong natural hedge.

CORE EBITDA margin expanding from maturing growth projects, productivity, a topic which is very close to my heart, cost discipline and obviously, operating leverage. I mean key priorities for myself, for the whole One Lonza team, of course, continue to elevate the One Lonza customer experience already evidenced by the significant increase in Net Promoter Score, but the journey goes on. A base business, execute with rigor and deliver constant -- I mean, through grinding of our business, our assets, constant margin expansion. Cash, it's going to be important this year or last year actually was an important step forward. We will continue on that journey, and we know how.

In terms of growth, execute this 23 growth projects and of course, kick off new ones and also on top of that, being agnostic to doing it organically or inorganically, driving our M&A agenda.

Group Functions are elevated in their role and their impact on the businesses, which is around standardization and also making us work in a more consistent way. CHI is going to be an important topic in 2026, driving the exit process and executing it at the appropriate time in the best interest of our shareholders and stakeholders.

And with that, I want to close with actually reminding all of us of the financial model that we are applying here at Lonza. Based on our Lonza Engine, there's an underlying market opportunity in terms of growth of low teens every year on average over time. In order to translate those opportunities into tangible business, we need to continue to add capacity, invest. And these investments as long as the growth opportunities on average over time are in the range of low teens, this CapEx requirement will be around mid- to high teens of sales going forward. This then delivers our CDMO organic growth model, which is a constant exchange rate sales growth of low teens percentages on average over time and the CORE EBITDA margin growing ahead of -- so CORE EBITDA growing ahead of sales growth.

Specifically for 2026, it means our constant exchange rate at sales growth is expected to be between 11% and 12% and a further CORE EBITDA margin expansion to a level above 32%. So already entering the corridor that was 2 years ago predicted to be achieved only in 2028. So what have been the key messages that I, we shared with you today.

First of all, Lonza has delivered in 2025 and is well prepared for the ongoing journey of transformation and growth in 2026 and beyond. We have made progress as promised and are set up for success in terms of consistently delivering our business and also the project in Vacaville and further evolve as the global One Lonza team. We expect, again, significant profitable growth and we'll continue on that journey.

And for the longer term, we are having -- we actually defined a clear strategy and the capital allocation framework to deliver in line with our CDMO organic growth model.

We are One Lonza, the pioneer global CDMO market leader, manufacturing the medicines of tomorrow for our customers and their patients worldwide.

I thank you for your attention and look forward to your questions.

Many thanks, Wolfgang. I'm David Carter. I'm the Global Head of Communications, and I'm going to be hosting the Q&A session. I'm going to ask my 2 colleagues here to just slightly rearrange the setup for us so that our leaders can relax. Philippe is back on the stage. And I'm going to ask anyone who's got questions in the room, we're going to start with you. If you could say your name, your institution and ask, I know it's ambitious, but if it's at all possible, no more than 2 questions. We will also, for people that are online, flick over to you at a certain point and make sure that you have a chance to ask questions, too. But first and foremost, are there any questions in the room? Let's start over here.

Daniel Jelovcan, ZKB. So two, the CHF 70 million hedging gain, which is booked in the top line, I'm not an auditor, but shouldn't an hedge can be booked somewhere in the financial expense or below the EBIT. I don't understand the mechanism if you can clarify. And then I ask the second question.

Yes. No, this is fully in line with hedge accounting. So this is normal. We've been doing this all along. It's just this year, this -- or last year, 2025, given the volatility in exchange rates, it has been higher than in previous year. But this has always been booked at the same place. Now to be clear as well, this is not accounted for in our constant exchange rate growth. So we remove it from that.

Okay. And the second question, when I do my calculation in Integrated Biologics, excluding Vacaville, you must have had an organic growth of 8% in the second half, quite a slowdown from the first half which was 17%. Why was that? Was that maybe some batches which were not booked in December, but in January, that's why you're guiding for a strong first half '26. Just to understand the picture.

Yes. No special reason. I think there's always volatility between the halves. We've seen that in the past. So I think it's more of a mix rather than kind of batches that would have been blocked in December. So nothing special to notice. It's the different phasing of assets coming online and mix. Nothing different.

Are there any more questions in the room? We have a quiet house today. We're usually more challenging that. Do we have any more questions online at the moment? We're going to hand over to Sandra online in that case, Sandra, if I could ask you to host the online question session, that would be great.

The first question comes from Ebrahim Zain from JPMorgan.

Zain Ebrahim, JPMorgan. My first question is on the Advanced Synthesis business, and growth momentum sounds -- was really strong in 2025 at [ 22 ] growth momentum going forward in '25 benefited from 2 growth projects that seems and you'll have further growth project contribution in 2026. Margins sound like 40% plus/minus, as you said. So any further commentary there would be helpful. And my second question is just on the Cell & Gene therapy business where you've indicated you expect an improvement in 2026. And just the question is what underpins that confidence?

Thank you for the question. I'll take the first one, I propose.

If you understood the first one, I will pick the second one. So I'm happy to take this.

Yes. I actually didn't understand the second one, so pass it on. But either way, on ADS, indeed, in terms of profitability, it probably will hover around the 40%. And that's what we expect going forward in 2026 in the years to come. The growth obviously was kind of exceptional in 2025 due to, I mean, many positive events coinciding. But it will be a growth engine going forward as well, but in 2026 and not at the level that we have seen in 2025. And maybe Philippe has made up his mind in terms of the second question in the meantime.

No. Second question, I think -- thank you, Zain, it's Philippe. So I think we're confident in terms of the growth rate for Cell & Gene in '26 versus '25. As we mentioned, I think, in the first half, we had some operational challenges in Cell & Gene in one of our sites during '25. This is being resolved. And so the business will kind of continue in a more normal fashion in '26. So from that point of view, yes, we are confident. On top of that, actually, we keep on ramping up commercial products in all of our sites. So all the Cell & Gene sites in the world for Lonza have a commercial product, which is, of course, helping to stabilize somehow the utilization of these sites. So yes, we are much more confident for '26 than what you've seen in '25.

Before we move on to next question if I could just ask anybody who's joining online to speak as slowly and clearly as possible. The line is not quite so clear at this end. So the slower and clear you are, the more easily we can understand you. So Sandra, I'll hand back to you for the next question.

The next question comes from Charles Pitman-King from Barclays.

Firstly, just on Vacaville, you're targeting stable CHF 0.6 billion sales now for FY '26 versus prior CHF 0.5 billion. Can you just confirm that this is going to remain stable around CHF 0.6 billion to '28 now. And with these 5 contracts in place derisking that target, can you confirm you're still targeting 30% utilization? Provide a little bit more detail around the predicted phasing of the contract and just confirm whether they all need to be fully ramped by '28 to offset that -- those lost contracts.

Then just secondly -- sorry, just secondly, could you confirm what the current Form 483s are currently outstanding for Lonza facilities? And what advised rectifications are required and how this is expected to impact any ongoing operations and just confirm there were no impacts in FY '25.

Yes. Let me indeed start with the second question. Thank you, Charles. This 483, and there has been rumors around that and around other topics as well on which I will briefly comment in a bit. This 483 actually was a huge success. Not that it wouldn't have been even better to have a clean sheet, but a 483 with only 3, I believe, minor observations, which could either be immediately in the short term, close out or a few weeks later, actually is a very good outcome and receiving 483 is more the standard outcome that essentially across the pharmaceutical industry is yielded.

It is not to be also clear around that. It has nothing to do in this case with the warning letter. The sequence from the process of the U.S. FDA is, I mean, a bad 483 with major observations, official action indicated can turn into a warning letter, but it's actually typically not the case, but what typically is the case that you get this form with your observations. And in this case of Vacaville, it actually was a very good outcome with only 3 minor observations which have been immediately being addressed and closed and are all addressed and closed right now. There was no impact, nothing on the ongoing operations and actually nothing of concern. I think that's important to say.

There are, of course, also, I mean, at least you're telling us that, because it's not brought to us ourselves, other rumors around Vacaville not being a high-quality asset, not being capable of being run in an efficient way as a CDMO asset and all that, obviously, coming from other market participants. I actually won't comment on that in detail, but I would like to let the evidence that we shared with you speak for itself.

Just 2 thoughts, maybe. First of all, and that is kind of my take of it as long as our competition continues to speak about us, and can't help itself to speak about us. I take it as reconfirmation of Lonza being the market leader in the space, first thought.

Second thought on Vacaville. And I don't know, but one way of looking at it, of course, is that people might be concerned from a competitive standpoint, what great things we, at Lonza can do with great assets over the next years. But I would like to leave it there, but I wanted to address that because I think it's important. What you should take with me is what I shared with you today, a great asset, a great acquisition at a great point in time with a business secured until 2028 and beyond to keep, actually to substitute the Roche volumes going out and to keep the revenue at the level of where we are today, plus/minus CHF 50 million maybe over time. And that actually leads to the first question of you, Charles, which is on, first of all, phasing and ramping up.

First of all, now having 5 contracts, of course, we will continue to sign contracts, right? We don't stop even though we will stop talking about it and reporting it because we don't do it for individual sites, which in the end are run as an integral part of the global network. So we will continue to add business because interest is very, very high.

Those 5 contracts, which are large. I mean, they will only come to full fruition after 2028 because that's the time you need to actually tech transfer and ramp it up. So this is already feeding growth beyond 2028 and the other business that we actually will win over the next days, maybe even weeks and months will then take us further for this site to, I mean, come to its full potential, come to full fruition in the early 2030s.

I think what is still open from your question, Charles, is the utilization. Yes, it's plus/minus that because the Roche business going out, new business coming in, keeping us stable at around where we are today, plus/minus. And us having the time invest into the flexibility, into the operational efficiency of the asset to them from 2028 onwards, be able to actually run at full steam and make it CHF 1 billion revenue and way beyond CHF 1 billion revenue side within the global network of One Lonza. I hope that answers.

Can I please just double check on the [indiscernible] 483 as well?

I actually don't have the details to the degree as I had them for Vacaville, but same here. I mean what I heard, and that's actually the feedback from quality is that this has been actually a successful inspection and all observations have been minor only and have been closed out in the meantime. So also nothing which would worry me or anyone within Lonza and nothing that should worry anyone outside Lonza or anyone holding Lonza shares.

The next question comes from Charles Weston from RBC Europe.

So my first is back on Cell & Gene therapy. You've indicated that perhaps you could have grown faster should there have been no operational issues. So I just wanted to get a sense of how much those issues may have held you back and what the state is of the relationship with any of the customers where they may have wanted more product?

And my second is on the EBITDA margin. As you highlighted, you've already hit or you intend to already hit the low end of your 2028 guide 2 years early. Can you help us understand whether there's anything to prevent margins even excluding Vacaville, continuing to grow at similar rates, particularly given there was some negative mix in Integrated Biologics in 2025 that perhaps gives you a nice start.

Yes. Thank you, Charles. Maybe Philippe starts, and I take the second question.

Which is on Cell & Gene?

Yes.

yes, I think I'm not going to quantify, but let me make sure and reassure that there was no customer issues related to that. Of course, this is our first concern when something doesn't go as planned. But then we work very closely with the customer. So on this one, there was no impact on customer and the issues are resolved, and we just need the time to restart everything at the regular run rate. So from that point of view, I think things are fixed, and we're looking forward to return to normal operations in '26.

Yes, and Charles, on margin expansion, that's our commitment to grow EBIT -- core EBITDA ahead of sales. And our organic growth model, our commitment what we want to do with this company to constantly expand margin, right? And you will see that already this year, and that's how we guided, and you will continue to see that over the next years to come through different measures. Of course, it's expansion of our gross profit margin through pricing, through efficiency when it comes to productivity, again, very close to my heart, cost discipline. It's also about keeping SG&A costs growing at a much lower pace. So operating leverage and a number of growth projects maturing and then contributing rather than diluting our profitability. That's what you can expect from us going forward. And that is our commitment.

I guess I just wanted to ask, is your confidence on hitting the upper end of that now increased given the strong performance you've had in '25?

Yes. Charles, I would like to leave it there because, I mean, while this margin, of course -- sorry, this guidance has been put out before me joining Lonza, it is, of course, rightfully so still in your hands, which is why I actually used it and kind of went back to it, to tell you that actually, what we are doing is in line with what has been promised to you before, but we're not going to guide again specific margins for specific years, but thought that actually the organic growth model is a much more useful framework for you because it's not guiding for a specific point in time, but rather providing for a trajectory in terms of both top line growth, our margin will evolve and what it takes to make that happen in terms of CapEx. So I actually would like to leave it there, but hope that I've been able -- we have been able to create confidence that this is a serious ambition that we will make happen.

The next question comes from James Vane-Tempest from Jefferies.

Just one on free cash flow, please. Very helpful to have what the business is now and obviously comparing to what that looked like in 2024, at a group level, including the CHI. So last year, you disclosed net working capital was 13.7% of revenues. I guess now we have trade working capital of 34%, showing a reduction. But from memory, in 2024, working capital went up, I think, by around CHF 45 million with Vacaville inventories and receivables into year-end. So my question really is underlying free cash flow for this year because if it's CHF 545 million with this new definition you've got, is CHF 500 million more like the right number on an underlying basis to how to think about for this year, just so we can figure out you understand what the underlying improvements have actually been.

You start Philippe, I'll take the end.

I'll probably finish. James, there is no change in definition in our free cash flow definition. So the comparators to last year is fully comparable to what we do this year. The only thing we have changed is to give you a much more precise view on what our trade working capital, which we believe is a number that we should all track and also be aware.

