Lonza lifts its mid-term margin ambition to the high thirties as it becomes a pure-play drug manufacturer

Lonza on Wednesday raised the profitability goal behind its growth model, telling investors it now aims for a CORE EBITDA margin in the high thirties over the mid-term as it finishes turning itself into a company focused solely on developing and making drugs for other companies.

A margin number on the growth model

Lonza said early Wednesday, Oct. 14, in an ad hoc announcement issued from Basel for its capital markets day in Vacaville, California, that it has upgraded the Organic Growth Model it uses to describe its contract drug-manufacturing business. The model now calls for organic sales growth of 10% to 13% at constant exchange rates on average over time, CORE EBITDA growing faster than sales, a CORE EBITDA margin in the high thirties in the mid-term, return on invested capital of two to three times its weighted average cost of capital, and improving free-cash-flow conversion.

The return target is new: Lonza said it "expands the model" to include it. When Lonza first set out the model in December 2024, it described low-teens sales growth with CORE EBITDA growth ahead of sales and said that was consistent with its earlier mid-term guidance for 2028, without stating a margin level in that announcement. Organic capital spending is still expected to run at around the mid-to-high teens as a percentage of sales, and Lonza said it remains committed to a progressive dividend.

The high-thirties goal sits above current guidance. Lonza's 2026 outlook calls for a CORE EBITDA margin of 33% to 34%; in December 2024 it had guided to a margin approaching 30% for its contract-manufacturing business in 2025. Lonza did not attach a target year to "mid-term." For scale, the company reported first-half 2026 sales of CHF 3.4 billion and CORE EBITDA of CHF 1.2 billion.

Third quarter in line, outlook unchanged

Lonza did not publish third-quarter sales or profit figures. It said performance was in line with expectations across all of its business platforms and reiterated the full-year 2026 outlook it raised after the first half: sales growth of 11% to 12% at constant exchange rates and a CORE EBITDA margin of 33% to 34%. It still expects currency moves to cut 2026 sales growth by roughly 2% to 3%.

Capsules & Health Ingredients, the unit Lonza is selling, was also in line, and the company still expects mid-single-digit constant-currency growth and further margin expansion there for the year. The sale to Lone Star Funds, a deal of about $3 billion agreed in March, is expected to close by the end of 2026, Reuters reported.

Chief executive Wolfgang Wienand said the pure-play structure and what the company calls the "Lonza Engine" further strengthen "our confidence in our Organic Growth Model and our ability to improve margin faster over time."

Vacaville and bolt-ons

The investor event is being held at Vacaville, the biologics plant Lonza bought from Roche in 2024 and its largest site for commercial manufacturing of complex biologics. According to the same report, Lonza's presentation said the site could reach peak sales of up to 2 billion Swiss francs ($2.4 billion) in the early 2030s at constant exchange rates, after finance chief Philippe Deecke said in July that Vacaville sales would stay broadly flat through 2028. The presentation also said Lonza is "ready to double down on bolt-on acquisitions."

That timing matters for the margin math. If Vacaville is broadly flat until 2028, more of the climb from 33% to 34% this year toward the high thirties has to come from the other drivers Lonza named on Wednesday: maturing high-return growth projects, better operational, commercial and capital-spending performance, and continued discipline on overhead costs.

Management was scheduled to present on a webcast at 9 a.m. Pacific time (noon ET) on Wednesday.