Lonza Aktie

So hello, everyone, and thank you for joining this session of the Morgan Stanley Global Healthcare Conference. I am Thibault Boutherin. I'm part of the European pharma equity research team based in London. Before we start the session, I just need to refer to important disclosures. Please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures if you have any questions. Please reach out to your Morgan Stanley sales representative.

So for this session, I'm delighted to have with me Philippe Deecke, CFO at Lonza. Thank you very much for being with us today. We will obviously go on to the Q&A. But before we do that, Philippe, do you want to start with some introductory comments on the current situation and the outlook for Lonza.

Yes. Thank you very much, Thibault. Thanks, everyone, for joining. So after a very strong first half 2026, I think we've now had another couple of months in 2026. And overall, I think we must say the industry for the CDMOs is still a very attractive one. I think we still see -- or we see very strong interest from both large pharma as well as biotech companies who, by the way, make up 50% almost of our revenue. So we are a big pharma company, but also a large company for biotechs. So I think we see a good environment.

We continue to see good request for our capacities and our capabilities, both in Europe, but also obviously, in the U.S. So overall, a good environment. So that's -- I think that's an important point to make. I'm sure we'll have questions about the environment. The second thing, we've progressed this year into becoming a pure-play CDMO. So remember, in March, we announced the divestment of 60% of our Capsules division, which we will complete by the end of this year. And so this will make Lonza now really a pure-play CDMO really focused on the services, both in development and manufacturing.

So that's, I think, another important step that will happen this year. Also in the plans, of course, since our investor update back in 2024, I think a much more impartial view at buying or building ourselves. We were historically a company that used to build everything we needed.

We are now much more impart in choosing what we build versus what we buy. Obviously, buying is always a matter of opportunities and is more difficult to plan ahead, but that's certainly part of our plans as well. So I think for us, a very exciting year.

We also have a Capital Markets Day upcoming in October, where we're inviting investors to join us in Vacaville. I think a very important site that we purchased almost 2 years ago now. And so we're very pleased to actually be able to show that site to people and also to update investors on our plans, our strategies and answer more questions. So that's a little bit kind of a run-up of where we are, but happy to take your questions.

Okay. Amazing. Before we go straight on the business, maybe a couple of questions on sort of policy tariff, these kind of things. So if we start with just the sort of BIOSECURE topic, there were some progress on the legislation in the U.S. It's likely that something will materialize in some shape or form in the future.

There was a recent legal win by WuXi that may be sort of slowed this down a little bit. But I guess the question is, is BIOSECURE already today a key focus for your customers and showing up in your customer conversations? Or is it still sort of wait and see for the industry and for your customers?

Yes. BIOSECURE is kind of this never-ending story. I think it started several years ago now. And I think we -- from the beginning, we didn't really put a lot of emphasis on it. And I'll explain you why. And we see this over the years, actually, location manufacturing in China has always been a discussion we have with customers and what it means. And I wouldn't say that BIOSECURE has made a big, big difference. Certainly not a difference that you could quantify in our numbers.

And let me maybe explain why because people think or may think this is counterintuitive. A lot of the work that's happening in China, a lot of the development work that's happening in China is for companies that are tendency, smaller and do their early-stage work in China. Why do they choose China?

There's certainly a cost aspect to this, but there's also a timing aspect to this that actually there's still many, many opportunities to move away to another CDMOs if your product end up being successful. And so -- if you put yourself in an early-stage company, you have one compound, Phase I, you may choose to finish your Phase I in China. If it's successful, you may even decide to do your Phase II in China.

And once you finish your Phase II, this is when you have to -- and you're successful. This is when you really have to decide where do you want to have your launch site and how do you want to secure your commercial volumes. And so this is where we see a lot of companies actually coming to Lonza or coming to a Western CDMO to do their work. And so therefore, you don't have kind of a mass exodus of companies now moving to exit China because they have a lot of time to do so.

I think even at the beginning of BIOSECURE, you had a very long grace period. I think at the time it was 8 years or so. So in 8 years, you still have multiple opportunities to move away. So I think it's a continuation of people being worried about having exposure to China for their IP for some of their development.

And some companies decide to be radical about it and move away. Others are just waiting and see. And I think most of the companies actually are in the wait-and-see mode. But we have companies that are coming to us at the end of their Phase II with a successful compound saying, I want to be with Lonza for my Phase III, my launch site, my commercial volumes.

Okay. That's very clear. And the other topic I wanted to sort of touch on before we move on to the business is tariff, U.S. tariff in particular. So how much of tariff and all the discussions around onshoring drove your conversations with customers -- so at some point, this year, you mentioned that some of the major U.S. manufacturing investments by the industry could lengthen some outsourcing decisions. So if you could comment a little bit on this and where we stand.

Yes. So tariff is also a complicated topic because it keeps on changing and evolving. I think very early, we communicated to the market that tariff would not have a direct impact on Lonza. Now why is that the case? First of all, because everything that we sell, we sell at the door of our warehouse. And our customers are picking it up, and they are taking it wherever they need to take it.

We actually often don't know if our volumes are being used for U.S., if they're used for Europe, if they're used for somewhere else in the world. So our production actually, we don't import into the U.S., and therefore, we're not directly exposed to tariffs, so they will not end up on our P&L. The second area where there could be an exposure is when we are importing raw materials into the U.S. So imagine we need a raw material in Vacaville.

We would -- could potentially import this out of Europe into the U.S. We have a policy that all the raw materials are passed through to our customers. And so if the price was before $100, we would basically do $100 plus tariff and then pass that on to customers. And the third area where this could impact us on tariffs is around CapEx. So we are building or we are renovating something in the U.S., and we are importing material. We're importing steel or whatever else equipment we need to buy in Europe.

This could impact us if that good is subject to tariff, but this would be capitalized over many years and therefore, also not really have a direct P&L impact for us. So the direct impact of tariff is actually very small on Lonza itself. However, of course, we have customers that could be exposed to tariffs.

Right now, pharmaceuticals are mostly excluded from tariffs. If there were some, of course, we are more than happy to welcome our customers in the U.S. We have very large quantities and capacity in the U.S. that we are able to provide to our customers. So if somebody really wants to change the supply chain, we could offer capacity in the U.S. So overall, I think we are fairly well protected from tariffs the way they are today.

And of course, it's constantly evolving, and so we need to keep an eye on it. Interestingly, a lot of the tariffs that were charged on some of our raw materials have been reimbursed to our suppliers. And so we will basically pass that on to our customers. But it's now coming -- money is coming back. It's a small amount, but this is what's happening today.

And it's not going to show on the P&L, right? Because we've seen other companies having tariff reform that were visible on the P&L.

No, this is not true for us. And again, it's very small because a lot of the pharmaceutical products are actually exempt.

Yes. Okay. That makes sense. So if we dig a bit on the sort of segments of the business, maybe if we start with your Advanced Synthesis business, very, very strong growth in H1. Can you give us a flavor on how the mix is evolving between sort of traditional small molecules and bioconjugates, maybe starting here when we see the very strong growth of this business in H1?

So Advanced Synthesis, again, the combination of our small molecules business and conjugation. This is the mix of very -- of 2 very strong businesses. One, over the last 10 years, we've basically been moving away from what you would call traditional small molecules. So it's been a while we don't do tons of APIs, we do kilos. And so these are very complex and much more high-margin type of small molecules. And so this business has evolved into already high margin and actually very attractive parts of small molecules.

So this is one business that is doing well. And we are here focused a lot on highly potent API that you use for many different things, but among others, of course, for ADCs. The second part, conjugation, also a very attractive business was 2 years ago still with our Biologics division, has now moved into Advanced Synthesis. Also, a platform that is very attractive. Conjugation is constrained globally. It's a scale that not many CDMOs can do and that very, very few CDMOs can actually do at scale.

And we're probably one of the only CDMOs being able to do large-scale commercial conjugation. So you put these 2 businesses together, and this creates a high margin and quite attractive business. Now the growth of 28% in the first half this year is not something that you'll see again. I think a lot of things came together here, the ramp-up of different assets on both sides, small molecules and conjugation that were not here in the first half of 2025 and have ramped up in the meantime.