To remind everybody, trade working capital for us is inventory, AR and AP. And so in the past, in net working capital, you had a lot of other things, which included early payments, also discounting liabilities, et cetera, which were partially also even noncash, which is correcting from the EBITDA line. So no change in free cash flow definition. So the improvement that you see in free cash flow versus '24 is the true underlying free cash flow improvement of the business -- of the CDMO business.

You'll find in our reporting as well the cash flow from the entire group, including discontinued operation, which top of my head is CHF 674 million, I think, if I remember well. So that's the full group. But in terms of CDMO, this is true underlying performance.

And adding to that, I mean, the financial engine, if you would like to call it like that. So top line growth profitably, expanding margins and decreasing CapEx as shared by Philippe through not because we would build less capacity, we need the capacity. Otherwise, we wouldn't go. But more discipline in terms of how we execute CapEx, I mean, has the ultimate goal of delivering ever more cash year-over-year. So that's what we are committing to with that CDMO organic growth model.

Sorry to come back, I guess maybe just to ask a question in a slightly different way. I mean in '24, it was highlighted that there was much stronger Vacaville inventories, which contributed to the free cash flow decline. So my question is looking at the growth, is it a clean number, the CHF 545 million? Or does it kind of benefit from perhaps some working capital, which was pulled forward into Q4 '24 rather than actually seeing that in 2025?

Yes. I think it's usually the case that our trade working capital is higher in the fourth quarter. I think this is nothing new. So from that point of view, I don't think that the number is anywhere significantly or materially influenced by what you're describing. But please, if you're not satisfied with the answer, it's maybe something you can pick up with Daniel. So we make sure you fully get the answer.

The next question comes from James Quigley from Goldman Sachs.

I have two, please. So the first is on the contract signing. So you said well above CHF 10 billion in contract signings in 2025 that follows CHF 10 billion in '24 and CHF 13 billion the year before. Does well above mean between CHF 10.5 billion? Or does it mean between CHF 10 billion and CHF 13 billion. And how do you use this figure? You said before, it could be quite volatile. How are you thinking about it in terms of targeting and signing -- future signing contracts and driving future growth? That's question one.

And question two, you gave some good details on the shift in number of molecules in development by pharma and biotech. But how do you think about M&A impacting that commentary around outsourcing and outsourcing trends as it stands as we look at the pharma industry, it looks like there was quite a big need for M&A. We've seen a pickup in M&A recently. So what happens when that shifts over time? And what have you seen when your customers, your biotech customers or even your larger pharma customers have been acquired in the past?

Thank you, James. To start with the contract signing value. It's not even a KPI. It shouldn't be a KPI because what is it really? It is an addition of value based on signed contracts, which might distribute over 3, 5, 7, 10, 15 years, right? And you just don't know. I mean our recommendation -- first of all, we will not make it a KPI. We will share it from time to time, but we don't believe that it's actually a meaningful KPI for which you should create or can create in a meaningful way, a time [ series ], which will actually tell you anything.

On the other hand, it's also clear that, I mean, high contracting will translate into future business, which is why we shared it as a qualitative information, right? So I would, while being relevant, useful, providing confidence reassurance it's actually, I wouldn't even call it a KPI, which is kind of also already the answer of. Let's not talk about, I mean, digits after the comma because it's actually not a precise signs around that.

And maybe one further thought, while signing with a certain customer, a 10-year contract, which might even be in the interest of that customer as opposed to signing a 5-year contract. The 5-year contract, even though the value in terms of contracted value, of course, is lower because just 5 years instead of 10 years, it might be commercially more attractive because it offers opportunity to speak about pricing after 5 years rather than being locked in for 10 years, just as an additional thought how to think about that figure not being a useful KPI.

In terms of M&A and pharmaceutical assets being acquired by large pharma through M&A takeover of small biotechs, actually, we have seen it all. We actually have seen the molecule just staying where it was with Lonza and the new owner of that asset being super happy, having a robust, proven global supply chain for this acquired asset. We actually have seen also the case where Lonza wasn't involved. But for example, when that pharmaceutical assets came from China, it was important for the Western acquirer to build a robust Western supply chain, calling us and Lonza creating that robust supply chain.

And there have been cases and will probably always be cases where if there is capacity and technology and capability available for that asset within the acquirer that this asset might actually be in-sourced or partially in-sourced. So it's kind of business as usual and nothing where we would actually see any trend or any shift in behavior.

We take now the last question for today's call from Odysseas Manesiotis from BNP Paribas.

Firstly, on the Visp, large-scale mammalian ramp, your 2030 peak sales assumption seems a bit pushed compared to earlier comments. Could you explain why that is? Was there some movement with contracts from Vacaville so on? And did you manage to deliver commercial batches within 2025 from that facility.

And last one quick one on the FX, given the moves you're seeing today. Can I confirm with you that the 2 percentage point headwind you're assuming for the guide takes into account January average rates rather than something closer to spot and would and around 4 percentage point impact be reasonable if we take into assumption today's moves.

Philippe, do you want to start with the last question, I'll take the 2 first questions.

Odysseas, thank you for the FX question. So obviously, I think if you read the small print, our forecast of 2% impact was based on mid-January rates. So I think if you take into account what happened on Friday, Monday, I think the number is probably closer to 2.5%, with probably the rate if you were to use that. So I think 4% is probably too high, but we'll provide you an update in Q1 and in half year again. So I think rates are more volatile nowadays than they were in the past. Rest assured that our financial hedging and natural hedging works to stabilize margin, but we'll provide you an update as rates evolve.

Yes. And thank you for the 2 first questions. I mean my main assumptions are not lower, to be clear, so now, unchanged. And in 2025, that large-scale assets in Visp actually started GMP production with, let's say, commercial ramp-up starting in 2026 and especially towards the second half of 2026.

I would now like to turn the conference back over to David Carter, if you have more questions in the room.

Any more questions in the room. We have one just over here. I'm aware that we are slightly running over time, but I'd like to give the room a chance to have a few questions if we can.

[indiscernible] I have a question about the CapEx 2025. You had 38% maintenance CapEx. I expected it to be a little less. Could you give us any advice about the next years, will this be the same level? Or will it come down a little?

Yes, if you look at our CDMO growth model, it actually tells you roughly how much we want to invest in growth, which is roughly low teens in terms of growth, the rest being mid- to high single digit actually in system infrastructure and maintenance. So that gives you the ratio. I think the ratio this year is probably normal. I think the majority of our investment go into growth. This will be the case also going forward. But this is -- this changes year-over-year depending on the different assets that are planned. But I think the CDMO growth model gives you a fair way to kind of value the amount of capital that would go into maintenance system and infrastructure.

And the second question is about one facility you moved from small molecules to the capsules business to be divested. Could you explain what kind of business it is and why you moved it.

Yes. This is a small site in Florida. They actually do fill/finish for clinical and very small batch sizes. This is a business that actually came with Capsugel at the time that we moved into small molecules because there were some synergies in what was being filled. I think we feel that this is a better fit with the CHI business overall and in terms of providing growth opportunity for CHI and synergistic. So we moved it back into the CHI parameter.

For clarification, when Philippe said fill/finish, it's not aseptic sterile manufacturing, it's OSD. So oral solid dosage forms. And especially in the case of Tampa, it's filling and that is where the fill/finish probably comes from of capsules, which actually is a nice fit as a kind of a business extension of the Capsules business itself. And again, came with Capsugel and we thought it makes sense to go with Capsugel because it's not going to be a strategic focus to do OSD for Lonza.

Talking about that and kind of as a reminder, what CHI is today is not the same that CHI was when acquired in 2017. So certain businesses, which are strategic for Lonza will actually stay within Lonza, for example, Bend in Oregon where we actually do really high tech around particle design and spray drying. So it's not going to be the same scope that we acquired at the time that we are actually exiting in 2026.

Any further questions in the room? One just here.

Laura Pfeifer, Octavian. I'm just wondering if you could talk a little bit about the Vacaville profitability in '25 and also maybe the outlook for '26 given that you will have new products being transferred there so a little bit of puts and takes, please?

Yes. I think profitability for '25 was better than we said. I think it was operationally dilutive as expected. And I think going forward, again, probably 2025 was still an easy year. That's why we called it for Vacaville because I think they produce the same products. Now we are starting to introduce new products. We will have also shutdowns for construction work that we also explained in the past. So I think the margin will improve over time.

I think it's not a linear path that will be getting better every year in the same increments. But I think we can confirm that by 2028, the site will be in line with the group at that point in time and therefore, neither dilutive nor accretive at that time, but it's not a straight line, but I think we were happier in '25 than we had expected.

So while it's adding in a relevant way already until 2028, I mean the rocket we will actually start in 2028 in terms of being ready, having done our CapEx into operational efficiency, new products at attractive pricing, then creating true volume, and that's actually where we will see the full benefit of the site and then reaching peak probably in the early 2030s.

Very good. We are over time now. So thank you all for your engagement both in the room and online, and I will pass back to Wolfgang to share some final words.

Yes. Thank you, David, and thank you all here in the room, ladies and gentlemen. And also those joining virtually for spending the time together with us, listening to actually a strong performance of the global One Lonza team delivering and even overdelivering on our promises and also listening to the commitments that we actually made for 2026 and listening to how we think about a great future for One Lonza, which should include, first and foremost, our customers and their patients will include our shareholders and, of course, ourselves as members of the global One Lonza team.

So thank you for coming, all the best and looking forward to stay in touch with you the latest for the half year in July. Thank you so much, and have a great day.

Welcome to the Lonza presentation here at the JPMorgan Healthcare Conference. From Lonza, it's my great pleasure to welcome the CEO, Wolfgang Wienand, who will lead the presentation. And that will be followed by Q&A where the CFO, Philippe will join us as well.

Without further ado, I'll hand over to Wolfgang. Wolfgang, welcome.

Yes. Thank you very much, Zain, and a warm welcome from my side as well. I'm happy to talk about One Lonza today and how we actually drive long-term value. But before we go into the presentation, let's have a brief look at the safe harbor statement. Please take note and feel bound to it. What are my key messages for you today?

First of all, we have a clear strategy for value creation and as part of that, of course, for capital allocation. I'll talk to that during the presentation. The Lonza Engine enables us to outgrow our already attractive underlying markets. Thirdly, we operate the leading global CDMO network and are well set up to support regionalization desires of customers of their supply chains. And lastly, we continue to invest across technologies and across the globe to support our customers' growth journey. And by doing so, growing strongly ourselves.

So the agenda, a quick look at Lonza, where we are today, then looking at the financial model, its key business drivers and actually going through 2 of them, which is strong top line growth, investment in growth, just to close out in the end with the financial model again and what you can expect from us in the future. And with that, let's start with a quick snapshot, and I will actually not take you through every detail here, but essentially, 3 key messages plus evidence supporting those claims.

First of all, we are the leader in the CDMO space by revenue. We're actually increasing profitability, and we look at a very well-balanced business in terms of regional revenues and also a very well balanced portfolio in terms of customer types. So roughly 50% for small and midsized pharma companies and large cap pharmas.

We at Lonza can essentially serve almost any key modality in any phase across the globe. 8 technologies within Lonza, which we apply across our global network of -- I mean, essentially, it's more than 30 sites. But if you look at sizable capacities, sizable sites, it's actually around about 20.

We at Lonza, have a strong track record of outgrowing the market, a CAGR of 12%. We currently manage a significant portfolio of growth projects. And we have supported over the last 5 years, around about 80 pharmaceutical assets being commercialized, being brought to the market.

But now to Lonza and what actually drives us and what is at the core of everything we do, in a way our North Stars, it's our vision. We are the pioneer and world leader in the CDMO industry, setting the pace with cutting-edge science, smart technology and lean manufacturing, a rich statement, which actually is very useful and educates ourselves and others about our ambition, what we want to do and what we don't want to do. By saying CDMO industry, we kind of implicitly took the decision that actually CHI is not the right business for us. While being a great business, we are not the best owner. We also make the claim to actually be world-leading across modalities, across the biopharma value chain, the product life cycle, but also world-leading in terms of value creation.

What does it take to actually create superior value? First of all, you need an attractive underlying market, which provides you with opportunity because otherwise, how to create value. Then you need a business model which enables you to translate those opportunities into real value. In our case, it's a CDMO business model. But so far, no differential really, right? I mean every company operates in the same market, and there are other CDMOs out there. Obviously, in order to create superior value, you need something special. Our magic Lonza Engine, which actually is kind of a composition of what we think makes us different and as a combined offering to our clients puts us into the position to provide superior services, which then translate into very attractive business opportunities.

It's actually 5 elements: high-performing teams, a leading scientific, technological and digital ecosystem, unparalleled customer partnerships, end-to-end execution excellence and lastly, plug-and-play investment and integration capabilities because we constantly need to actually add people, add technologies, add capacities in order to grow at the pace at which we can and expect to grow going forward.

Just -- I mean, not in order -- in order to not just make claims, I brought some evidence for each of those elements of our One Lonza Engine. First of all, high-performance teams. We -- I mean, like every year, twice actually do a voice of employee survey to kind of test where we are, what are the teams thinking, what are they doing? And just to report a few, I think, impressive figures here among the top 200 leaders, you see 95% strongly support the One Lonza strategy, the One Lonza purpose and the One Lonza mission.

Engagement index, well above 80%. And very important, we -- I mean, on the 1st of April, we introduced a completely new target operating model with a lot of change with the exception of myself, CEO, CFO and General Counsel, almost everyone of our 200 leaders actually sitting on a new chair with a new responsibility. But still, in October, role clarity was 88%. I think remarkable.

Leading scientific, technological, digital ecosystem. We at Lonza brought with our GS System in Biologics, more than 100 molecules to the market and actually worked on 2,000 unparalleled customer partnerships, while being market-leading in terms of Net Promoter Score already last year based on the new target operating model with the strategic enterprise account management and many other changes, we have been able to even increase this a good figure, times 2 for big pharma clients and by 50% for small and midsized pharma companies.

