Lonza CEO Pierre-Alain Ruffieux has announced his departure from the $38 billion Swiss drug ingredient manufacturer. He will be replaced by Chairman Albert Baehny until a successor is found. The news has resulted in a 10% drop in Lonza’s share price, reflecting investor concerns about the impact of Ruffieux’s exit on the company’s upcoming targets, set to be announced later this year.
Ruffieux’s departure follows a period of significant spending by Lonza, aimed at positioning the company to benefit from the growth of drugs made from human proteins and reducing its reliance on pandemic vaccine production. Since Ruffieux became CEO in 2020, Lonza’s capital expenditure as a percentage of revenue has increased from 20% to 30% last year. However, the company also faces challenges, including weaker biotech spending due to drug pricing controls in the United States.
Analysts predict that Lonza’s sales growth between 2023 and 2026 will be just 9%, according to data from the London Stock Exchange Group (LSEG). This falls short of the company’s historical target of “low teen” percentage growth. Even before the recent share price slump, Lonza’s stock was trading at 32 times its forward earnings, similar to its pre-pandemic levels.
The unexpected departure of CEO Ruffieux, without a clear explanation, has further disrupted Lonza’s plans for growth. Investors now anticipate that achieving the desired growth will take even longer.
Lonza, a key player in the global pharmaceutical industry, has been focusing on expanding its capabilities in complex drug manufacturing. The company’s strategic investments have aimed to position it as a leader in the production of drugs made from human proteins, which have shown promise in treating various diseases.
Lonza has been seeking to decrease its reliance on the boost provided by pandemic vaccine production. The company’s increased capital expenditure in recent years has been aimed at developing technologies and infrastructure to support its expansion into the fast-growing sector of complex drugs.
However, Lonza’s plans face headwinds, including the impact of drug pricing controls in the United States. These controls have led to reduced biotech spending, affecting Lonza and other pharmaceutical manufacturers. As a result, analysts are not as optimistic about Lonza’s sales growth prospects as they once were.
Lonza’s share price decline following the announcement of Ruffieux’s departure highlights investor concerns about the potential impact on the company’s future performance. The uncertainty surrounding the CEO transition and the delay in finding a suitable successor have intensified these concerns.
Investors will now closely watch Lonza’s upcoming targets, set to be revealed later this year, to assess the company’s ability to deliver on its growth plans. The new CEO will face the challenge of navigating the complexities of the pharmaceutical industry, capitalizing on Lonza’s investments, and driving the company towards achieving its targets.
Lonza’s story reflects the broader challenges faced by pharmaceutical companies in a rapidly evolving industry. As Lonza navigates its transition to a new leader, the company’s ability to adapt to market dynamics and capitalize on emerging opportunities will ultimately determine its success.
More detail via Reuters here… ( Image via Reuters )