And therefore, you see the full effect of new capacity on this business. So 28% is not what you should expect from it, but this will normalize over the second half. And so the full year number will be a much more normal number for this business.

Okay. That's clear. And similar to gross margin as well was very, very strong in H1 and probably should normalize in H2. You had 48% EBITDA margin in H1. So in general, even with the normalization, is the margin profile of this business, has it improved materially compared to the past few years? And if yes, what are the sort of key drivers for the margin improvement you've seen in Advanced Synthesis?

Yes. So of course, it didn't exist 3 years ago. So again, you're putting together 2 very attractive businesses. And so this creates, again, both growth-wise, but also margin-wise, an attractive business. I think we said that margins around 40%, sometimes a little bit more, sometimes a little bit less is probably what this platform can deliver. So yes, it is an attractive business.

Again, you have, on the one hand side, something that is more complex, doing highly potent APIs, doing APIs with many, many synthesis steps that not everybody can do at scale. On one hand. On the other hand, you have a constrained capacity in conjugation.

So putting the 2 together creates quite some attractive margins, and this is probably here to stay, again, not at the 48% level, but probably hovering around 40%. It can be sometimes better depending on the mix that you're producing in that moment. But in general, yes, this is attractive.

Okay. That's very clear. And you touched a little bit about how difficult it is to do conjugation, the technological sort of challenges and the capacity in the industry. But it's a very attractive area of CDMO. So do you see more investments from the competition? Do you see competition participating more in the sort of new ADC products that are being allocated to the CDMO industry. So if you can comment a little bit on the evolution of the competition for conjugation.

Yes. We see -- if we look at the market, the beautiful thing around ADCs is you have very large pharma companies building entire platforms around ADC. So on the same platform, they would have several molecules that they are developing in multiple different for now, oncology indications.

But you also have a significant amount of small biotech companies doing development and early-stage development in ADC as well. So this is really a category that is very broad, a lot of investments from the pharma side flowing into ADC. And we see the market growing roughly 20% over the next 5 years. So this is a high-growth part of health care. And so we are very well positioned for this.

Again, we can do -- we're one of the very few players that actually can offer everything for an ADC. In a couple of years, we'll be also able to fill finish to put this into a drug product. But today, we can offer, of course, conjugation. We can produce the protein, the mAb.

We can produce the linker, we can produce the payload. We conjugate everything together. And we have own IP for linker. We bought a company called Synaffix a couple of years ago with own linker technology. So you can also use our linkers, which will then generate royalty revenues in the future. And we're one of the few players that can actually offer all of that from early-stage development all the way to commercial.

Okay. Amazing. And moving on to specialized modalities. Again, exceptional growth in the first half of '26. There was an element of catch-up after the challenges you had last year. But do you expect that business to continue to outpace the group in terms of growth? And what -- on the EBITDA margin as well, at what sort of time frame do you expect that this business could catch up with the group in terms of margin?

Yes. So specialized modalities for the folks in the audience, this is a combination of our Cell & Gene business, our microbial business, our Bioscience business unit, which is a product business, if you want, and then a smaller mRNA business. So this is what makes specialized modalities. And so this is, again, a construct that the market didn't know before because we put this together in 2025.

And so in 2025, both the performance of our Cell & Gene unit and our performance of our microbial unit were not at the right level. We had both an asset change in microbial, which meant that we had a shutdown for part of the year. And also on the Cell & Gene side, we had some manufacturing challenges in 2025. And so the performance in '25 of this new combination was actually not what you could expect from it. 2026 is much more what you can expect from this combination.

Bioscience, a high-margin business, niche product business for media, for testing, actually performing really well in '26. Cell & Gene, again, from a low base, performing a lot better. And also our Microbes unit, which is a very attractive modality actually, which was also part of our Biologics unit in the past and a little bit probably a forgotten child is actually quite an attractive business. And so you put these 3 together at the right level, and this creates nicer margins than what we used to see in the past.

Again, the growth is probably a catch-up from last year. So probably looking at '25 and '26 in combination is probably more correct in terms of the dynamic of this business. But certainly, the margin will be now at a much more acceptable level also for us. It will take a while for all of these businesses to reach the group average. So it will still be probably dilutive for a little bit, but much closer actually to our group average of now 32% to 34%.

Okay. Amazing. And if we focus a bit on Cell & Gene, obviously, driven by the commercial or clinical and then commercial success of your partners. You mentioned recently you manufacturing -- sorry, 6 approved Cell & Gene therapies. Do you have some visibility on that time lines for additional products? So how do you think about the pace of new commercial therapies in your portfolio over the next few years?

Yes. So we have a rich pipeline, but I think probably the risk or the probability of success is probably smaller on the cell and gene side than on average for late-stage compounds. So I won't do a prediction now. But of course, the future of Cell & Gene has to be in having more commercial products and being able to actually repeat a similar process over and over and over again because this is when you can optimize the process, is when you can utilize your facilities much better.

So I think the future is to have more commercial products, but this will take some time. And I won't do a prediction now as to how many products we'll have. I think we -- back in '23, we forecast, I think, 6 by 2026 by 2027. So we are there. We have 6 products. We're quite pleased with that. Not all are large products, but all are saving lives. And all of them are actually important therapies for patients. So I think we are in Cell & Gene to stay in cell and gene. We believe in the modality.

We believe in the use of cell and gene. And you have to be willing and capable of riding the waves of cell and gene because this is certainly something that if this is the only thing you do, it's actually very difficult to actually manage these waves. If this is part of our portfolio, we can actually manage that.

And we are, therefore, so much more attractive to companies because they know we'll be here in 2 years, we'll be here in 5 years, we'll be here in 10 years to manufacturing the product, which is more difficult if you're a stand-alone smallest cell and gene manufacturer.

I think that makes sense. And moving on to the other part of your business, which is Integrated Biologics. I think when you look at the performance of Lonza in the first half, I think it's been obviously very strong. What has been surprising some investors is the mix of this growth where Advanced Synthesis was really, really strong, as we mentioned, Specialized modalities was very strong.

And Integrated Biologics, I think you're guiding for around 10% growth this year, which is maybe on the lower end of where investors were expecting biologics to grow based on the industry trends. So just if you could sort of coming back on this. Is it sort of a business that's getting a bit in a more mature phase? Is it this year is seeing a bit of a sort of phasing in terms of the ramp-up projects? Like what's -- how to help investors sort of understand the 10% growth we're seeing this year in Integrated Biologics?

Thanks for the question. I think probably 2 fundamental things to explain. First of all, we are very pleased with the performance of Integrated Biologics. We said this in July. They are absolutely delivering on what we expected from the platform. So there's no kind of dark cloud or anything that didn't work the way we wanted. Fundamentally, when do you grow as a CDMO? Or how do you grow as a CDMO?

You need to be adding capacity, right? So if you see the significant growth we discussed before on ADS in the platform, this is because you had new capacity coming online. Now if you think about INB, there is no large capacity coming online now. What we are doing is we are finishing some of the ramp-ups we had on small assets -- we are basically growing the base by squeezing out a little bit more here and there, but there's no large capacity coming online right now. And therefore, you need to wait for capacity to come online to create that growth. Once the assets are full, you're basically back at 0 growth.

And so this is the way a CDMO grows. And when we are promising the market that we will grow 10% to 13% on average over years, this means that we have capacities coming up in the different modalities at different point in time to generate 10% to 13% growth every year. They may not all come equally every year, right? And so for biologics, if you think about what we're doing today, we are basically changing Vacaville, making Vacaville CDMO-ready or entirely CDMO-ready, which basically means that Vacaville for now is flat.

It's going to be flat until 2024 and then we start 2028, then we'll start growing. So until then, it's actually even, yes, a headwind to growth for the platform because in the year-over-year, you basically have CHF 0.5 billion of revenue that is not moving.