End-to-end execution excellence. So our view on what can be an attractive offering besides the individual nodes of drug substance, drug product, which is integration. Drug substance and aseptic drug product manufacturing, significant increase of activities of such integrated offerings in the Biologics space.

Integration capabilities, 2 obvious examples, Synaffix acquired in 2023 with integration and this business running at full steam already in Q1 2024. And of course, Vacaville, 1.5 hours away from here, and I'll speak to that later with the integration successfully accomplished mid of 2025.

So also for those of you who followed Lonza a little bit more than 1 year ago, I, together with Philippe, we shared at our investor update mid of December, the areas where we actually want to work on and make promises in terms of pushing our company further, reshape, elevate, focus, expand at the time. Reshape target operating model, done. Elevated quality to the Executive Committee, new business platforms and all that worked very well. Elevate in terms of asset construction because that's actually key for us to continue to grow. And also there, we are making strides and good progress in terms of being faster and getting more efficient in terms of how we spend our funds. Focus, exit of CHI, which is well prepared now. The legal entities are separated, all systems, IT processes are separated as well, and the exit process is underway.

And with that, I actually want to turn to our financial model, the flywheel, which is one of a compounding defensive growth company. That's how we see ourselves from a financial perspective. First of all, strong top line growth, which then we need to translate into margin, expanding margins, which then lead to cash generation. That cash we can then use to either, I mean, kind of incentivize and share with our shareholders or to continue to invest into the next capacity, next technology to then actually continue to grow and on it goes.

So what are the drivers behind that? Obviously, revenue drivers, margin drivers, cash drivers, growth drivers. I will speak today about the upper 2. First of all, revenue drivers, innovative pharma pipeline, which is a source of growth opportunities, manufacturing outsourcing trend, which, in our view, will continue to prevail and will continue to be happening. Active market selection, regionalization. Growth drivers is organic growth, CapEx and M&A.

What I don't speak about today, but you can rely on this being a super focus of myself is, of course, to kind of expand margin over time and make sure that we actually are very, very mindful about, I mean, how much cash we actually earn and how we spend it. I'm very serious about that myself, but not the topic for us and here today.

So strong top line growth. how do we define our growth potential? And here, we see it on the left-hand side. First of all, the underlying pharma market itself is an attractive one, not very cyclical, growing at 6% to 7% a year in terms of value. Then there is this additional growth increment available to companies like Lonza, which is the increase of outsourcing of captive manufacturing of pharmaceutical companies to partners like Lonza, 1% to 2%.

Active market selection. So that's our choice, our decision where to invest into which technology and which subsegments of this underlying pharma market we want to address. And by carefully choosing the most attractive spaces, we actually add another 1% to 2% growth increment, which leads to a growth of 8% to 10% on average over time of the CDMO market addressable by Lonza.

And then there's the Lonza Engine, which kind of makes us special and adds to our capability that actually enables us to outgrow by another 2% to 3% so that our view based on the conditions that we see today to Lonza on average over time, there is a growth potential of 10% to 13% available. That's actually what you have seen at the very first slide being kind of our historic performance as well and is the centerpiece of our so-called Lonza CDMO organic growth model.

So I've spoken about choices that we made at Lonza. And on the top, we actually see that, I mean, the pharma market itself, USD 1.2 trillion and the clinical pipeline of more than 7,000 molecules growing at 9%, while the underlying market growth at 7%. And Lonza did make choices over the last years in terms of which technologies to serve aid in our case and actually where to play in the life cycle of a pharmaceutical product where we actually cover and offer services from early phase discovery through clinical phases to, of course, then in the end, commercial large-scale manufacturing.

If we apply those filters, those conscious decisions, then we are looking at an addressable market for Lonza of around about USD 100 billion, growing at the previously mentioned 8% to 10% and us being able to actually address above 90% of the innovative pharma pipeline, so we can actually make offers and look at what's happening in pharmaceutical innovation for a very, very large portion of the pipeline. So that's one view.

Then I said continued outsourcing and 2025, as we all know, being a very exciting extraordinary year when it comes to pharmaceutical supply chains and actually who does what and who does what, where. And we decided for ourselves, of course, listening to everything that has been published and talking to our clients about the future and how they want to work together with Lonza, we decided to take actually a cold eyes view and ask ourselves, what does it really mean. And in order to do that, we -- I mean, got back to official figures, I mean, official public figures, Bloomberg consensus estimates for forward-looking activities of the top 20 pharmaceutical companies and of course, actual historic figures. When I said top 20, we decided to actually exclude Eli Lilly and Novo Nordisk, not because these wouldn't be great companies, but because we wanted to normalize for the special effect of the catch-up investments for GLP-1 API, which actually kind of distorts the whole picture slightly though, but still distorts the picture.

So if we look at 2 KPIs here for large pharma, top 20, first of all, for the time horizon from 2015 to 2025, I kind of assumed actual and then further out to 2030, just the absolute CapEx amounts spent by those pharmaceutical companies, we actually see a historic CAGR of around about 3%. And also based on consensus forecast of Bloomberg, this is going to be 3% over the next 5 years as well. So no big change in expectation.

Second KPI or second figure we looked at is the ratio of that CapEx divided by sales. And here, we see the range being between 4.5% and also going forward, 5%. So also no visible significant change. So that's big pharma. And there's the other portion, very important of the pharmaceutical universe, which is small biotechs and midsized pharma. And here, we kind of got back to the pharmaceutical pipeline and ask ourselves who is contributing what. And here, we see that actually the number of molecules, innovative molecules being contributed by small biotechs, midsized companies is actually growing over time to -- and is expected and actually is in 2025 at 75%.

Why is that relevant? Because just by the model, by the setup, biotechs actually don't invest in own manufacturing capacities and capabilities, and they shouldn't because every dollar probably is best spent in terms of innovation and creating value there.

So our conclusion from all that is, first of all, it's not a surprise if you really think it through, that the strong economic rationale to outsource to capable CDMOs actually is unchanged, will continue to prevail. And we actually don't see a relevant trend change in terms of pharmaceutical companies outsourcing manufacturing to capable CDMOs like Lonza. What is, of course, or most likely happening is that the kind of capital allocation takes place at different places, and there will likely be a preference of the pharmaceutical companies to actually create additional capacities in the U.S. That speaks to regionalization. And here, as Lonza operating a very well-diversified global manufacturing network, we actually see ourselves in a good position to serve and help our customers in their desire to regionalize their supply chains if they will.

I spoke about our global network here. I won't go through all those sides, but you essentially see that there is a significant presence. And it's actually true since 25 and 30 years already in the U.S., East Coast, West Coast. There is obviously also a strong presence and quite an amount of capacities within Lonza in Europe, but also in Asia. And that is the outcome, of course, of many, many years of investments. But considering the last 5 years, Lonza has spent roughly CHF 10 billion overall across the world, across technologies to further strengthen our network and build that network that we are looking at out of which CHF 3 billion over the last years already went into the U.S.

This slide, I leave for you to read, which is kind of commenting and putting into perspective our activities across different technologies. and different stages in the life cycle of a pharmaceutical product.

All that leads to a current business portfolio within Lonza, which comprises of more than 1,000 different molecules across the different stages throughout the product life cycle. And we actually start in many, many cases, early on with early phase of Phase I development and then assuming clinical success, of course, bringing those molecules to market together with our clients with a retention rate throughout the phases if clinical success is there of 99% and above, which essentially means once with Lonza, people stay with Lonza because we can provide great services.

Of course, there are drop-ins coming from left and right, either from captive manufacturing internally as pharma companies or from other CDMOs. That leads to an attractive mix in terms of customer types, which is more tilted towards small biotechs in the early phases, not a surprise because there are more opportunities out there. And later on, large pharma companies comprise or providing the highest portion of revenues. So that's actually what we see in terms of our business.

Now how to make sure that we continue to lead the market, that we continue to be able to offer our clients what they need, and that is about investing into growth. At Lonza, we are currently managing a portfolio of 23 growth projects across the world, across different technologies. And Lonza is a company based on the high-performing teams I've been speaking about at the very beginning, which actually is able to efficiently build, to efficiently construct and to efficiently operate assets all around the world, in Europe, in the U.S. and also in Asia.

A few highlights, a few projects from that portfolio 23 growth projects. For one, a Commercial high potent API manufacture drug substances facility in Visp, actually medium-sized CapEx project being started up in 2025 and already contributing in a very nice way to our 2025 performance. Peak sales are expected prior to 2030. And also in Visp, a large-scale mammalian drug substances manufacturing facility, 120,000 liters, obviously, a large CapEx project, started GMP production in 2025. And here, we will actually step-by-step ramp up and expect peak sales around 2030.

Another example, kind of closing a gap that we had before in the area of aseptic fill and finish services. Here, we are investing in a medium-sized CapEx of project in Stein into highly flexible filling lines, different technologies. And this capacity is expected to start in 2027 with peak sales in the early 2030s.

And then a pleasure to talk about Vacaville. Obviously, a great fit to Lonza acquired at a great point in time. And by the acquisition, we actually created the largest U.S. CDMO mammalian network in one go in 2024. Acquisition price, CHF 1.1 billion at the time, and fermentation capacity of 330,000 liters. So it's really one of the world scale, the very few world-scale sites existing on this globe and closing was on the 1st of October. Peak sales expected in the first half of the 2030.

Let's quickly go through some highlights of that acquisition. We -- and that we kind of knew, acquired a very capable and strong team, super low attrition. People there embrace the opportunity to work within a company where actually manufacturing is at the core of what we are doing, very low attrition, and they like to work together with leaders and subject matter experts from our global Lonza network, and they're actually ramping up and creating CDMO capabilities in a great way.

Integration worked very, very well across processes, standards, IT systems. We are fully on track. No relevant issues there. Also end of last year with our first and actually very successful U.S. FDA audit under new ownership, which is an important step, of course. But here, we could actually build on the strong quality track record that Vacaville under the Roche ownership already had, but of course, relying on the strong quality mindset of Lonza as a whole.

High customer interest, 4 contracts signed, more in the making. I myself will actually go with 2 potential clients or 2 clients to Vacaville tomorrow and on Thursday and look forward to actually present this great site, the 2 potential new products, potential new customers.

High-quality assets. So what we bought from Roche was a high-quality asset already. We don't need to do anything about that. The investment of roughly CHF 500 million is about increasing flexibility and turn it into a CDMO, into a highly flexible CDMO operation when it comes to automation and also spaces so that we, in a better way, can parallelize our manufacturing and become more efficient. But all that, I mean, aside, I just want to cite a great quote, which kind of reflects what the team is doing in Vacaville, "A truly seamless tech transfer into Vacaville — execution at a level I've rarely experienced in my whole career." Spoken by a senior external Head of External Manufacturing of a large pharmaceutical company. I think it speaks for itself.

And lastly, kind of concluding in terms of capital allocation, how we look at that and the financial model and the CDMO organic growth model. First of all, we, of course, need to generate cash and then need to invest into maintenance, repair systems, then we actually distribute to shareholders, of course, dividend. Then there will potentially be proceeds from the exit of CHI that leads to discretionary cash available for us to make choices and to invest into Lonza's future through organic growth, growth CapEx or M&A. And we actually apply this framework in a very rigid way with clear expectations in terms of returns. We don't like fluffy synergies. We want to be very clear in terms of creating value, and this is what we actually do.

What does it mean in terms of investments to be expected going forward? Based on our CDMO organic growth model, you can actually expect us to invest well above CHF 7 billion until 2030. And the majority of this amount of money will actually go into future growth.

And with that, I actually want to close with the CDMO organic growth model. On the left-hand side, you see our magic, the Lonza Engine, which actually leads eventually to an underlying market addressable by us of 8% to 10% plus the growth -- plus the Lonza Engine increment of 2% to 3%. In order to actually turn those opportunities into value, we need to continuously invest into our systems, maintenance, mid- to high single-digit percentage of sales and into growth, low teens of sales. And if we do that and as long as the conditions are as we see them today, our CDM organic growth model kind of expects constant exchange rate sales growth of low teens on average over time and an expanding core EBITDA margin, so margin growth ahead of sales.

For 2025, we actually upgraded our annual guidance together with the half year results in July to a constant exchange rate sales growth of 20% to 21%, including around about CHF 0.5 billion revenues from Vacaville and a CORE EBITDA margin of 30% to 31%. And I would be happy to actually see or meet as many of you as possible on the 28th of January when actually Philippe and myself will actually reveal and report our full year 2025 performance.

And with that, actually close the presentation. No, I don't close. I share my key messages once more, which is we have a clear strategy. I hope that became clear for value creation. We continue to outgrow our attractive underlying markets. We have a strong global network and will further strengthen it. And we, as One Lonza have made progress as promised a year ago. Lonza is set up for success. We are One Lonza, the pioneer and the CDMO market leader, manufacturing the medicines of tomorrow for our customers and their patients worldwide.

And now I close and hand over to Zain. Thank you very much.

Thanks, Wolfgang, for a great presentation. And I'd like to welcome Philippe Deecke, the CFO of Lonza as well to the stage to join us for the Q&A. [Operator Instructions]

I've already had a couple of questions that have come through. One question is on Vacaville. And I think you've said in the presentation, 4 contracts signed, more in the making. We had 4 contracts in Q3. So what's the latest there in terms of contracting momentum? It sounds like customer interest is still high.