So the next wave of capacity will come from our 620,000 in Switzerland in WIP that is actually starting this year. And so over the next 2 to 3 years, they will provide growth, then Vacaville will provide growth starting in 2029. And in the meantime, we also have some of the fill and finish assets, which are also in INB that will provide growth over the next few years starting in '28, right? So you only grow with new capacity. And therefore, 10% for INB, fully in line with plan and actually, we're quite satisfied.

That's very clear. And maybe taking a step back when we think about the industry and the key trends, one of the topic that's been emerging is biotech funding sort of coming back more strongly. So is it something that you've seen? Are you seeing sort of an impact on your business already? And to what extent is this important for Lonza? So if you can come back a bit on the biotech funding piece.

Yes. So biotech funding, obviously, we're pleased to see that the funding is coming back. I think we see also some venture capitals having made money and reinvesting it into early-stage compounds. This is not a KPI that we follow too attentively because in the end, early-stage work is a very small part of Lonza. It's roughly 10% of our revenue. So it's not -- financially not the most important piece of our business.

However, it is strategically very important. And so we are very interested to see healthy early-stage companies, early-stage compounds because we -- first of all, we want to capture them early. A compound that we capture early in Phase I usually will not leave Lonza. We have a retention rate of 99%. So people that join us early have successful molecules, which stay with us until they are commercial. And so the earlier we can grab these customers, the better. Second, you learn a lot about a molecule.

You learn a lot about a company. You know how to deal with the molecule, you know how to scale it, you know how to make it successful commercially. And so it's very difficult actually for another CDMO to be more attractive than we are because we know the molecule so well that we can price it correctly. If you take a compound in the later stage, you don't know exactly how the molecule will scale.

You're basically making buffers in your calculation, so you're usually less attractive. So strategically, it's very important to get access to early-stage compounds. It's very interesting to be in touch with biotech companies. But financially, it's not a big driver. And therefore, no, we don't see it in our numbers today. But I think we see the interest increasing, and we see that actually the demand is quite healthy.

Okay. Amazing. Just one thing I wanted to mention. So you talked about the phasing of growth over time depending on projects coming in and out. If we think about the margins, what we've seen in the past at Lonza is periods where margins are sort of slowing down or declining because of precisely a wave of new projects starting the ramping up phase.

So I guess the question is, could this happen again in the future in terms of new projects coming in at the same time and margin being impacted? Or are you confident that now with the sort of scale you have, you can manage this transition without impacting meaningfully on the downside your operating margins?

So 2 aspects as well to this question. I think, one, of course, new assets are dilutive. Usually, when you construct the assets, you capitalize, so no impact on the P&L. Then you start operating a very fresh, young asset. It's usually underutilized for a few years. And therefore, during that time, this is dilutive. So this always happens, and this will continue to happen. There's no way -- this is the part of the game. They become accretive when they reach a good enough utilization and then full peak utilization. So this will continue.

However, I think there's a difference. We're coming out of a phase where we are investing over 20% of sales into CapEx. This was a catch-up phase. There was also a lot of infrastructure that need to be updated. So this phase is behind us. And so in our organic growth model, we are basically promising a growth of 10% to 13% by investing mid- to high teens CapEx in percent of sales. So this is the model.

You need a healthy market. You need 14% to 19% of CapEx. And with these 2 components, you create -- you generate growth of 10% to 13%. So with a level of 14% to 19% of CapEx, we won't go back to this really being visible to you. We will offset this through margin improvement through productivity, operating leverage, et cetera. So the model actually works very well when you're in that band of 14% to 19%. Therefore, yes, there will be continuous dilution, but our promise is to grow margin every year.

Okay. Amazing. And as you touched a little bit on the sort of CapEx algorithm. Can you come back on free cash flow sort of -- how should we think about the free cash flow generation of the business going forward? You mentioned CapEx management. Do you have other levers to improve free cash flow conversion, free cash flow generation over time?

Yes. So free cash flow is increasingly important. It was always important. Obviously, you need cash, but it's increasingly important now for the next phase. We -- I think we've been making sure that the growth is coming. We make sure that the margins are coming, and now we need to make sure that also the cash follows. There are several levers to improve cash in our business. One is, of course, CapEx efficiency.

So you need to build the same cheaper. So it's not that we're building less because we still need to generate the 10% to 13% growth. So we still need to add assets every year. But the efficiency as to how much dollar you get out of every CapEx dollar needs to be bigger. So I think there's a lot of work we do on this.

The next levers for cash, obviously, driving margin in general with more flowing down to cash, working a lot on trade working capital, so making sure that our inventories are optimized, our accounts receivables, payables, so the classical kind of trade working capital management.

Here, I think our biggest lever is inventory. We've done continuous progress, but I think this is something that will never end. And we're continuously working on better transparency, being able to pull demand and to pull inventory across the world. So these are some of the levers that we're pulling to improve cash.

Okay. That's clear. Maybe on M&A. When you -- management did the Capital Markets Day back in December 2024, clearly, one of the message was M&A was going to probably become a bigger part of the strategy going forward. But you haven't really announced major acquisitions since.

So I guess, was it because you were focusing on carving out and executing on the capsules business divestment? Was it because you are focusing on organic delivery on macro policy? Or is there a scarcity of attractive assets at reasonable valuation over that period?

Yes. So I assume a lot of you are involved or have been or have seen M&A, right? This is something that you cannot just decide, oh, let's do M&A. I mean you can do this. You probably will end up overpaying and buying the wrong assets. So making M&A part of our strategy or increasingly making part of our strategy doesn't mean that we become an M&A machine, and we will be basically overpaying. So we will continue to be very diligent and disciplined in investing money and in buying.

And so you need to find the right assets. You need to find the right assets at the right price. For us, to maybe explain what this means, first of all, we need to make sure that the assets we're buying benefit from what we call the Lonza engine. So this special sauce, the special capabilities that Lonza has, how does this new asset benefit from these skills? And can we actually generate more value out of this asset than by it being stand-alone?

For Vacaville as an example, which is an acquisition for us, it was very clear. It was an underutilized asset that we could turn into a very attractive CDMO asset that -- where we could then put our existing customers or use our commercial engine to actually introduce new customers that before that never had access to Vacaville. So here, the value is very clear. And so you need to find the assets where there is something that we are bringing that will make this asset worth a lot more than what it was before.

So this is the first one. The second one, I think, is financially, depending on what we buy, the added value will be different. It will come either immediately, will come over time. We also bought -- maybe you didn't read everything. We bought 2 small technologies. So these small technologies take time to come to fruition. They will generate royalties in the future, but these are small things that have a very different financial profile than something like Vacaville.

And so -- all these different types of acquisitions that we can do need to be prepared. We need to think by them. We need to make sure that they are adding value and we can have a strong case. Last but not least, assets are not easy to find. I think usually -- and the conference is organized by Morgan Stanley. Many of the large banks are coming with names that we all have in our heads that are basically coming to the market soon.

These are usually not things that are very attractive, too expensive, usually not something that we would do. And so you need to find the assets. You need to go and search for them. You need to be proactive. You need to go to pharma companies saying, "Hey, I could use this asset. Is there something we can do?" This takes time, and this is much more complicated than buying off the shelf.

Okay. That's very helpful. Maybe on the last couple of minutes we have, one of the recurrent question always from investors on the CDMO industry is the balance of supply and demand. I think with a focus on Mammalian capacity in the long run, we see always this very large CapEx announcement from some of the players in the field. So what visibility and confidence do you have that the balance of supply and demand is -- remains attractive for CDMOs over the next few years?

Yes. This is obviously something that we are looking at very diligently again and again and again. We do this very extensively for Mammalian, which is our biggest business. We do this also for the other modalities where data sometimes is not as good as for mammalian. But the good thing is that supply is very clear because everybody is announcing everything that they are building. So we know exactly the supply that's coming.

And on demand, we feel very confident. I think there is -- if you look at the next several years now in the future, there's actually an overhang on demand. So the market is rather getting tighter than moving towards overcapacity.

The size of CDMO and the industry is very well utilized and will actually be increasingly utilized in the future. So we don't see that risk. We also don't see that risk given the announcement of many large pharma companies to build. I think we see these investments as shift into the U.S., but not as globally more capacity. And so we don't foresee any such risk at this point.

Okay. Amazing. We're coming to the end of the time. So Philippe, thank you so much for taking the time to be with us at the conference.

Thank you very much, Thibault. Thanks, everyone.

Ladies and gentlemen, welcome to the Half Year Results 2026 Investor and Analyst 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 Wolfgang Wienand, CEO. Please go ahead, sir.

Yes. Thank you, Sandra, for the introduction, and thanks to all of you for joining our call today.

Before we start the presentation, let me share with you our disclaimer regarding forward-looking statements made by us. This is also available in the online version of our presentation for you to download and read in your own time, I guess.

Before we move to the details of our half year results, let's briefly look at the agenda that we prepared for you today. I will start with an overview of our H1 performance and some of the highlights from across our business.

I will then hand over to Philippe, our CFO, who will take you through the financial results in detail. After that, I will return to provide an update on the performance of the individual business platforms and conclude with our outlook for the rest of the year.

Following the presentation, we will take a short 2-minute break and return with a live video stream for our Q&A session. Let me start with the top line overview of our H1 performance.

We delivered a strong performance across all three of our business platforms. All of this essentially spot on or even better than our expectations at the beginning of the year. This strong performance reflects the sustainable, robust demand for our offering. The depth of our customer relationships and the disciplined operational execution by our global One Lonza team.

Together with some favorable phasing, these strengths taken together enabled us to deliver sales of CHF 3.4 billion and a CER sales growth of 16% compared to H1 2025. The core EBITDA reached CHF 1.2 billion, which represents a high margin of 34.8%, an increase of 4.4 percentage points versus H1 2025.

Alongside the strong sales growth and further margin expansion in H1 2026, we improved our free cash flow by CHF 300 million compared to H1 and 2025. Based on this performance and our current H2 forecast, we are upgrading our full year core EBITDA margin outlook to 33% to 34% and reconfirm our expectation of 11% to 12% CER sales growth.

As in previous years, our guidance remains rooted in a disciplined assessment of our business. Our track record of consistently delivering on and its times exceeding the promises we make to you gives us confidence in the upgraded outlook we are providing today.

My takeaway as the CEO of Lonza, we have a tight control and very good visibility of our business at hand and how it will evolve over time. And we have a global team which efficiently translates over and over again, market opportunities and our customers' trust in Lonza into an attractive and very profitable business.

Earlier in H1, we also marked an important strategic milestone for our company with the agreement to divest the [ Capsules ] and Health Ingredients business to Lonza. With this large divestment alongside the other recent divestments, we further executed the One Lonza strategy and have now completed our transformation into a pure play [indiscernible] at high pace. All this within less than 15 months after announcing our new strategy in late 2024.

While H1 numbers as such are obviously an important proof point, in our case, a strong one, let me put them into perspective to how we see the full year performance evolving and how it relates to what you can expect from us in the years to come.

Based on our upgraded 2026 outlook, we are convinced to eventually look at another strong year and another important step on our overall trajectory of strong profitable growth and significant value creation at Lonza year-over-year. All of this fully in line with our ambitious organic growth model of low teens annual CER top line growth on average over time at continuously expanding profitability and cash generation. My takeaway we continue to deliver on our promises and intend to continue to do so in the future.

Now let's dive into our group's business and the overall operational performance in H1. The first half of 2026, we saw broad-based momentum across our businesses with all three business platforms delivering double-digit constant exchange rate sales growth at high profitability. This also meant a return to positive sales growth for specialized modalities as expected and communicated to you earlier, which reported 22.6% sales growth compared to H1 2025.

In Integrated Biologics we have seen healthy momentum in our mammalian and drug product technology platforms. While delivering fully in line with our expectations, the business platform is lining up, among others, the large-scale commercial assets in [indiscernible] and [ Wakad ] as important drivers of future growth in the years to come.

In advanced synthesis, exceptional growth has been driven by a combination of small molecules and bioconjugates and in specialized modalities, we have seen exceptional growth in microbial from a low prior year base alongside sustained healthy growth in BioScience and a strengthened operational performance in Cell & Gene.

With our new operating model that we have introduced in April last year, we have further increased focus on quality, operational execution, productivity and cost discipline across our global network and across all three business platforms. The organization-wide effort to drive both top line and margins and improved cash generation is becoming increasingly embedded across One Lonza, and I am encouraged to see the first tangible results of these efforts already reflected in our H1 performance.

This is another proof point for me that we are on track with our measures to deliver both elements of our longer-term organic growth model, which is not only attractive top line growth, but equally margin expansion, which will then more and more translate into attractive cash generation.

Customer demand remained robust across technologies during H1. This was reflected as an example, and the extension of our strategic long-term collaboration with a leading U.S. biopharma company for a broad range of innovative clinical and commercial biologics. The agreement underlines continued high demand for our global biologics development and manufacturing services as well as our capability to deliver highly tailored and flexible solutions to meet specific customer needs.

The ability to combine multiple sites, including all of our commercial scale U.S. sites and development services from across our global network within a single partnership highlights the strength of our unique One Lonza business model, which strongly differentiates us within the CDMO industry.

In Specialized modalities, we have seen the approval of the six commercial Cell & Gene therapy in the Lonza network, further consolidating our position as the world's leading commercial manufacturer in this space. We continue to support sustained demand by investing in our growth, and this is reflected in our announcement of today of two new ADC-related projects.

One, to expand our payload linker manufacturing capacities in [ FIS ] and another to further strengthen our commercial scale, ADC, fill-finish offering in Stein, both in Switzerland, more about these in a moment.

These investments also support the continued expansion of our integrated offering across technologies, which sees growing interest as customers are looking for a single strategic partner that can support their programs from early-stage clinical development through to large-scale commercial supply and from drug substance to drug product. This end-to-end capability is further evolving as another key differentiator for Lonza and positions us strongly to support antibodies, bispecifics and ADCs and other bioconjugates throughout their life cycle.

With our increasingly diversified offering, our deep, long-term customer partnerships and our broad and well-diversified geographical footprint, our business model is uniquely positioned to remain resilient and deliver profitable growth as the external environment evolves. Let me now provide an update on some of our key growth projects in some more detail.

Across our network, we continue to make good progress in executing the investments that will support the next phase of growth for Lonza, and we are adding new ones to support future growth mid to long term.

In Vacaville, the upgrade measures towards CDMO readiness continued to progress well. As communicated previously, already the five contracts signed by the time of our full year 2025 reporting in January this year are expected to offset the gradual reduction of Roche volumes through 2028, perceived attractiveness of the capacities and customer demand remain high, reinforcing our confidence in Vacaville starting to drive growth after 2028. And fully exploiting the site's capabilities and capacities in the early 2030s to maximize value creation for Lonza. Let me also briefly touch on our large-scale [ aseptic ] fill/finish facility in Stein.

As customer needs continue to evolve, we have decided to further enhance the strategic scope of the facility by adding capabilities for high-value small molecule drug products alongside its original focus on biologics only. This will broaden the addressable market for us and will further strengthen the long-term attractiveness of the site. The additional capital requirements will be small, while the enhanced scope is expected to extend the time line to start operations in 2028.

Turning to our newly announced investments on the right side of the slide, both in support of our integrated [ ADC ] offering. This area continues to attract strong customer interest given its high therapeutic and commercial potential.

And fifth, we are building a set of multipurpose, highly potent payload linker suites, which are scheduled to commence ramp-up in 2029. We continue to see strong customer demand in this area, supporting our confidence in the long-term opportunity for this investment.

In Stein, we are building a second commercial aseptic ADC filling line, which is due to commence ramp-up from 2030 onwards and already benefits from a major pharmaceutical company as an anchor customer and strategic partner. Both projects will reach peak sales by the mid-2030s at the latest.