Yes. Customer interest is high. And that probably is due to, of course, Vacaville being as such a very attractive capacity run by a very capable team, but it kind of makes sense as well, right, with the desire to regionalize supply chains and limited capacities in the U.S., this capacity obviously is highly valuable. And so we are in very constructive discussions with customers, but can't share anything else at least today.

But again, we are very confident that this will actually -- is a great solution to our clients and will contribute to our future business success.

And I think it's clear from the presentation, but just to make sure it's clarified for everyone, you've had a successful FDA audit. So I think it was a 483. So it sounds like that's all resolved now in terms of operations as usual.

Yes. I mean, to put that in perspective, 483 as such is a rather common thing. I mean sometimes at Lonza, we are able to actually get away with a totally clean sheet, so no observation. But I mean, as a matter of fact, it's typical that there are some observations. In this case, in Vacaville, they have been minor, classified as minor observations leading to voluntary actions indicated. Very few, most of them closed, maybe even all, I don't know. But I mean, the takeaway is this was a very welcome -- not surprising, I have to say, but a great confirmation of the high-quality level at which the Vacaville team operates and obviously, a very, very good outcome for ourselves, for Vacaville and also for our clients. So great news.

And last question for me on Vacaville would be you've had 4 contracts so far, more to come hopefully soon. So could you put into perspective how many more contracts you need to achieve your midterm outlook for Vacaville to maintain sales stable over the midterm?

I actually would refrain from giving a figure because it will just naturally be wrong. I mean this can be very large contracts over many years. There can also be smaller ones still of high value. So I actually wouldn't share a specific figure. But maybe share how we see sales to evolve over the next years.

First of all, until roughly 2028, we expect the Vacaville site to operate at around CHF 0.5 billion, plus/minus revenues. Why is that so? Because we actually decided and made it a conscious decision to take the time to do the upgrades needed to make it a fully highly flexible CMO manufacturing site. And for that, you need downtime, which means you can't manufacture during that time. But we will benefit later on by having a stronger asset, a more flexible asset and more efficient asset. And this site in terms of revenues will then take off probably starting around 2028 and fully flourish beyond 2030.

And you talked about the One Lonza strategy and the Lonza Engine being able to deliver growth above market. We've seen a lot of changes in the market over the last 15 months, and you alluded to some of it in the presentation, particularly on the policy side, on the tariff side. But as you look back over the last 15 months, how do you feel now about the 10% to 13% CDMO growth? And what are the key drivers to be able to achieve the upper end of that range versus the lower end?

Yes. Actually, while a lot of things are happening, and they are relevant. So I'm not saying that they wouldn't be relevant. But in the end, we decided to really step back and ask ourselves, what does it mean for us? And how are we positioned towards those changes, which is probably at the heart of things, the desire to create more regionalized supply chains. And here, the outcome is while our, let's say, regional supply -- I mean, our own supply and regional demand in the market is not always everywhere a perfect match. We actually are everywhere where it's important and have the starting position to actually build out accordingly.

So in this regard, we actually didn't see a change or the need to change our organic growth model and still believe that we actually will be able to deliver going forward on average over time towards that ambition. It can be sometimes even above maybe, sometimes at the lower end, hard to tell, but that's our view I mean, even considering the changes that we all experienced over the last year.

And looking into '26, I appreciate we'll hear more in a few weeks from now, but what are the key drivers that we should bear in mind in terms of '26 CDMO growth for the top line and also margin?

Yes. It's actually an easy answer because we can't talk about it until the 28th. But I think we see the dynamics continuing in all the modalities we are. I think especially in mammalian biologics, the dynamics are very strong. We've seen again for 2025, a very strong signing year. We'll share the numbers at the end of January, which, of course, contributes to the future growth in '26 and beyond. So I think the modalities perform well. Our assets are ramping up.

So I think the only headwind that I think people know is we are sitting on CHF 0.5 billion of Vacaville sales, which are not growing. So in that case, this is some kind of a financial headwind, if you want. But we believe that the rest of the network is so strong that we can actually offset that. So we're not concerned about this. So actually, '26 so far looks good. Also the funding in biotech, which is a small part of our business, seem to regain a little bit of strength at the end of the year. So that's also a little bit of a cloud that was hanging on the CDMO industry, which is probably a little bit lighter now.

That's very clear. Any questions in the audience? On the biotech funding piece, you mentioned the improvement in trends, and I think there's been green shoots that we've seen even this week at the conference and it was in the last year. So just to remind us how long that would take to manifest itself in RFPs? What's the latest that you've seen in RFPs that we should bear in mind for '26?

Yes. So I think maybe to put it in perspective, I think 70% of our business is actually commercial business. So we are a CDMO that work and makes the money mostly in commercial contracts. But of course, clinical and early-stage biotechs and molecule work is important for us to have this pull-through to learn about what's going to be needed in the future. So it's a business that we want to do and that we nurture. But it's not a big growth or driver upwards or downwards depending on how the industry goes.

I think so far, usually, when you see an uptake in funding into the biotech industry, this takes 2 to 3 quarters to actually materialize. Why? Because companies are getting the money. They need to review their development plans, they need to issue RFPs, companies to come back. So this usually takes time. And the earlier the phase, the smaller these amounts are. So these are the beginning redevelopment work. There's a lot of manufacturing, batch manufacturing that is involved in this. So again, I think it's usually a good healthy sign of health for the industry. It's not a significant growth driver or growth impact for Lonza. But of course, we're always happy if the industry performs well, we ultimately perform well.

That's very clear. And another topic that's been a debate has been on the U.S. competition, and you touched on it in terms of pharma investments and concerns over insourcing versus outsourcing, but maybe broaden that even the CDMOs that we've seen invest in the U.S. after you invested in Vacaville and maybe trying to catch up with you.

What are your latest perspectives there? You put the slide that you're leading share in the U.S. So how are you thinking about the competition that's emerging in the U.S. from likes of Fujifilm and Samsung and any impacts that we should be thinking about?

Yes. Obviously, we don't comment on what other companies do. Of course, see it, observe it and if need be, to make conclusions. But in the end, I think the key message for ourselves is Vacaville, I mean, obviously, even more so since what's happening in 2025 is a great addition to the Lonza network and will add significant value to the company.

I mean, with us having a great presence in Portsmouth, in Walkersville, in Houston, in Vacaville and other places, we actually have a great platform, I would say, on which we can actually to which we can add additional capacities if need be. So in this regard and in general terms, I think we are well positioned to also lead the industry going forward, including a leading in the U.S.

That's clear. And I suppose on the tariff front, I think we've had a few months now to digest any potential impact for a lot of the large cap pharma maybe who signed an MFN deal, there's no impact. But has there been any change that you've seen in trend in terms of interest in Vacaville as a result of some of the tariff announcements that we've seen?

Yes. Let's say, this idea of regionalized supply chains is something which we, of course, hear very often. And to kind of briefly elevate the topic, in the end, in my view, it's reaching out far now. But anyway, I mean, I think the COVID pandemic has shown the world how fragile and how complex actually supply chains are. And as a result of that, I think we're having the discussion today, how we can actually make them more robust, more regional. And in this regard, that is not so much of a surprise. And in the end, customers are interested in that. And of course, we engage in those discussions and can build on a great starting position in terms of the distribution of our assets that we already have today.

On the other hand, it's not that we would actually perceive panic or deep concern in our conversations with customers that they -- in the sense of them, I mean, intending to shift away from A to B in an uncontrolled hectic manner. Now it's a calm rational approach. We're having the right discussions and are, in many cases, able over time to offer solutions to that rightful desire of our clients.

And maybe I'll close with one last question on CHI. You mentioned the legal entity carve-out is complete. So latest perspective there on the exit process and potential timing. And maybe to think about the deployment proceeds, you put the funnel on the slide as well, but how you're thinking about the balance in business development versus investing internally?

For you, Philippe.

Yes. Maybe I'll start. So thanks for the question. So whoever has done a carve-out before, this is always a very lengthy and complex process. You need to go to every legal entity, you need to split them, you need to separate systems process, et cetera. So I think all this work, I think we've made great progress in 2025. So I think that all worked well.

In terms of the exit process, that's really a private process between us and the potential new shareholders so that we will inform you whenever we have something more to say on this. So no change on that front versus where we were in Q3. But more importantly, I think it's important to note that the business is actually improving. I think our Capsules business was flat year-over-year. Remember, it went through a downward phase after COVID, where there was a lot of Capsules on stock. And so this has gone away. We've seen the business grow in the second half. We were flat again in H1, growing in the second half so that we feel really good about -- the growth is coming back. We feel very good about also the margin is coming back when sites are more utilized.

So overall, the business, I think, is really performing as we planned. And that is, I think, is the most important and the exit process moves on, and we will update you when we have news to say.

Perfect. With that, I think we're out of time. So thanks very much, Wolfgang. Thanks, Philippe. Thanks, everyone, for joining.

Thank you.

Ladies and gentlemen, welcome to the Lonza Q3 2025 Qualitative Update Conference Call and Live Webcast. I am Sandra, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Philippe Deecke, CFO. Please go ahead, sir.

Good morning, good afternoon, and a very warm welcome to our Q3 qualitative update. Before we go into more details, please let me remind you that we intend to provide you with a general business overview with our qualitative update, but we will not be sharing figures related to our financial performance. We will do so on the 28th of January with our full year update.

Let me start with an overview of our group performance before we move to the performance of our business platforms and [ THI ]. Afterwards, I will provide you with an update on our business contracting and our growth projects, followed by the current macroeconomic situation before I close for the Q&A session.

Today, we report a strong Q3 performance across our CDMO businesses aligned with our expected full year trajectory. Supported by this strong performance, we are confirming our 2025 outlook for the CDMO business, which we upgraded at half year, with sales growth of 20% to 21% at constant exchange rates compared to the prior year and a core EBITDA margin in the range of 30% to 31%.

Excluding Vacaville, which is now expected to contribute at the upper end of the range of around CHF 0.5 billion in sales and a better-than-expected core EBITDA margin in 2025, we expect low teens percentage organic CER growth and a margin improvement in our CDMO business, in line with our CDMO organic growth model.

As anticipated at our half year release in July, we confirm our expectation of higher sales in H2 2025 than in H1. We see a healthy progression of our core EBITDA margin in line with the 2025 outlook. Progressing well on its expected recovery path, we also confirm our full year 2025 outlook for the Capsules and Health Ingredients for CHI business at the low to mid-single-digit percentage CER growth and an improved core EBITDA margin in the mid-20s.

Based on FX rates at the beginning of October, we can reiterate an anticipated year-over-year headwind of around 2.5% to 3.5% of sales and core EBITDA for full year 2025. However, our margin is well protected due to a strong natural hedge and our hedging program in place.

Moving to the performance of our business platforms. Let's start with Integrated Biologics. Integrated Biologics continue to see strong momentum with robust demand for its large-scale mammalian assets. This is further supported by Vacaville, as I just commented on. In our small-scale mammalian assets, we see a high level of utilization, and we have a good level of visibility for the remainder of this year. But let me come back to the early-stage business later to provide further context and outlook. Overall, we are pleased to report a continued good operational execution alongside maturing growth projects and growth and margin drivers in our Integrated Biologics business.

Turning to our Advanced Synthesis platform. We continue to see strong commercial demand for our small molecules and bioconjugates capacities as underlined by the deal mentioned in our Q3 release, signing a large multiyear supply agreement in small molecules. Growth is supported by new capacities in small molecules with our new highly potent API plant and bioconjugates. The business platform further benefits from a robust operating execution and the demand for complex products supporting margins as witnessed already with our half year results.

Our Specialized Modalities platform improved in Q3 as expected. Also, we expect the full year performance to remain moderate in the context of the softer first half. Deliveries are weighted into Q4 and depending on the progress of key customer projects and decisions, sales may also fall into 2026.

Life Science had a good Q3 with robust growth, and we are pleased to report that microbial returned to growth in Q3 after a softer H1 performance.

In Cell & Gene, ongoing pipeline variability and complex manufacturing continues to weigh on asset utilization. While we anticipate a gradual recovery in operational performance, it will remain below the strong execution seen in 2024. Cell & Gene is a business with strategic relevance to Lonza and is our aim to increase resilience of the business over time, commercially and operationally. But in the meantime, some business variability may persist.

Our CHI business returned to positive CER growth in Q3, in line with the expected full year trajectory for 2025. We are pleased to report that also the pharma capsules business is seeing improved demand trends and returned to positive volume growth in Q3. We can, therefore, confirm that both our nutraceuticals and pharmaceutical capsules business has moved beyond the post-pandemic destocking phase.

In the current geopolitical environment, our manufacturing footprint in Greenwood, South Carolina and Puebla, Mexico is continuing to support CHI's customers to navigate the evolving geopolitical environment. In the U.S., recent preliminary affirmative countervailing and antidumping decisions continue to be in place, allowing more balanced competition for pharmaceutical and nutraceutical capsules in the U.S.

In Q3, we progressed with the necessary internal carve-out measures to prepare our exit from the CHI business. The good business momentum highlights the attractiveness of the CHI business as a leader in its markets, and we are confident in the business ability to return to historical CER sales growth in the low to mid-single-digit percentage and a core EBITDA margin above 30%. We are, therefore, confident to exit the business in the best interest of our customers, employees and shareholders, and we will do so at the appropriate time.

Before turning to our growth projects, let me say a few words on contracting. For 2025, we expect again a healthy level of contract signings across technologies and sites. Recently, we were able to sign several significant contracts, including a further strategic long-term contract for integrated drug substance and drug product supply of bioconjugates. In our small molecules technology platform, we signed a large multiyear commercial supply agreement. And in Integrated Biologics, we were able to secure a fourth significant long-term supply agreement for our Vacaville site. In Vacaville, we expect further contract signings in the coming months, and we continue to see strong customer interest for large-scale U.S. capacity.