Alongside investing into growth in line with our new One Lonza strategy. In the first half of 2026, we also took the final step on our transformation journey to a pure play CDMO. We signed an agreement to divest the CHI business to Lone Star for an enterprise value of CHF 2.3 billion. The transaction is expected to close before year-end 2026.

Within less than 2 years, we have systematically transformed our portfolio around the technologies and capabilities where we see the greatest opportunities for superior long-term value creation.

As you can see on this slide, this transformation included four divestments of non-CDMO and noncore CDMO activities sharpening our focus on our three business platforms, integrated Biologics, advanced into this and specialized modalities. At the same time, we continued to embed our new One Lonza operating model across the company to ensure our organizational scalability and readiness for the significant growth in the years to come.

Today, Lonza has a clear strategic direction and the portfolio fully aligned with our ambition as the global leader in the CDMO industry and the most trusted partner for the biopharmaceutical industry.

While implementing our One Lonza strategy, we follow a highly disciplined approach to how we deploy our funds. Every growth investment, organic or inorganic, is assessed against our defined capital allocation framework. We have presented this before. However, let me briefly recap it here, considering its importance for our strategic decision-making process.

As you will see, our first priority is to invest in maintenance, infrastructure and systems, ensuring that our base business remains robust, efficient and well positioned to reliably deliver value over time.

Second, we are committed to a progressive dividend policy. This brings us to the discretionary cash that we have available for growth investments, both organic and inorganic. We remain highly disciplined when allocating capital to organic CapEx or bolt-on M&A guided by strict financial thresholds and our commitment to sustainable value creation.

For such investments, we need a clear view on how our distinct CDMO business model can deliver value for our customers and that we can differentiate against competition through the Lonza engine is our unique sets of strength.

In the absence of appropriate strategically and financially attractive growth opportunities, surplus capital would be returned to our shareholders.

Until 2030, based on our organic growth model, we intend to invest more than CHF 7 billion in organic CapEx, with the majority of it dedicated to future growth. As said, these investments follow clear financial return criteria, namely an IRR of at least 15% and the ROIC at peak of at least 30%.

For acquisitions, we will remain disciplined and committed to attractive financial returns to ensure shareholder value creation from a strong strategic fit and the potential to generate synergies.

Now let's take a brief look at some analytics underpinning our confidence in Lonza's growth potential going forward. Across our technologies, we continue to see sustained demand for outsourcing. For example, demand for marine capacity continues to outpace supply. With recent geopolitical developments pharma and biotech customer demand for U.S. capacity has remained particularly high. and this is reflected in the sustained level of contracting for biometrics capacity at all our U.S. sites, namely [ Portsmouth ] and [indiscernible].

Looking ahead, we anticipate an increased regionalization of supply and demand, a trend that aligns well with Lonza's broad and well-diversified global network and our ability to support customers across key pharmaceutical markets. The sustained trend towards outsourcing across the biopharma industry, is reflected in the modest end based on our historic and forward-looking analysis unchanged CapEx to sales ratios of the largest pharmaceutical companies, which balanced out at around the 5% between 2015 and 2030.

While the ratio has remained largely flat and look set to continue at the same level, there is greater interest in U.S. investments in the current geopolitical context likely at the expense of investments in other regions. As a result, we continue to see healthy momentum in strategic outsourcing across both large pharma and biotech customers and attractive opportunities across technologies and geographies.

In this context, Lonza's continued focus on growth investments has remained attractive to both large pharma and small and medium biotech. This has helped us to maintain a largely balanced customer portfolio among the 2.

In my regular exchanges with a number of key pharma customers, I have not seen any evidence of a fundamental shift in how they view their strategic partnerships with Lonza or outsourcing more generally. This reinforces our confidence in the resilience of the demand environment and our ability to deliver on our ambitious growth trajectory.

Within our customer portfolio, I should also mention that we have a high weighting of long-standing strategic partnerships that, in multiple cases, spend decades. At the same time, we continue to maintain a strong presence in early-stage development, which supports future demand for our technologies and capacity.

Overall, the fundamental drivers of outsourcing remain firmly in place. And we see Lonza very well positioned to continue to significantly benefit from these sustainable long-term industry trends.

With this, I hand over to Philippe for him to take you through the details of our strong financials in H1 2026.

Thank you very much, Wolfgang. Good afternoon, and good morning to those of you joining from North America. Before we dive into the details of our half year 2026 financial performance, let me remind you that all figures relate to Lonza's continuing CDMO business, unless explicitly stated otherwise. This means they exclude the Capsules & Health Ingredients business, which is reported as discontinued operations.

The half year 2025 financials have been restated accordingly and were published on June 23, 2026, to allow you to put today's results in perspective. Also, unless otherwise stated, sales growth figures are reported in constant exchange rates.

Starting with an overview of our financial performance in H1 2026, and where Lonza delivered a strong performance with sales of CHF 3.4 billion and H1 weighted CER sales growth of 16%.

Importantly, this growth was entirely organic, whereas the growth -- the strong growth reported in H1 2025 included the contribution from the [indiscernible] acquisition. In actual exchange rates, sales grew by 11.2% and reflecting an FX headwind of almost 5 percentage points versus H1 2025, mainly from the weaker U.S. dollar. This FX impact is expected to moderate significantly in H2 2026 as the U.S. dollar weakened primarily during the first half of '25, when it strengthened again more recently.

For the year, we therefore expect an FX impact on growth of minus 2 to minus 3 percentage points. Core EBITDA increased to CHF 1.2 billion, representing a growth of 27.4% and versus H1 2025. This translated into a core EBITDA margin of 34.8%, up 4.4 percentage points versus last year. Our margin expansion was supported by the by operational execution, maturing growth projects and operating leverage, a favorable product mix and phasing further contributed to the margin uptick. This is also reflected in the continued improvement in our return on invested capital, ROIC, which increased by almost 3 percentage points to 13.2% in H1 2026 and versus H1 2025 on an annualized basis. This demonstrates that our stronger earnings performance is also increasingly translating into higher returns.

The strong H1 performance provides the foundation for our upgraded 2026 core EBITDA margin outlook of 33% to 34% from our previous outlook of a core EBITDA margin above 32%. As Wolfgang already mentioned, this was a particularly strong first half, supported by a lower prior year base and favorable business phasing. Momentum remains positive and absolute sales growth will continue in H2.

We expect a lower percentage growth in the second half of 2026 based on the prior year high comparable, especially in advanced synthesis. As a result, H1 and H2 for the group should be viewed together with a stronger first half performance and a more normalized second half growth combining to deliver growth in line with our full year 2026 outlook.

Looking at sales growth by business platform. All three business platforms delivered double-digit CER growth in H1 '26. Integrated Biologics grew by 10%, and Advanced Synthesis by 28% and Specialized Modalities by 23%. This demonstrates the broad-based nature of the first half performance and shows that all our businesses are contributing to Lonza's growth.

Integrated Biologics delivered healthy momentum, driven by maturing growth projects and robust growth in the base business. Vacaville, as communicated earlier, showed an H1 weighted sales phasing due to a planned shutdown in the second half to implement the CDMO readiness changes. And for the full year, we expect the bakeries site and sales to be roughly in line with full year 2025 at around CHF 0.6 billion.

As expected, Advanced Synthesis delivered another half year of exceptional growth supported by strong performance in small molecules and especially in bioconjugates versus a lower 2025 base.

H2 sales for the platform are expected to be higher than H1 in absolute terms, with growth versus the prior year normalizing against a much stronger prior year base and favorable phasing. Adjusting for these factors, underlying growth in H1 was in the low teens, demonstrating the continued strength of the business.

Following a somewhat weaker year 2025, impacted by planned asset adaptation microbial and operational challenges in Cell & Gene, our specialized modalities business platform returned to strong CER sales growth, mainly driven by microbial and bioscience.

Cell & Gene returned to normal operations towards the end of H1, which is expected to support growth in the second half. Overall, sales for the group grew by almost CHF 0.5 billion in constant currencies in H1 2025. This reflects our continued effort to bring new capacities online and increase throughput within our existing base assets.

Turning to core EBITDA and margin development. The strong top line growth translated into significant margin leverage. The group core EBITDA margin expanded by 4.4 percentage points to 34.8% in H1 2026. This uplift was mainly driven by three factors.

First, growth projects across platforms continue to mature, meaning are more utilized and operate more efficiently and so contributed positively to margins. Second, sales growth outpaced functional expense growth, creating operating leverage. And third, our organizational focus on operational execution productivity measures and cost discipline began to show tangible results. A favorable product mix and H1 weighted sales facing further supported margin accretion.

The strongest margin improvement came in Advanced synthesis, where core EBITDA margin increased by 6.8 percentage points to around 48%. Also, H2 margins are unlikely to reach the exceptionally high level seen in H1 and we continue to see a strong margin trajectory for the business overall.

Specialized modalities also delivered a material margin improvement with the core EBITDA margin increasing 10.7 percentage points to 28% and from strong margin improvement in our Microbial business. This was driven by the return to growth of the platform, favorable portfolio mix and disciplined cost management.

With that margin uplift for microbial and the continued attractive margins in bioscience, Specialized Modalities is now getting closer to the overall group level margins.

In Integrated Biologics, the core EBITDA margin remained stable at a solid 36%. Margin accretion in the gross business from project ramp-up was offset by less favorable profit mix in the base business.

Moving to free cash flow. We made further progress in H1 2026. Free cash flow improved to CHF 426 million compared with CHF 116 million in H1 2025. This represents a clear step-up in cash generation and reflects the stronger earnings level as well as somewhat lower CapEx spend. It also illustrates that our organizational focus on cash generation is beginning to show first results.

CapEx amount to CHF 530 million in H1, equivalent to 15.7% of sales compared with 21.2% of sales in H1 last year. In H1 2026, trade working capital as a potential of sales increased to 37.9%, reflecting the stronger sales growth in H1 and which resulted in a higher level of accounts receivable at the end of the first half. We expect this to be a temporary factor, and we continue to see additional opportunities to improve trade working capital.

Now let's take a look at our CapEx spend and project portfolio in more detail. In H1 2026, around 60% of CapEx was invested into growth projects across our business platforms. While we expect some normal CapEx phasing from 2026 to 2027, investment intensity is expected to remain within our CDMO organic growth model range. Our key investment area in H1 remain the million, drug products, bioconjugates and cell and gene.

We continue to make progress on our major growth projects, including the upgrade measures at [ Vacaville ], which will lead to the aforementioned shutdown in H2. Also, we advanced larger CapEx projects in drug product and bioconjugates. This investment portfolio is central to our CDMO organic growth model. The assets currently in ramp up are increasingly contributing to growth and profitability in the short to medium term as utilization continues to build.

At the same time, the projects under construction provide the additional capabilities and capacities needed to support Lonza's long-term growth ambitions and meet future customer demand. Across both categories, we remain focused on disciplined return criteria and investment areas where the Lonza engine creates a clear competitive advantage.

Our CapEx investment plans and how our disciplined capital allocation translates into sustainable long-term growth, cash generation and value creation is a topic we will have the opportunity to discuss in more depth at our upcoming Capital Markets Day in Vacaville in October. I very much look forward to see you all there. With that, thank you for your attention.

Now let me hand back to Wolfgang for the business platform updates and the 2026 outlook.

Yes. Thank you, Philippe. And indeed, now let's look more closely at the H1 performance of each of our three business platforms, starting with Integrated Biologics.

In this platform, our largest business platform, we delivered sales of CHF 1.87 billion, and you see our sales growth of 10% as compared to H1 2025. The core EBITDA margin -- core EBITDA of CHF 67 million. We delivered a flat margin of 36% versus H1 2025.

Sales and margin were both driven by healthy momentum from growth projects ramping up across our Malian and drug product technology platforms. Sales growth was further supported by the base business, although the margin was offset by weaker product mix in H1 and the growth projects ramp up in [ FIS ].

Looking at specific sites, we saw H1 weighted sales at [indiscernible]. However, we anticipate that this will be offset in H2 due to the extended shutdown to progress with the site CapEx measures, with full year 2026 sales expected to be broadly flat versus full year 2025 at around CHF 0.6 billion. Overall, we are very pleased in how the site is now fully integrated in our global network continues to fully deliver on our expectations and to attract high customer interest. [indiscernible] is also part of the, I believe, unique and successful offer that we could make to a leading U.S. biopharma company as one of our strategic partners.

Turning to our large-scale mammalian asset in [indiscernible], we have commenced a multiyear ramp-up in line with our planned time line. While during ramp-up, this asset doesn't contribute to growth yet and is dilutive on margin. It will become an important source of future growth of our biologics business. In addition, the already ongoing drug product investments in Stein that I mentioned earlier, belong to integrated biologics and will also support the platform's long-term growth trajectory.

Now let's take a moment to look at the performance and key highlights in our Advanced Synthesis platform. Here, we delivered exceptional CER sales growth of 27.7% versus H1 2025, resulting in sales of CHF 834 million. We also reported a core EBITDA margin of 48.1%, an increase of 6.8 percentage points versus H1 2025 for core EBITDA portfolio CHF 401 million.

Sales growth in this platform was driven by a combination of factors. We saw a strong performance in our small molecules technology platform and especially in bioconjugates. This was further supported by increased asset utilization alongside the favorable product mix, the lower base in H1 2025 and phasing. The accompanying high core EBITDA margin was supported by a favorable mix, good operational execution and strong operating leverage.

While we are pleased with the exceptionally strong performance in this business platform in H1 2026 and anticipate higher absolute sales in we envisage that CER sales growth will moderate in H2 as planned due to a combination of less favorable phasing and portfolio mix alongside a higher base in H2 2025. Similarly, margins will normalize in the second half of the year as expected.

To support the attractive long-term growth outlook of Advanced synthesis, our recently announced highly potent payload linker expansion that I talked about earlier, will provide much-needed additional capacity in response to strong customer demand.

Finally, let me take a moment to review the performance of our Specialized Modalities business platform. Here, we delivered sales of CHF 553 million and a strong CER sales growth of 22.6% as compared to H1 2025. We also reported a core EBITDA margin uplift to 28%, an improvement of more than 10 percentage points versus H1 2025. Resulting in a core EBITDA of CHF 155 million.

We are particularly encouraged by this continued progress with margins in specialized elites now approaching group average. This highlights the balance across Lonza and demonstrates the profitable growth is being delivered across all business platforms.

The return to positive sales growth was driven by exceptional growth in our microbial technology platform compared to a low base in H1 2025 with the asset successfully adapted and now contributing to growth. Performance also benefited from favorable phasing in H1 2026.

Bioscience sustained double-digit sales growth as well, benefiting from favorable sales phasing, while Cell & Gene showed a strengthened operational performance towards the end of H1 2026, and we, therefore, expect the business to make a meaningful contribution to growth in H2.

Double-digit core EBITDA margin accretion was driven by a combination of strong sales growth, and favorable portfolio mix alongside our ongoing focus on good cost discipline across our operations.

Now let's turn to our outlook for the full year 2026, the strong performance we delivered in H1 reinforces our confidence in our One Lonza strategy and its centerpiece, the Lonza engine. Together, that drive attractive growth above the underlying market, while our disciplined investments continue to create the foundation for future growth. These investments will remain in the mid- to high teens of CapEx as a percentage of sales and will proceed in line with the capital allocation framework that I shared with you before.

Based on our strong H1 performance, we are upgrading our full year 2026 core EBITDA margin outlook to 33% to 34%. And while reconfirming our expectation of 11% to 12% CER sales growth.

In summary, for 2026, you can expect from us the delivery of another full year of strong profitable growth, which will then form the basis for us to continue on our overall trajectory of strong profitable growth and value creation year-over-year, in line with our organic growth model.

As we come towards the end of our presentation, let me take a moment to summarize the four key takeaways of our half year results. Firstly, we delivered a strong H1 performance with 16% sales growth at constant exchange rates and a high core EBITDA margin of 34.8%, while also materially improving free cash flow. Based on this, we are well set up to deliver a strong full year in line with our upgraded outlook.