Let me say a few more words about Vacaville. One year after closing the acquisition, we are very pleased with the site's integration into Lonza's network, which is progressing in line with plan. The site continues to demonstrate robust execution in support of Roche and maintaining excellent quality track record, which is also reflected in our expectations for Vacaville continuing at the high end of our initial estimate for 2025. The site is also preparing new product introductions for 2026 and the first phase of CapEx is progressing as planned to the [indiscernible] system and [indiscernible]. [indiscernible] our new highly potent API facility is progressing well, and we commenced full commercial operation in July 2025.

Our large-scale mammalian facility also showed good progress in ramp-up activity in Q3. GMP operations are underway and commercial production is expected to ramp up gradually from 2026 onwards. Ramp-up activities for both facilities are those progressing in line with plan.

Before closing my remarks and opening for the Q&A session, let me reiterate our expectations of no material financial impact on Lonza from the currently announced official U.S. trade policies. The so far announced U.S. tariffs do not include tariffs on API, intermediates and raw materials as described in the Annex 2 of the Executive Order. We further remain confident that our well-diversified global manufacturing footprint with large capacities in the U.S., Europe and Singapore will enable us to support our customers' global manufacturing requirements today and in the future.

We, of course, remain vigilant to the continued evolution of the situation and potential impact on our businesses. We also continue to closely monitor biotech funding trends and recent fluctuations in funding levels are expected to have only a minimal impact on Lonza's growth momentum in 2025 and beyond, with early-stage activities representing only approximately 10% of the CDMO business and only a portion of that business originating from companies requiring funding.

To close, let me provide some final remarks. Lonza is on track to deliver on its full year 2025 outlook. We see strong contracting demand with customers seeking Lonza's services for their strategic projects. Our growth projects are on track and are contributing to our growth this year and will continue to do so also in the years to come. In the current geopolitical environment, our large commercial business provides stability and our global asset positions us well to support our customers in the complex manufacturing needs.

With that, I would like to thank you for your time and hand over to Sandra.

[Operator Instructions] Our first question comes from Ebrahim Zain from JPMorgan.

Hopefully, you can hear me okay. This is Zain Ebrahim from JPMorgan. I'll stick to one question, which is on Vacaville. So just on the significant contracts you announced this morning, how should we think about the timing of tech transfer for the contract? And when can it start contributing to revenues? And related to that, just based on this contract, where are you with respect to your target for being able to maintain Vacaville sales stable over the midterm?

Thank you very much for the question. So I think as we've stated in the past, I think large commercial contracts are usually not for immediate use of batches. It takes time to tech transfers, as you say. But I think all the contracts we are announcing for Vacaville are part of the plan to offset the reduced need for batches from the initial Roche contract. And so this new contract is part of that plan and reconfirms that our stated trajectory for Vacaville of more or less flat sales in the next few years is exactly on track. So this contract will start working the [indiscernible] site next year [indiscernible] to revenue over the next 2 to 3 years.

The next question comes from Charles Pitman-King from Barclays.

Charles over here from Barclays. Hopefully, you can hear me okay. Just a question, please, on guidance. Just wondering, given you kind of raised the backfill outlook to the upper end of your around CHF 0.5 billion range this year, but you ran the top line guide. I was just wanting to confirm if there's one portion of your business that you think is kind of deteriorated such that you are just kind of reiterating that top line guide?

And just maybe whilst we're on guidance, I was wondering if you were -- if you could provide commentary on your thoughts on FY '26 guidance next year, which is currently looking for low double-digit growth. I know you don't typically comment, but worth asking.

Yes. Thank you, Charles. Thank you for offering the answer to your second question. [indiscernible] more seriously. Look, I think on guidance for this year, I think we gave you a range. There's always things that move up and down. So certainly, I think we're pleased with the Vacaville progress this year and continue to be pleased with it. So that's helping us.

On the other hand, there are, as we mentioned, some uncertainty on SPM. So I think within that range, this is what the puts and takes are. So that's for 2025. We're 3 months away. So we kind of have good visibility on what's going to happen for the rest of the year.

On 2026, as you know, we usually guide in January when we report full year numbers. So we will stick with that. For 2026, I think we talked about early stage, which is not going to have a material impact on our numbers no matter what the funding level is. And I think we're very pleased with the contracting, as we said, for 2025, which will also help in '26. So, I think everything is in line for '26, so far [indiscernible].

The next question comes from Charles Weston from RBC Europe.

I wanted to stick on 2026, please. So not asking for a number. But since the large mammalian Visp asset will be ramping in '26, which could presumably be a bit dilutive to margin with a relatively high base in Advanced Synthesis in Vacaville, there might be some headwinds to margin improvement year-on-year in 2026, perhaps a bit offset by the Advanced Synthesis improvements. But are there any other moving parts that I haven't mentioned that could drive an improvement next year?

Yes, Charles, so again, you summarized very well, which is great to hear. I think, again, yes, we have large growth assets that start dilutive as it is very normal. Vacaville, I think, is probably more of a top line headwind because this is going to be more or less flat for next year. So that's a big block of sales, if you want, that does not contribute to growth next year. Nevertheless, I think our organic growth model is looking at low teens growth and improved margin year-over-year. And that's, I think, for now the new best assumption for next year.

The next question comes from [ Theodora Rowe Beadle ] from Goldman Sachs.

So just on the separation of the CHI business, is the process of carving out this business now complete? And are you able to share with us anything in terms of the timing of separation or when you'll be able to communicate the decision?

Yes. Thank you for the question on CHI. So I think the progress on the internal separation, which contains of legal entity work, [indiscernible] as I said in my speech before, is progressing well. I think we're nearing completion of that. And I think the rest of the process is really an internal process that is going to be between us and the other parties and we will inform when things are decided.

The next question comes from James Vane-Tempest from Jefferies.

On back of [indiscernible], I mean you've announced you won a new contract and there's potentially some in the coming months. So just to clarify, should we understand that there could be some by year-end, but we're not going to find that out until full year in January if you don't plan to disclose more in real time like your peers? I guess I'm asking this because some of them have been more visible to the market in terms of the number of contracts they've signed, which suggests a much more competitive environment. So perhaps I can also ask what you're seeing on that front?

Yes. Thank you, James. So again, we usually do not communicate all the contracts we're signing. This would be issuing a lot of release. I think if you remember, our signing in 2023 was about CHF 12 billion. Last year, it was about CHF 9 billion, if I recollect right. So I think these are a lot of contracts being signed. We do not have a history and we do not mention every single contracts we're signing. I think we decided to do so on Vacaville to provide you, I think, more visibility into our confidence to fill the assets over time. So this is the reason why we're kind of providing you the Vacaville contracts on a more regular basis.

And usually, our customers also have no interest for us to publicly announce their contracts. So we don't do so. I think indeed, I think if we were to sign further contracts this year, you'll probably hear about it at the end of January when we report our full year numbers. And I think as stated as well, I think we should get off the rhythm of announcing contracts for a single site. And probably we won't do so in 2026.

But let's see, I think the contracting situation is very strong. We're also very pleased with the interest in Vacaville. So we have a lot of concurrent negotiations ongoing. Some will finalize over the next few months. Others may take longer. These are very large contracts. These are usually also complex multiyear contracts that need time to be negotiated.

In terms of the competitiveness and what our peers are doing, you would have to ask them. I think for now, we are very pleased to have a very strong footprint in the U.S. with attractive capacities available in the U.S., but also our sites in Europe and Asia see good demand. And you saw that some of the contracts that I mentioned today also include some of our non-U.S. assets. So I think on the contracting side, we're very pleased with the progress and with the interest of companies, large and small to contract with Lonza.

The next question comes from Patrick Rafaisz from UBS.

Just a follow-up on the large contract wins. For Vacaville, is there any chance you could add a bit of color on size and types of capacities, the amount of capacity required. And the same for the large bioconjugate contracts, for which site was that specifically? And can you add some color on what types of services from your end did this include?

Yes. Patrick, happy to take your question. So I think on the Vacaville contract, I'm not going to directly answer your question, but maybe give some more color about the contracts that we have signed so far. I think all of these contracts, including the latest one, are multiyear contracts that are significant for the site as well and which are very important for us to offset the declining revenue coming from Roche. So I think these are very helpful projects because they start contributing very soon, helping us to maintain flat sales for Vacaville.

Important also to note that we see great interest for both assets within Vacaville. I think, as you know, we have a 12,000-liter asset and a 25,000-liter asset. And I think also coming from the market, I think there were certainly question marks around the market still requiring such large reactors like the 25,000 liters we have. And we're very pleased to say that, yes, indeed, there is big demand for such large reactors. So we see contracting for both our 12,000-meter reactor and our 25,000-meter reactor.

So again, Vacaville for us following a very -- tracking very well along the plan that we had. And this confirms our outlook for kind of flattish sales to 2028 and then increasing sales further on as we ramp up utilization of the site.

For the integrated offer contracts that we also mentioned today, I think here, we are offering several services, including producing the protein, the conjugation and the drug product. So again, I think the reason why we mentioned this contract to you is because, again, this shows the interest from pharma companies, large and small, to ask us for integrated business, which cover more than one modality. So more and more we get asked to do not just the protein or not just the conjugation or not just the drug product, but the combination of several modalities across our platforms. And I think we believe that this is, again, something where Lonza can clearly differentiate, of course, in the areas of ADC, but not only.

The next question comes from Thibault Boutherin from Morgan Stanley.

My question is just on tariff and the CapEx announcements in the U.S. by large pharma players. Clearly, there is a push from the U.S. administration to bring more manufacturing to the U.S. So did you have discussion with the administration and confirmation that investing through CDMOs such as Lonza meets the administration goals for locating manufacturing in the U.S.? So it makes sense that it does, but just wondering if you had an explicit confirmation that it would fit what you're looking for?

Yes. Thanks, Thibault. So I think there are multiple discussions happening. I think with the U.S. government, certainly, pharma companies are talking directly. The Swiss government is talking directly. We also have contacts that we use. I wouldn't go into more details of what's happening in these discussions until there's a result. I think this would be premature. So I think we'll wait until something is official and is being communicated. But overall, I think I reiterate that also we at Lonza are investing significantly in the U.S. So of course, if you compare this with the numbers of big pharma, this is a different magnitude. But I think as an industry leader, we are investing significantly in the U.S. in multiple sites -- of our investments in Portsmouth, of course, our investment -- of our large investment in California and Vacaville, and there are other sites that are seeing further investments. So I think we feel very confident to also here be very much in line with the intention of the government, but more importantly, the intention of our customers to have capacity and strong capacity in the U.S. So we will continue to offer increased capacity in the U.S. And if our pharma customers can leverage this, then even better. But in any case, having a footprint in the U.S. is helpful to our customers.

The next question comes from Manesiotis Odysseas from BNP Paribas.

First one, Philippe, I wanted to follow up on the detail you provided on the contracting between Vacaville bioreactors. Is it fair to interpret your -- the details you provided there as that you've landed in these 4 contracts, at least one of them has to do with the 25,000 liter? And on top of that, within these 4 contracts, you also have contracts for more than one bioreactor? So that's the first one.

And secondly, could you remind us the pace of the new Visp mammalian capacity ramp? Is this still expected to run at full utilization by '28, '29? And has there been any plans change given the recent push to reshore capacity in the U.S.?

Yes. So let me give you -- maybe reconfirm what I want to say just before on the Vacaville contract. So indeed, I think we have been able to contract for both assets for the 25,000 and the 12,000. So I think there's a different mix in the contracts. I'm not sure I understand what you meant with the contract for more than one reactor. But I think I can confirm that the new contracts that we have signed are involving both 25,000 and 12,000 assets.

I think on the Visp, on our large-scale mammalian facility, I think we mentioned a while back how the profile of such large-scale facilities look like. And indeed, it usually takes 2 to 3 years also to ramp. So since we started late this year, you can do the math as to when we would expect utilization to be high and contributing favorably to our bottom line and to our margins. So I think this asset is a typical large-scale asset that will follow this path. Yes. So everything is in line. We started GMP processing this quarter. So progress is in line with our plans.

The next question comes from Max Smock from William Blair.

Maybe just a quick one here on Vacaville. I appreciate the fact that revenue is going to be flat next year in 2026. But in the past, you've talked about margins at that facility ramping up as you replace some of that Roche revenue with additional third-party customers. Can you just talk about how you expect Vacaville margins specifically to trend next year?

Yes, Max. So I think on Vacaville, again, we said 2 things. One, I think revenue will be more or less flattish through '28 and margins will progress over time to basically be neutral to group by 2028. So I think this continues to hold true. I think margins this year were a bit better or better than we expected, as we mentioned in our first half call. Now of course, this was also an easier year. 2025 was an easier year for Vacaville since they were basically continuing to produce the products that they knew from before for Roche with not a lot of new tech transfers to do, et cetera.

So 2026 will be more challenging, if you want, for Vacaville because they have not only the implementation or the execution of the CapEx investments to do, but they also need to start to onboard and tech transfer new programs while still delivering the batches for Roche. So it's a more complex year.

Nevertheless, I think we believe that our goal for 2028 is confirmed, and we'll have to see closer to next year how the margin exactly behave versus what they do this year. I think we had before the question from Charles around the dilutive effect in terms of growth for the company. So in terms of growth, yes, this is a dilution. In terms of margin, we'll have to see if we can replicate this year's margin or not. But the progression -- the progression over the next 3 years is confirmed.

The next question comes from Falko Friedrichs from Deutsche Bank.

My question is on your Cell & Gene business. And now that we are in the middle of your fourth quarter, can you speak a little bit more about your level of visibility into this year-end pickup and what exactly is driving that?

Yes. So I think if you talk only about the Cell & Gene business, I think there, we met in H1 that we had also operational issues. I think remember this is a much more manual and very complex manufacturing process. So there, I think we see improvement in the second half and that business has certainly improved versus the first half. But I think we're still managing the complexities. And overall, for the year, we don't expect this to be as good of a year as we had in 2024.

Now if you talk about SPM as a platform, I think there also, we saw better performance in the third quarter. We remain with several customer decisions and customer projects that are late -- happening late this year in Q4. And so these are the one that could still move between '25 and '26 and this we will only know probably late this year.

Microbial, which is the second large business in this platform, is performing well and it's usually a very stable and strong business. We explained the first half in our July call with mainly a very high base and some contract -- some construction in our assets in microbial. But otherwise, this is kind of a stable and nice business. So overall, we see SPM better in the second half, but for the full year, certainly will be difficult to offset what happened in the first half.

The next question comes from Sebastian Bray from Berenberg.

It's on the early-stage fraction of the portfolio. It was mentioned earlier in the call that it looks relatively robust, at least on a few months' view. How far does the visibility extend in this area? And if conventional biotech funding measures, which suggest that this business faces a funding squeeze in '26, are no longer a reliable guide, where is the money for these end customers coming from? When they go and sign the contract and if research funding is not there anymore, where is it coming from instead?

Sebastian, so let me first reconfirm what you said very quickly. I think the early-stage business is strategic for us because it allows us to look very early into the pipeline of pharma companies as to what services and technologies will be needed in the future and also contributes clearly to our future commercial utilization. So I think this is an important business for us. But again, this is not a very large business for us given the sizable commercial contracts and commercial assets that we have. So this early-stage work is about 10% of our CDMO revenues. And also for us, the funding in biotech is only a portion of what drives this early-stage work for us because many of our customers don't require external funding. This can be large pharma, large biotechs, midsized companies that have their own revenue and own funding. So only a portion of the 10% is actually really relying on external funding being from [indiscernible], follow-ons, venture capital, et cetera, et cetera.

So I think what we wanted to make clear is that the funding levels that we're seeing today, and I'll come to this in a second, will not play a major role in the Lonza performance. And we have visibility of roughly 6 to 9 months in that business. That's usually the delta that you see between any movement of funding and then again, these smaller company relying on funding being able to deploy the capital they received or having to reduce their spending because of the lack of funding. So this is usually the visibility that we have.

So for now, we would see roughly into the first half of 2026. And for there, I think we see good level of utilization certainly for '25 and early '26. I think the inquiries that we're seeing have reduced slightly throughout 2025, but not dramatically.

And on the funding side, actually is good news. Q3 was actually better than Q3 last year. So I think this is not only bad news there. I think we saw a great increase in pipe funding, which is one of the other mechanisms for these companies to get money. [indiscernible], I think, was holding well at similar level as previous quarter. So I think this is still something that's volatile, but the decline that we've seen since early '25, at least has been put on hold for Q3. That's at least what we see, but that's probably the same data that you are all looking at.

So I would say we're happy with the progress certainly in '25. We are confident that we can manage '26 and that we will continue to see interest for early-stage work to then be retained within the Lonza network over the years to come.

Ladies and gentlemen, this concludes today's question-and-answer session. I would now like to turn the conference back over to Philippe Deecke for any closing remarks.

Yes. Thank you, everybody, for the question and the interest in Lonza. Again, a strong Q3 and confirming our outlook for this year. So I think good news from our end, and I wish you a great end of your day and talk to you in January.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

Ladies and gentlemen, welcome to the Half Year Results 2025 Investor and Analyst Conference Call and Webcast. I am Sandra, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Wolfgang Wienand, CEO. Please go ahead, sir.

Yes. Thank you, Sandra, for -- to all our guests for joining the call today. Good afternoon to those of you based in Europe, and good morning to those of you joining from the U.S. This time last year, I joined the half year results call to briefly introduce myself to you, but I was still very much the new joiner, having commenced my tenure as CEO just a couple of days before.

This call today marks a milestone as I have now completed my first year in the role. And it has been a pleasure to meet many of you at our investor update and on our roadshows since then. And I'm looking forward to continuing our dialogue during our scheduled trips in the coming months. Today also marks a milestone for One Lonza as we report on the performance of our newly formed business platforms for the first time.

You will recall that we used to report on 4 divisions, even up until the Q1 qualitative update. However, we have now formally transitioned to our 3 new CDMO business platforms, Integrated Biologics, Advanced Synthesis and Specialized Modalities. Alongside these 3 core CDMO platforms, we will also be reporting on Capsules and Health Ingredients, CHI, of course, which continues to operate in its existing structure. We will also share an update on our exit plans for that part of our business.

But before we jump into the details of our half year results, let's have a quick look at our disclaimer regarding forward-looking statements that Philippe and myself will be making during this call. This is also available in the online version of our presentation for you to download and read in your precious spare time.

Looking at our agenda today. We will start with our group business and some of the highlights and key events over the course of H1. I will then hand over to Philippe, who will do a deep dive into key areas of our financial performance. After that, I will share more detail on our business platforms before finishing with our outlook, both for our CDMO business and for CHI.

After we have concluded the presentation, there will be a short pause so that we can switch from webcast to video for our Q&A. With all that now clear, let's start with an overview of our group business at the half year. Here you see my key messages on our business in the first half. We have delivered a robust performance in H1, which means we now expect to deliver the full year ahead of plan.

We have reported CHF 3.6 billion in sales across the group, which translates into 19% CER sales growth as compared to 2024. This resulted in a core EBITDA of CHF 1.1 billion, which represents margin growth of 0.4 percentage points to now 29.6%. During the first half, we retained our dual focus on discipline and delivery and top line growth with our overall CapEx reaching 19% of sales.

Focusing down from the group business actually on to our core CDMO business, excluding CHI, we saw 23.1% CER sales growth, leading to a core EBITDA margin slightly above 30%. In light of the strong H1 performance, actually together with our positive view on the second half year, we have decided to raise our guidance to an upgraded CDMO outlook for full year 2025 of 20% to 21% CER sales growth and a core EBITDA margin of 30% to 31%.

Our performance, and I guess the adjusted outlook is a testament to the hard work and dedication of our people across One Lonza's global network. And I would like to thank all of them for their significant contributions to our business as they have maintained performance levels, while at the same time, embracing the structural transformation of our company to a new target operating model, and I'll briefly speak to that later in the presentation.

Finally, as we reflect on our H1 and consider our planned performance for H2, we remain actually confident that we can continue to deliver in an uncertain macroeconomic and geopolitical context. We will continue to monitor the global landscape in order for us to navigate, but remain resilient to the challenges that may impact our businesses or industry over the course of H2.

Let me now say a few words about some of our business highlights in H1. Looking at the technologies that sit within our CDMO business, we see Mammalian has strongly supported sales growth in our Integrated Biologics platform. Within our Advanced Synthesis platform, our bioconjugates and small molecules offerings have strongly driven sales. And finally, turning to Specialized Modalities, we see sales are supported by our Bioscience business returning to healthy growth levels after a softer year in 2024.

Across our technologies, we are seeing sustained commercial contracting interest in our capacities across the U.S., Europe and Asia is strong. In H1, a particular highlight was the signing of a long-term strategic antibody drug conjugate supply contract for the integrated delivery of both drug substance and drug product, which actually underpins our leading market position also on that playing field.

Looking at the large acquisition last year, we are continuing to see high interest in our mammalian capacity in our new site in Vacaville, with new customer contracts currently in negotiation and actually further signings expected soon.

Our resilient CDMO business model and our geographically well-diversified global footprint, including a substantial presence in the U.S. largely shield us from potential U.S. tariffs and at the same time, enables us to support our customers in navigating and minimizing the potential impact of such tariffs. This is an area that we will continue to monitor closely in the coming months to ensure that we and our customers remain resilient to changes.

As previously shared, we can confirm that we, as Lonza, expect no material financial impact from current U.S. trade policies. That aside, our resilience is also fundamentally incorporated into our CDMO business model itself as we maintain a disciplined focus on the balance of customers and molecules within our portfolios.

You will see here on the left side that our CDMO customers are weighted only slightly towards big pharma, and this is balanced by a minority of small and midsized pharma and biotech customers. Lonza has created attractive offerings for customers of any size and any level of maturity with the right combination of technologies and expertise to support their individual journeys from innovation to commercialization.

Establishing long-term customer relationships based on trust and collaboration carries strong strategic value for both parties as we see a high proportion of repeat business from customers of all sizes, and One Lonza is especially able to do this.

Looking at the CDMO sales split by molecule development phase, you can see that around 10% of business is positioned in the earlier stages of the life cycle around preclinical and Phase I. We see the value of capturing molecules at this early stage as it allows us to build long-term relationships with customers of all sizes from the outset of the molecules' journey and ensure we can collaborate to optimize the commercial potential of their discoveries.

However, the focus of our portfolio remains on Phases II, III and of course, commercial, which are areas of managed risk and higher level of certainty and visibility on sales. As in H1 2025, we continue to see strong demand for our global mid- and large-scale capacities. We are also seeing good levels of interest in commercial manufacturing of niche drugs as well as development work for new drugs in our small-scale assets, all this leading to high levels of utilization in such assets.

Looking beyond 2025, we are closely monitoring the biotech funding environment and also regulatory developments in the U.S. In the context of our well-balanced business and us continuing to see many growth opportunities available to us, we are progressing with our ambitious CapEx program in line with plan.

Our CapEx spend in H1 was CHF 672 million, equivalent to 90% of sales with 64% dedicated to diversified portfolio of growth projects across our 3 CDMO business platforms. These numbers reflect a period of comparatively high CapEx intensity, and we anticipate that this will gradually decrease in line with our CDMO organic growth model.

Specifically, we are continuing to drive projects across technologies with high commercial value in areas of sustained customer demand. In Integrated Biologics, we have targeted growth in our mammalian and drug product assets. In Advanced Synthesis, we are especially focusing on growth in our bioconjugates offering and in Specialized Modalities, we are driving growth in Cell & Gene Technologies.

Now turning from principle in theory to practice, let's take a moment to review progress on a snapshot of selected key projects. We have seen good progress actually in Visp, where GMP operations commenced in our new mammalian large-scale facility in late H1. Also in Visp, our new highly potent API facility is ramping up in line with plan, and I can confirm that we have started full commercial operations in July.

Vacaville remains a focus for investment, and we are currently in the first wave of our disciplined CapEx plan, which is focused on upgrading our level of automation as well as the multipurpose capabilities at the site.

Finally, in Stein, our new commercial scale aseptic drug product facility is on track within its revised time line as communicated to you in our Q1 qualitative update, and we anticipate that operations will commence in 2027.

Now coming as announced before to our new operating model. H1 was a time of intensive growth and delivery, of course, for our business, but we have also remained focused on delivering our planned transformation program in line with our new One Lonza strategy, which we shared with you at our investor update here in Basel last December.

As a quick reminder, the Lonza engine is now the centerpiece for how we think about our One Lonza strategy and sets out the five key components of our business as you see them on the left side of this slide. It is the Lonza engine, which drives long-term differentiation, competitive advantage, superior customer value and through all of that, long-term superior value creation for you.

Our transformation plan was designed to ensure that we optimize all five components of this Lonza engine and create the most suitable operating model to support the execution of our One Lonza strategy. While we have already discussed with you the new structure, its underlying rationale and expected benefits for our customers, for ourselves and for our ability to achieve our ambitious growth targets, I'm happy to report that the new operating model successfully went live on April 1, actually perfectly in line with our original and very ambitious time line and without any complications.

Our teams actually in a great manner embraced the change and quickly adapted to our new way of working while maintaining momentum in operational execution. This new operating model also forms the basis for our new reporting structure as already applied to the whole first half year of 2025, as you have seen.

Before I close my overview, I would like to share a brief update on progress in our preparations to exit Capsules and Health Ingredients, CHI. As we have said before, we plan to make our exit at the right point in time and in the best interest of all our stakeholders to maximize the value of the business. To support the process, we mandated external advisers earlier this year, and we have now made good progress in preparing the carve-out of CHI from our core CDMO business.

We are continuing to prepare a stand-alone setup and progress the separation of the CHI functions and IT infrastructure from the main Lonza Group. We will continue to provide updates on the exit process when we have further news to share. And with that, I'm happy to hand over to Philippe for him to share the update on our financials for the half year.

Thank you very much, Wolfgang. Good afternoon, and good morning to those of you joining from the U.S. Before we go into the details of our financial performance in H1 '25, let me remind you that from now on, our financial reporting framework will reflect our new business platform structure, which we implemented on April 1.

I would also like to remind you that growth is reported at actual exchange rates, except for sales growth, which is reported at constant exchange rates. In the first half of 2025, Lonza showed strong performance at both the group and CDMO business levels. With 23.1% growth in our CDMO business, we delivered above our expectations. The growth was mainly driven by first-class operational execution in our new Vacaville site and a very solid commercial CDMO business.

We are also pleased to report good growth in our small-scale CDMO offering, where we manufacture both molecules in early stage of development as well as lower volume commercial products. We are also pleased to report a core EBITDA margin in H1 of above 30% for our CDMO business, supported by good operational execution, disciplined cost management and improved margins of maturing growth projects. This has helped us absorb the margin decline in the SPM platform.

Group sales in H1 were affected by a negative 2% of currency headwind as the Swiss franc appreciated materially over the course of H1 versus the U.S. dollar, but more on currency in a moment. Looking at the details of our sales development versus H1 '24, you can see that integrated Biologics and Advanced Synthesis were the driver of our sales growth, benefiting from sustained commercial demand, a good growth project execution and the Vacaville acquisition, where sales are H1 weighted for this year.