Secondly, these results show benefits of our sharper focus on quality, operational execution, productivity, cost discipline and cash generation. While this is an ongoing journey that will never stop, the first signs are encouraging and reinforce our confidence that we will continue to unlock value across all levers.

Thirdly, looking to the external environment, we see that customer demand for launches capabilities and capacities remains strong. This reflects the deep trust of our customers in us and support the resilience of Lonza's unique business model. Across our global network, we continue to see customers choosing Lonza for our scientific expertise, our strong commitment to quality our manufacturing excellence and our ability to support complex programs across the molecule life cycle and across the world.

In H1, lastly, we have successfully completed our transformation into a pure-play CDMO, which will enable us to continue to unlock significant value from our CDMO business. This gives us a clear strategic focus and ensures disciplined capital execution with a partial view on organic investment and bolt-on acquisitions.

With all of our investments, we are guided by the same objective, creating sustainable long-term value for our shareholders, our customers and the patients they serve. Before we conclude, let me remind you about our Capital Markets Day, which we will host in Vacaville this October. This is your opportunity to engage with our Chairman and myself with Philippe as our CFO and other members of our leadership team. You will gain deeper insights into our strategy and value creation framework and visit one of the most important sites in our global network, widely recognized as a global Beacon of biologic manufacturing across the biopharmaceutical industry since more than 25 years.

We will share how we are executing the One Lonza strategy, discuss our growth ambitions and provide a deeper look at the opportunity ahead in our integrated biologics business platform. We look forward to welcoming many of you to Vacaville, and we encourage you to register your interest soon, if you wish to join us.

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

[Operator Instructions] We take the first question from Charles Weston from RBC Capital Markets.

It relates to CapEx programs. And I just wanted to understand how you manage the CapEx growth projects in order to keep growing smoothly within the medium-term guidance range. And when there is a change like there has been twice now for commercial fill/finish in Stein, where different assets ramp quite differently and change the business mix. How should we think about the impact in terms of where you will fall within your range in any given year and margins? So that was the one question. In summary, when CapEx programs change, what's the impact? And how should we think about that?

Yes. Thank you, Charles. And first of all, great to have you. And before we actually answer a question just for your information, I mean, if need be, Philippe and myself will be happy to actually add another 5 to 10 minutes to our session and we'll be happy to answer your questions.

Before -- maybe to your point, first of all, CapEx is in itself a process which is lumpy. And how it actually occurs over time is not easy to plan, which is why we are kind of more looking at the overall corridor in line with our organic growth model, so mid- to high teens percentages of sales. And this is how we would actually like you to look at the CapEx figure as we described it for the first half and how we see it evolve for the full year, kind of shifting somewhat into 2027.

Second part of the answer is -- and we have a very clear view, I mean, not only for the next 5 years, but further out because lead times of large projects actually is much longer. And we actually know precisely when we actually need to take which investment decision in order to have the capacity ready to then further out provide the capacity that we need to deliver the revenues.

When it comes to [ shine ] and the, let's say, more strategic decision that we have taken there to broaden the scope of the facility towards high-value, small molecules. This, in the end, was a view of creating, I mean, additional potential and an attractive offering for our clients and kind of came with consequences for like a small additional CapEx amount insignificant, but a certain extension of the time line.

When it comes to our growth trajectory, I mean, midterm and longer term, actually, we continue to commit to our CDMO organic growth model of low teens sales growth in constant exchange rates on average over time. So in this regard, I believe there is no reason to be concerned because this is how we foresee our company to grow over the next years. I don't know anything to add from you, Philippe. So thank you, Charles. James, great to have you.

The next question comes from James Quigley from Goldman Sachs.

One on the revenue outlook and the guidance. So you didn't upgrade the guidance for revenues with a set of results, but how would you characterize the visibility that you have on revenue growth for the second half of the year? There is a bit of a concern among some investors on the exit rate being lower in half 2 and then moving into 2027. But could you talk to the dynamics that give you confidence in the outlook. To be clear, I'm not looking for any guidance for '27. What are the factors that give you confidence in being able to continue to grow in the midterm range despite the 6% to 8% implied growth for the second half?

Yes. Thank you, James. Maybe me taking at least the first part, maybe the full answer. First of all, visibility for the rest of the year is very good. And in a way, if you look at our top line guidance and also the upgraded margin guidance, actually pretty narrow corridors, which you can pay, I guess, our confidence and our tight grip that we have on our business.

When it comes to -- I mean, what does it tell us for -- I mean, the future of Lonza. I mean you will have your view or anyone will have his or her view. But in our view, 2026 will be another year of strong profitable growth. And you should rather see it as a starting point for our organic growth model to continue to be applied. So while there has been phasing between H1 and H2, you might rather see that as a reflection of the fact that actually Lonza is not a cookie factory, right? It's a pretty complex high-tech operation with just by nature, a certain lumpiness in its business.

So actually, for me, as a CEO, for us at Lonza, this is of no concern. And we remain confident, and we try to convey that in our presentation that we'll be able to continue strong profitable growth over the next years to come. Again, in line with our CDMO organic growth model, which is for us, the North Star in terms of how we think about our future ourselves and how we actually explain and communicate to you about what you can expect going forward.

The next question comes from Thibault Boutherin from Morgan Stanley.

Just in terms of -- when we think about midterm outlook, between the different divisions, I think there was at least a consensus that view that biologics would be the fastest-growing midterm. And we're seeing this very, very strong growth in advanced synthesis. So just if you could, without giving guidance, if you could just give us an idea of your view on which modalities is as the strongest potential on sort of short to midterm. So we have a better idea of what to expect.

Yes. Again, I would start with my answer to that. First of all, I would rather take this as a sign of strength because what is actually happening and what you're seeing at work is risk diversification across technologies and across business platforms. And this enables us to actually commit to our organic growth model to actually deliver low-teen CER sales growth on average over time in the future with margin expansion step, expanding step-by-step.

So this idea of kind of diversifying a certain lumpiness within our different businesses is not an outcome, but it's actually an incoming hypothesis and one of the design principles of our company and our overall portfolio.

If you ask me what our growth expectations for all those businesses are? They are all high, and Biologics is a growth engine of the company and will continue to be a growth engine. And in my presentation, I shared I thought I said the business platform is right now lining up the next commercial scale, large-scale assets in first and also in Vacaville drive significant growth in biologics over the next years to come. However, those assets today don't really contribute to growth yet because Vacaville an acquisition from Roche. And [indiscernible], the large-scale biologics asset is an asset in ramp up right now. ADS is a highly attractive market segment where we're actually leading as a company, and we enjoy significant growth and are happy to continue to invest and double down on this technology, Specialized Modalities, as we talked about, benefited -- or Lonza benefited very much about from this diversification logic that I just declared before last year.

But we also told you at that time that this business platform will also start to contribute not only to growth but over time also to margin. That is what we are starting to see right now. So also Cell & Gene we consider to be an attractive modality in which we would like and will be present going forward. Anything to add it I'd say that is a good sign.

The next question comes from Justin Smith from Bernstein.

A quick one. Given where the ROICs are now, I just wondered if you wanted to make any potential comments about where ROIC might be as a percent -- as a multiple of work?

Yes. Thank you, Justin, for the question. So again, 13% now, which again, benefited, of course, from also putting our Capsules business into discontinued operation. And now you're seeing the increased margin dropping all the way down, of course, to profits and to ROIC ultimately.

So in terms of WACC, we are probably now close to 2x whack or so, and we probably see further potential. But we are not guiding on ROIC, but given our margin expectations as you have them in the organic growth model, ROIC will follow suit.

The next question comes from Odysseas Manesiotis from BNP Paribas.

Firstly, would it be fair to assume you're by processing raw materials and finished goods inventory is at level similar to or below usual -- and with small scheduling changes in this be reason for volatility we're seeing in the bad processing side on the supply side.