This positive momentum was partially offset by a sales decline in Specialized Modalities, both from a high prior year base in Cell & Gene and Microbial and from a temporary weaker operational execution in Cell & Gene. Moving on to the details of our core EBITDA and margin evolution. We are pleased to report a flat margin of more than 30% for the first half in our CDMO business, supported by disciplined cost management and highly utilized assets across our platforms.

Integrated Biologics was able to show solid underlying margin progression and a higher Vacaville profitability than in our initial more prudent expectation. Advanced Synthesis, now combining small molecules and bioconjugation continued on its path of margin accretion already seen in prior years with strong margin evolution across both technologies.

Integrated Biologics and Advanced Synthesis both benefited from a good operational execution and improved margins in their respective growth projects. The lower margins in Specialized Modalities are explained by the lower sales and lower cost absorption. Finally, we faced higher corporate costs than in H1 '24 due to various smaller items such as FX hedging, higher social security and insurance contributions.

We expect that the higher corporate costs will normalize over the course of the year with the full year top and bottom line being comparable with 2024. Moving on to cash generation. We delivered CHF 0.2 billion free cash flow in the first half against a high prior year level.

The strong top line growth in this first half led to an increased need for net working capital, which impacted cash generation. However, relative to sales, net working capital reduced, and we continue to make good progress in reducing inventories. The decrease in free cash flow is also explained to a lesser extent by lower customer funding for certain growth projects.

As mentioned before, let me briefly turn to currency movements. This slide provides an overview on the past and expected FX impact on our sales, core EBITDA and core EBITDA margin for 2025. As you are probably aware, the U.S. dollar lost 13% in value to our reporting currency, the Swiss franc, between January 1 and early July. As a group, we generate around 2/3 of our sales in foreign currencies, with the dollar being the largest share, even more so now after the Vacaville acquisition.

The next largest foreign currency is the euro, which was more stable, however, with only 1% decline. For the first half, the translational FX headwind impacted sales by a negative 2 points and core EBITDA by a negative 1.3 points. Thanks to our global manufacturing network, we have a strong natural hedge, meaning that our revenue and costs in the different currencies are very well aligned.

This natural hedge, which we complement by a financial hedging program, provides a good margin protection against currency fluctuations. For the full year, assuming FX rates as of early July prevail for the remainder of 2025, we would expect an impact of negative 2.5% to negative 3.5 percentages on sales and core EBITDA.

Before closing the finance section, let me say a few words on our capital allocation framework in addition to what Wolfgang said earlier during his comments on the planned exit for CHI. As we shared in December at our investor update, we have clear priorities for our use of capital from operations.

First, investing in maintenance, infrastructure and systems is a priority to maintain our base business in good shape for the future. Second, we also gave you our commitment to maintain or increase our dividend year-on-year. Under normal circumstances, this leads us to the discretionary cash that we then use for growth investments, organic or inorganic.

While hypothetical for now, in the case of a straight sale, the CHI business exit would bring additional proceeds, which would increase our discretionary cash available for growth investments. In such a case, we would follow the same highly disciplined approach to decide upon organic CapEx or bolt-on M&A. We would do this based on clear criteria, ensuring strategic business fit with the Lonza engine and attractive return generation.

While our decision criteria for organic CapEx have clear financial thresholds, meaning 15% IRR and 30% ROIC at peak, the variety of bolt-on acquisition targets do not allow for such fixed thresholds. But our commitment for attractive return generation is the same for organic and inorganic investments, and while attractive M&A targets often arise opportunistically and cannot be planned, we have clear line of sight for the type of bolt-on acquisitions we are looking for, which we shared with you back in December during our investor update.

First, high-quality manufacturing capacities, which accelerate and derisk our growth agenda, like in the case of Vacaville and its large-scale mammalian capacities. Second, innovative technologies and IP that make sure we stay ahead of competition in the areas where we are active or broaden the scope of our business operations, like in the case of Synaffix and its ADC linker technology.

Third, portfolio expansions in business area where Lonza has a smaller footprint, like in the case of the still emerging Cell & Gene Technology business. With that, it's my pleasure to hand back to Wolfgang for an update on the performance of our business platforms. Over to you, Wolfgang.

Yes. Great. Thank you, Philippe. And now let's indeed look more closely at the performance in H1 for each of our business platforms, actually starting with Integrated Biologics. In Integrated Biologics, we reported strong CER sales growth of almost 40% compared to H1 2024, supported by the Vacaville acquisition and sustained high demand for both large and small-scale assets. We also saw healthy margin development in Integrated Biologics in H1. Good operational execution and maturing growth projects, together with the better-than-expected margin of the new Vacaville site resulted in a core EBITDA margin of 36%, an increase of 0.5 percentage points versus H1 2024.

In Vacaville, with H1 weighted sales, we saw better profitability than initially expected. In our mammalian technology platform, we have seen strong momentum driven by commercial demand alongside a high level of utilization also in small-scale assets with good visibility for the remainder of 2025.

We see sustained momentum in new contracting for our global mammalian capacity. Additionally, our large-scale mammalian asset in Visp is in ramp-up, and we expect the sales contribution to increase gradually over the coming years.

Across the business platform, good operational execution alongside maturing growth projects are driving both underlying growth and margin. In Advanced Synthesis, we reported strong CER sales growth of above 18% compared to H1 2024 with both small molecules and bioconjugates making positive contributions. We have seen particularly strong demand for complex small molecules in the first half, including highly potent APIs and bioconjugates. Sales growth has been driven by the ramp-up of growth projects, and we have a strong pipeline of confirmed orders and progressing opportunities.

Supported by growth project ramp-up, operating leverage and robust operational execution, the Business Platform's core EBITDA margin reached 40.3%, an increase of 6.9 percentage points versus H1 2024. The business successfully maintained its positive momentum, continuing the margin improvement trajectory established over the past years.

In Specialized Modalities, we reported CER sales at minus 9.2% and a core EBITDA margin of 17.3%, a decrease of 6.1 percentage points versus H1 2024. In CGT, pipeline variability led to lower asset utilization alongside also a softer operational performance compared to prior year.

By pipeline variability, we mean that the lower maturity and the smaller size of the Cell & Gene industry as a whole with a much smaller number of projects cause higher degree of volatility due to clinical failures and less diversification of such development risks in the smaller portfolio.

The softer operational performance refers to the greater variability of production execution due to the often complex and manual manufacturing process required for Cell & Gene therapies. We aim to increase resilience in our CGT business over time by expanding our portfolio, especially with more commercial molecules. Currently, we have 5 commercial products within CGT, the most of any CDMO in this space.

In Microbial, growth was impacted by the high sales and core EBITDA comparison of H1 2024. Additionally, the technology platform was impacted by a necessary plant adoption to accommodate a new customer in one of the microbial assets. Bioscience had a good H1 2025, underpinned by market recovery, and we are pleased to see that it has returned to healthy growth after a more difficult 2024.

Looking ahead, we anticipate stronger performance for both CGT and Microbial in H2 with delivery weighted into Q4. Finally, Capsules and Health Ingredients progressed on its recovery path with flat CER sales growth versus H1 2024, which is in line with the projected trajectory for the full year. Core EBITDA margin reached 26.2%, an increase of 1.4 percentage points versus prior year, supported by increased production volumes and the positive impact of productivity initiatives.

The capsules business has shown quarter-over-quarter CER sales growth since Q3 2024. The nutraceuticals capsules business saw good order momentum in H1, while the pharma capsules business is on track to return to pre-COVID volumes in the second half of 2025.

Looking at the external environment of CHI, the business is seeing limited impact only from current U.S. tariffs as we supply the U.S. market primarily from our U.S. site in Greenwood, South Carolina. Furthermore, our strong footprint in the U.S. is expected to support CHI and its customers in navigating the landscape as it continues to evolve.

Also in the U.S., we saw positive preliminary determinations in recent countervailing and antidumping filings, which are expected to restore competitive balance for nutraceutical as well as pharmaceutical capsules in the U.S. market.

As I mentioned before, we also made good progress in H1 with our internal preparations to carve out and prepare for the exit of the CHI business. CHI is an attractive business, world-leading in its markets. And as we can see from its half year performance, it is on a successful and sustained transformation journey.

In line with our guidance, we expect the business to return to CER growth in 2025 with an improved margin at around the mid-20s level. Now let's turn our heads to our outlook for the full year 2025. Today, as you have seen, we upgraded the CDMO outlook for full year 2025.

Our CER sales growth was previously expected to approach 20%, and this has now been raised to 20% to 21%. Also, our core EBITDA margin was previously expected to approach 30%, and this has now been raised to 30% to 31% excluding Vacaville, which is expected to contribute around CHF 0.5 billion in sales, we expect low teen percentage organic CER sales growth at improving margins for our CDMO business in full year 2025.

In line with this outlook, we expect sales in H2 to be higher than in H1, with the core EBITDA margin at similar levels for both half years. Supported by the good performance in H1 and continuing market recovery, we can confirm the outlook for full year 2025 for our CHI business. As a reminder, our outlook is a return to low to mid-single-digit percentage CER sales growth with an improved core EBITDA margin in the mid-20s.

In the midterm, the CHI business is on track to return to its historic sales growth in the low to mid-single digit and a core EBITDA margin of more than 30%. Before we turn to the Q&A, I would like to summarize the presentation with a few closing messages of mine. First and foremost, we have good reason to feel confident that One Lonza is well on track as we reach the end of the first half.

In H1, we delivered strong CER sales growth of 23.1% and a core EBITDA margin of 30.2% in the CDMO business. This was supported by sustained contracting across technologies and good progress on key projects. In the context of these robust results, we have upgraded our CDMO outlook for 2025 to CER sales growth of 20% to 21% and a core EBITDA margin of 30% to 31%, as just discussed.

And finally, CHI saw a tangible recovery in H1 and is on track to return to its historic CER sales growth and a core EBITDA margin above 30% in the midterm. This positions CHI well as we continue with internal preparations to exit this business.

With that, I thank you for your attention, and we will now take a 2-minute break while we set up the video recording for the Q&A session. We look forward to joining you again in just a moment.

The first question comes from Ebrahim Zain from JPMorgan.

This is Zain Ebrahim from JPMorgan. I'll stick to one question, which is just on the U.S. CDMO market in terms of how you're thinking about the balance between supply and demand there currently. I know we've seen some large contracts announced by one of your competitors. So how would you say interest in the Vacaville facility has progressed in H1 relative to your initial expectations? And somewhat tied to that, given the strong integration you've highlighted today and better-than-expected margins for '25, when do you now expect Vacaville margins to be neutral to the group?

Thank you, Zain for the question. I, for sure, take the first one. I mean, briefly, we do track the global supply and demand view. We actually do not typically boil it down to local markets. However, what we can tell is looking at the utilization of our capacities in the U.S., where we actually are the by far largest CDMO, we see continued high demand. That applies also to Vacaville -- high interest, I should say, but also to the other sites in the U.S.

When it comes to Vacaville, I mean, as you know, as we shared before, we actually have three commercial contracts signed already and a number of customer negotiations going on right now, which is why we are confident to be able to actually share with you the signature of next customer contracts.

What you might take into consideration when looking at the time line is that those contracts are actually can be massive and probably will be massive in terms of value and both parties actually spending the time to do it right. So -- but overall, our confidence in terms of Vacaville contributing to the business mid- to long term and already today is actually high based on the customer interest that we actually see from tangible conversations and negotiations with such clients. And the second part is that for you, Phil?

Yes, if you want. Yes. So Zain, so on the Vacaville margin, so yes, they were in the first half better than we had planned for, we had expected. However, I would not take this as a sign for the rest of the time for Vacaville, at least in the short term because, as you know, we have a significant portfolio shift to execute in Vacaville. And therefore, we stick to the guidance that we gave you earlier where the margins of Vacaville will become neutral to the group towards the end of the next 3 to 4 years. So we stick to that. Again, 2025 is a more quiet year, if you want, for Vacaville, where we are not yet really changing the portfolio.

The next question comes from Charles Pitman-King from Barclays.

One from me just on the Capsules and Ingredients business. Just noting that in the footnote 9 in the H1 report, you've confirmed that it's not being classified as held for sale or probable for sale given it's not ready for a sale, meeting the criteria of IFRS 5.

So just wondering what it is? What the requirements are? What do you need to see to convert that into a discontinued operation to kind of signal that you're getting close to a sale? And then just kind of following on from that, if you could provide me some thoughts on how you are thinking about the implications of this divestment on Lonza's return on invested capital and free cash flow.

Yes. No, thanks, Charles. So IFRS 5, two main criteria. I think, one, you need to classify an asset that's held for sale to meet one criteria, which is need to be able to execute the perimeter when you put it as held for sale. This is not yet the case. I think as you can imagine, we need to restructure the entire legal and legal entity structure around the world. We have CHI entities, which is a product business. So we have legal entities in many markets. Therefore, this is not ready yet, and therefore, this criteria is not met today.

The second one is more of a timing. Are we expecting to do this within the next 12 months, yes or no? I would say this is a moot point given that criteria #1 is not met. So we'll do this as soon as we're ready internally. You'll see us doing that, and we, of course, we will be informing you.

In terms of the divestments, the impact on, I guess, the return on invested capital and cash flow, I think as we had discussed before, we are still having quite a bit of goodwill sitting on the acquisition at the time of Capsugel. So I think if you do your modeling, you need to assume that a larger part of that goodwill would go with the divestment. And therefore, ultimately, I think our ROIC should have a pickup from the exit of CHI.

In terms of free cash flow, also that had been discussed before. Certainly, CHI, a more cash-generative business versus the more -- the other platforms in CDMO business that need and use cash. But there, again, you heard Wolfgang say that our aspiration to lower the CapEx intensity will also bring the CDMO business to be cash generative very soon.

The next question comes from Charlie Haywood from Bank of America.

Charlie Haywood, Bank of America. Just you noted obviously strong demand or interest you're seeing in the U.S., but I would also love to hear your views on the pricing you're seeing in the U.S. CDMO market, I guess, across modalities as well, so not just for your Vacaville site. And if you've seen any sort of step change in pricing environment this year given the broader macro debate everyone is having.

Yes. Thank you, Charles, for the question. I mean Lonza typically has typically been able to actually set through its price expectations, which, of course, in the end relate to our return expectations, and that didn't change, and looking at the ongoing negotiations with potential future clients also for Vacaville, we expect that to continue. Is there an extreme change in the one direction or the other? I wouldn't be aware, no, we don't see that.

The next question comes from Odysseas Manesiotis from BNP Paribas.

Congrats on the strong half. Firstly, on your Vacaville guidance with sales remaining flat by around '28. This technically implies 2 to 3 more contracts from here, if my math is not wrong, assuming they come online by 2028. So given today's guide upgrade and the interest you're seeing, has customer interest been running ahead of your initial expectation? And could this target appear conservative? And secondly, could you give us some more reasoning for the CapEx phasing? What are the key reasons you under spent in H1 here? And what kind of equipment will the CapEx focus on in H2?

Yes. Thank you very much. I would start with the first part of the question, then probably hand over to Philippe. In terms of sales evolution, as we expected for Vacaville over the next 3 to 4 years, we can never forget that actually three things and actually all of them important and also important for our long-term success at that site, three things are going on in parallel.

First of all, our commitment towards Roche. So the sale -- the asset came along with a contract for the Roche portfolio that we committed to continue to manufacture. So part one. This, however, is going down over that period in time and at least contractually to 0. At the same time, and that's what we have been talking about before, we continue to develop new business and talking to customers, signing contracts and approaching signing with other customers, so this is kind of substituting the loss of volumes, the loss of business with the Roche portfolio as originally planned and anticipated at the point in time of sale.

The third part actually is one that we deliberately decided to do, which is investing into the site so that it can become an even more efficient and a more flexible manufacturing asset as we, as Lonza, as a CDMO actually needed. These investments do not only mean money, CapEx, but also downtime for us to be able in our engineering teams to be able to actually execute the upgrade in automation and also the increase in flexibility by additional areas and other measures. So it's a conscious decision to not fully optimize in the short term, but creating the right foundation for mid- and long-term value creation by balancing all three elements: Roche, new business and upgrade CapEx into automation and flexibility at the same time.

I'll take the second one. So on CapEx, we guided the year for low 20s. We delivered in the first half, 19% CapEx in percent of sales. So overall, I think pretty close to balance for first half or second half. It's not unusual to have a slightly heavier CapEx load in the second half.

You were also asking for what type of equipment. I mean, it can be everything we -- as you know, we are working on 20 growth projects and this is anything from very early construction work to late phase handover to operations and finishing the inside of some of the suites. So this is really a mix of construction and equipment for the different technologies.

The next question comes from James Vane-Tempest from Jefferies.

Two, if I can, please. Wolfgang, if you were to reflect on your first year, what do you think has exceeded expectations? And where can we expect a greater focus over the next 12 months? And then secondly, to Philippe, with higher CDMO sales expected in the second half and new facilities ramping up, why aren't margin expected to be higher in the second half as well than first half if lower margin Vacaville revenues have been first half weighted? Or is there some conservatism here given the political landscape?

Yes. Thank you, James. And on your first question, first of all, I'm working in the industry for almost 20 years. Of course, I knew Lonza as the market leader and kind of the gold standard in that industry from the outside, and I knew Lonza because I hired some at my previous place and lost some colleagues to Lonza at the time. So I think had a pretty good factual view on Lonza. However, what you don't get without really being in the team, being in the company is kind of the emotional part of it and what it really means.

And in terms of the people, the quality of people that I met in terms of expertise, but also in terms of ambition, openness, I mean, these are the people working for the market leader, but still have been very, very receptive also to my perspectives as I have been very receptive to their thinking, and if you kind of -- and I don't want to bother you with too many details, but if you kind of reflect back on what the team achieved in only 1 year, I think it's massive, and that is probably while I had high expectations, there's probably the one which I would state here as a surprise, openness to change, readiness to embrace change and readiness to execute change, and that actually makes me very optimistic with regard to, I mean, all of the next coming years during which we will continue on our transformation and growth story.

Thank you, Wolfgang. James, to answer your second question, I think two -- three components, I guess, to help you understand the margin evolution. One is, yes, Vacaville is more weighted towards H1, which means less weighted into H2. And as you know, volume drive margins in our business. So I think that's one component.

Second is the underlying business in Integrated Biologics. Also there, the mix is different between the second half and the first half. Therefore, there, we expect a little bit of headwind from mix. And then the third one, ADS, margins above 40% for H1. Now while we believe this is roughly what the business can deliver, there will be always up and downs. It will be slightly above, will be slightly below that line. And so this is also what we see coming for the second half. So a story of three pieces, a little bit of Vacaville, a little bit of R&D, a little bit of ADS.

The next question comes from James Quigley from Morgan Stanley (sic) [ Goldman Sachs ]

James Quigley from Goldman Sachs. I've got two, please. So one on Advanced Synthesis. So revenue and EBITDA margin were both significantly ahead of consensus. So can you give us a little bit more color on your expectations into the second half and into maybe 2026 as well, particularly on sustainability of the growth, and you already mentioned the margin level may be a bit volatile in the second half, but should we think about 40% as sort of peak margins for Advanced synthesis? Or is there a little bit more room to go?

And secondly, on CapEx, on Slide 8, you gave us the split of total CapEx, but how does that split look when just thinking about growth CapEx between the key modalities? And as we look at that today, with Integrated Biologics first, followed by Specialized Medicines and Advanced Synthesis, does that reflect where you think the key growth opportunities are? Or is that more of a phasing thing in terms of the size of the CapEx?

James, so on ADS, as I just mentioned, I think the margins around 40%, I think, is reflective of the combination of our improved small molecule mix towards more complex, highly potent APIs as well as a higher-margin business around bioconjugates. And I think the 40% is really reflective of also operationally things going well and assets being well utilized. So I think, yes, you can assume that we will always have highly utilized site and always have the perfect mix.

But I think I would take 40% more kind of as a base value that can go up or down over the next half. So it's not peak, but it's certainly something that can move up or down. In terms of revenue and margin for '26, I think we are obviously not guiding yet for 2026 and certainly not on a platform level. But I think the growth was really strong in the first half and is a strong '25, but we're not going to go into 2026 at this point. Do you want to take the CapEx?

I can take the CapEx part. James, thanks for that question. First part, simple. I think it has been 64% of total CapEx into growth, right, in first half 2025. And when it comes to -- which -- I mean, I understand your question as kind of a follow-up or a deeper question on our capital allocation framework.

So how do we take decisions when it comes to CapEx into organic growth. First of all, we do have clear financial thresholds, which actually, I mean, almost each organic growth projects need to fulfill 15% IRR and a ROIC of 30% or more at peak sales. However, what we don't do is to just decide based on the next project coming and delivering upon those criteria because that would make us prone to, I mean, coincidence, timing, phasing of the outside world, but we need to have a view how to evolve our overall asset portfolio, not only for one technology, but for the whole portfolio of technologies because we are committed to play a leading role in any relevant pharmaceutical modality in the CDMO space.

So there's a more sophisticated, I would say, framework, which, of course, includes financial thresholds, but also qualitative strategic criteria, which we apply to essentially, in the end, make sure that not only short term, but also mid- to long term, we create the right global asset footprint across the right technologies in a proper balance.

The next question comes from Charles Weston from RBC Europe.

First is on whether you can provide some more color on demand trends in clinical inquiries, perhaps in terms of the trend that you've seen through the quarter and if you have seen softening, whether that's mainly from biotechs or a more broad customer base.

And the second question on Specialized Modalities. Medium term, the market could be growing, I guess, high teens or even 20s, but your own growth will be very dependent on your specific commercial products. How do you envisage your own revenue trajectory in this business? Is there 1 year that could particularly inflect? Or should we think about this as a smoother acceleration path?

Yes. Thank you, Charles, and I'll take the first one for sure. On, let's say, clinical inquiries pipeline development. Maybe let's start with describing the current status, which refers to our small-scale assets. And here, we saw in the first half 2025, high utilization and we will see a high utilization also in the second half, first of all.

Those small-scale assets we actually use for development work, clinical development work for our clients supporting their discoveries, but we also use it for small-scale commercial products. And to kind of put it into perspective, and we shared that data point in one of the slides, our overall early phase, so Phase I development work-related revenues are around about 10% of our revenues.

Second statement in terms of what we expect in the future, which is, first of all, hard to tell, but still sharing how we think about it and what data we use to form our opinion. First of all, of course, we are looking at VC funding, probably the same sources or similar sources like the ones that you are using. And we actually see -- I mean, through the report that actually VC funding is going down.

However, if we, I mean, go one level deeper and ask ourselves, where are those early phase development projects really coming from? It's not only small biotech. We're happy to work with colleagues there and we do that, as you have seen in terms of customer split across our portfolio, I mean, always half/half, big pharma and small to mid pharma. However, also big and mid-scale pharma by internal own funds continue to develop new pharmaceutical assets and us, we are serving both.

So actually, the part which in the end is affected, if at all, by VC funding is actually not that big within Lonza. I mean, elevating the discussion maybe one more level, which is, in reality, I think in terms of funding taking place for early phase development, you probably have to look at VC funding, yes, but you need to -- I mean, probably look at other funding mechanisms like IPO.

You need to look at R&D budgets at midsized and big pharma companies. And if you add that all up, you first of all, see the VC funding part becomes relatively small, which is volatile though, too. But overall, we see a healthy development of what is spent as an aggregate into early phase development. But of course, we continue to monitor also VC funding, but couldn't be -- I mean, are not able to tell really what it means for 2026 and beyond, if that makes sense. You take the second one.

I'll take. Yes. Charles, on SPM growth, you're absolutely right that our growth will be more driven by the own pipeline that we have. I think I'll split it in probably two. One is the commercial products that we have already today. We mentioned the five products. There, we are dependent on the commercial pickup of these products. Some are very small niche indications. And so these things can vary.

Others are large indication where the biotech companies have certain forecasts, and we're dependent to a certain extent for these volumes. The second is the evolution of our Phase II and Phase III products that we have in the pipeline, how quickly they move forward and then again, how commercially successful they are. So I think it's very hard to give you an inflection point. I think you can probably follow our five commercial products and see how they develop, give you one view for the pipeline, I think we'll mention once we have approvals, I'm sure we'll be mentioning that as well.

But the question is spot on. The mission for that business actually is to expand the portfolio so that the risk diversification effect, which is the beauty of the CDMO business model also kicks in, in this business of Lonza, and as soon as portfolio expands, we will actually get closer to the overall growth trajectory of that CGT market globally. So actually, last question, please, who would be ready to shoot at us.

The last question comes from Patrick Rafaisz from UBS.

Happy to fire away. A couple of questions from me to close it off. The first would be a follow-up on Vacaville. On the phasing or the H1 loading of the revenues, is that a typical seasonality for the Roche business? And with the three contracts you've already signed and the ones about to sign soon, can you describe how much of the projected Roche ramp down in '26 is already in the bag to maintain the CHF 0.5 billion run rate next year?

And then the second question would be for Specialized Modalities. You mentioned some of the variables affecting H1, including the plant modification and the tough comps. Do you think in the second half of the year, you can overcompensate these shortfalls on revenues and still generate flat or maybe positive growth for the fiscal year?

Yes. Thank you, Patrick. Maybe for me to start, phasing of the Roche business, actually, we don't have a superior insight. But of course, we have a close cooperation with this important client. So talking about forecast, talking about manufacturing plans. And based on this information, we actually make our own plans and also share insights with you.

The CHF 0.5 billion run rate, yes, that's actually what we shared with you. And actually, there is no reason and no reason to actually change that. We expect that business to continue to operate at around CHF 0.5 billion revenues over the next 3 to 4 years for the reasons explained later. And afterwards, I mean, fully ramp up or fully utilize over time this great asset and believe that we will then achieve peak sales sometime in the first half of the '30s. So that would be my view on that, second question.

Yes, Patrick, happy to take the second one. So I think two things for the lower performance in 2025 of SPM besides the fact that they had a high base, but in terms of sales in the first half, two things. One is we're adapting an asset in microbial to be ready to produce a new product for a new customer. This is -- the construction is now -- or the adaptation is now completed and the product will come in the second half. So that, I think, makes us feel confident that this will come.

The second one was a slower performance on our manufacturing for Cell & Gene. Also this, I think, in the last few weeks of the first half was back to normal. So also there, we expect a much more normal second half. However, what we said is both of these things are probably rather late phased into the second half towards Q4. So I think we need to make these things happen. But overall, we know the things have been done and the run rate, if you want, should be improving month by month.

Thank you very much, Philippe, and thank you very much, Patrick. Thank you very much, all of you for joining us, for your interest in Lonza for the lively discussion. And I myself, I guess, Philippe, we are very much looking forward to, at the latest, reconvene again and talk about Lonza and what we will by then have achieved for the full year 2025 in January 2026. And with that, we wish you a great day. Thank you very much.

Thank you.

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