And secondly, Philippe, should we take your comments on CGT production coming fully back to normal in late as at Portsmouth for A3 on a CGT product has been fully resolved? And fair to say at this point that all the [indiscernible] have been resolved as well?

Sorry, I could not understand the very last part of your question. has returned to normal and then you said something else?

Yes. And that essentially means that the 43 import Smith has been resolved, but also that all the other forests in the key facilities have been resolved as well.

So I think on our inventory levels, I think, again, we are continuously working on our inventory levels. not just around raw materials, but all across the chain from raw materials all the way through to finished goods. So I think right now, I wouldn't say that there's a significant change between where we were at the end of last year and the first 6 months, but this is a continuous path. But if you're trying to read across some of the bioprocessing companies, I would not do that just based on kind of our inventories.

On CGT, indeed, we've resolved the manufacturing challenges that we had last year, which were actually unrelated to the 43. So I would not want you to make a link between the 43 observations and our operational challenges in the sites. But the production has resumed, and this will contribute to the second half performance of Cell & Gene. So this is, I think, good news.

In terms of the 43 across the other side as we communicated before 43 is almost nowadays normal course of business. You always get some observations from the FDA when they come and visit the site either for a product launch or to look at the site in general. And we are working very closely to remediate the observations. But none of the 43 have had an impact on our operations or revenue generation.

And next question comes from Charles Pitman King from Barclays.

I just have a question on the kind of customer behavior and market and any commentary you can provide by customer -- so just wondering if you've seen any push out or delay for demand related to macro uncertainty. Or if there's been any change in the broader European contracting environment given your reassuring comments if that -- if there's any difference between your larger and smaller customers.

Yes. Thank you for the question, Charles. And we kind of starting in a more general level and kind of circling back to what I said during the presentation. And of course, we kind of carefully listened and carefully did our own analytical work.

So -- and the summary from that is actually the strategic outsourcing trend. We actually don't see any change. I mean no one in the industry told me that they are now changing their individual model, which is different, from company to company. And the amount of outsourcing is also different, but that no one is actually really changing its outsourcing model with outsourcing away being a big pharma company thing because the small- and medium-sized companies anyway need manufacturing partners like one. So that's the first observation.

The more data-driven conclusion that we shared in the presentation about -- I mean, do we really see a fundamental change in CapEx behavior of big pharma. We kind of shared with you our answer being actually no, we don't see that. However, there will likely be a shift in where this money is spent less so in the rest of the world, probably more so in the U.S. when we -- earlier kind of shared impressions about certain decisions on the customer and taking longer, that actually -- I mean our explanation is that, of course, those companies kind of have to find their way through all this volatility, which took them some time to eventually come to conclusions, many -- some of them earlier, others later. So this is, I guess, our take here.

But kind of taking it down to what really matters is the sustained demand that we continue to see and customers continuing to enter into or extending their strategic outsourcing partnership with Lonza.

So overall, and not so much by surprise if you think about it, the CDMO model, especially with a leading company or the leading company like Lonza, which is, I mean, a broad technology broad regional offering remains very attractive and in very high demand. Variation between small and large customers, it is not really a change to before because small midsized customers kind of by default, had to go to companies like Lonza. They continue to do so, us having 45% of our revenues with this kind of this are type of customers and large customers with our own capacities take a different perspective, which, again, is different from company to company as well.

But we continue to have very effective conversations and continue to be able to win business with them as before, I would say.

The next question comes from Ebrahim Zain from JPMorgan.

My question just on the H1, H2 phasing just to make sure I fully understand. So I think the advanced indie commentary is really clear. But just on specialized modalities because I also saw very strong growth you highlighted in the first half, that 23% revenue growth. Just how should we think about the trajectory for the second half and even on the margin for specialized modalities, as you said, approaching group margin? How should we think about that going forward in the second half and the years to come?

Yes, Zain you for the question. So again, maybe I can take you through the three platforms, making it easy, I think, probably on [ SPM ] and Biologics, I think the two halves are comparable for different reasons. I think on [ SPM ], of course, we had a little contribution from Cell & Gene in the first half, as just answered in the question before, we see more contribution from Cell & Gene in the second half in terms of growth and probably some moderation on the rest of the technologies within [ SPM ].

I think the biologics divisions integrated Biologics probably also as you can imagine, with the shutdown in Vacaville, we will have less sales in Vacaville, which is a little bit of a drag. On the other hand, as Wolfgang mentioned, our 620k in [ FIS ] is starting operations in the second half. So this will help. So that's a little bit the ups and downs for biologics. And then ADS is probably where we will see the biggest change given also the very different size of the halves we had in the previous year, right? I think the second half last year in ADS was a very strong half where we had several new capacities coming online and starting to ramp up. So this, I think, is probably where you see the biggest difference in terms of percentage growth.

But again, bear in mind, our second half will still be growing in absolute. So it's still kind of a growth versus where we are today. And so all three platforms will be very competitive. On the years to come, I won't comment besides you have the organic growth model. You have our algorithm, and we are guiding to this.

And kind of adding to that and searching back to what Charles asked at the very beginning of the first question in terms of -- I mean, how to -- I mean, make sense of 2026, the half year in the second half and how to use it to kind of think about the future of Lonza. Our view on that is that you actually should look at the full year, which will be a strongly profitable year with within our organic growth model.

And it actually is playing out as expected so far and we kind of communicated that to you before. I mean this profile of H1, H2 is not a surprise. It's going according to plan. And when we think about our future, we will look at full year 2026, which again, according to our upgraded guidance will be another a year of strong profitable growth. And then we will actually continue our business planning in line with our organic growth model, which has low teens sales growth year-over-year on average over time with profitability margins expanding over time as well.

So that is probably the view that we would recommend you to take when thinking about the future in H1, it's just, I believe, a strong proof point of the market leadership of Lonza of the appreciation of our offering and of our ability to actually not only strongly grow but also turn this growth into significantly increasing profits and eventually also cash.

One more question, we will be happy to take and then would have to close the call. So I don't know, Sandra, if there is anyone -- anything that we could actually take on .

Yes, sir. We take the last question from James Vane-Tempest from Jefferies. .

Just a clarification to my car from the prior question. At least coming back to the sort of phasing agent. I understand in terms of the margins, there were no one-offs or termination payments in terms of seeing that sort of increase in the first half. But when I look at last year, that both advanced this and specialized modalities, the margins were kind of relatively stable.

So when we think about the normalization in the second half of the year, is that the right framework we should be thinking about for those two segments? Or was there perhaps a pull forward from the second half. So maybe the second half margins would be lower. I know you're not going to guide specifically on what the margin would have like in the second half, but some of the kind of the puts and takes in that to understand what that floor looks like in the second half, that would be very helpful.

Yes. No, thanks, James. Well, the floor we gave you is 33, 34 of the full would be 33. for the year. So I think we can do the math of what it means for the second half. But taking probably your question was seriously. I think on ADS, clearly, as I said in my presentation, the margins will not stay at the H1 level. There will be a lower margin in the second half because, yes, H1 grew very strongly. You had a strong operating leverage. You had a slight phasing, which was some help from 2025 into 2026. This will not repeat. So this will become more for a normal second half in terms of margins. And we said that for advanced indices, we are happy with margins around 40%, starting with the 48%. Of course, this is a good start in the year. But there will be margin normalization for ADS very clearly. On the other platforms, I think we feel comfortable to be in the range of historical -- not for SPM historical performance.

As important. What you said about margins applies to ADS, correct?

So when you say that in specialized modalities, comfortable is approaching sort of the group C margins. Is that sort of like a step change for the first half, which you think about in the second half in terms of how you're looking at things versus last year? Or is that also expected to normalize?

Yes. I think on SPM, what I think happened is that we put together microbial together with cell and gene and Bioscience. And so [ Microbia ] is actually a very strong business has always been a strong margin business as well. Unless -- except for 2025, where we had this asset change. And therefore, almost kind of you're not used to see SPM with microbial and bioscience performing. And so -- now you're seeing SPM with two of the three components performing. And therefore, this is probably margins that are to be expected.

That was the last question, over to you Sandra.

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 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.