I'm actually, so hello, stop talking.
Welcome to the Lonza presentation from the J.P. Morgan Healthcare Conference. From Lonza, it's my great pleasure to welcome the CEO, Wolfgang Wienand, who will lead the presentation. 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.
Yeah, thank you very much, Zain, and a warm welcome from my side as well, and happy to talk about 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 driver, drivers, and actually going through two of them, which are strong top-line growth, investment, and 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 three key messages plus evidence supporting those claims. First of all, we are the leader in the CDMO space by revenue.
We actually are increasing profitability, and we look at a very well-balanced business in terms of regional revenues and also a very well-balanced, balanced portfolio in terms of customer types. So roughly 50% for small and mid-size pharma companies and large-cap pharmas. We at Lonza can essentially serve almost any key modality in any phase across the globe. Eight technologies within Lonza, which we apply across our global network of, I mean, essentially it's more than 30 sites, but if we look at sizable capacities, sizable sites, it's actually round 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 five years round 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 Star. 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 wanna do, and what we don't wanna 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 pharma value chain, the product lifecycle, 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, the 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 five 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 to just report a few, I think, impressive figures here.
Among the top 200 leaders, actually 95% strongly support the One Lonza strategy, the One Lonza purpose, and the One Lonza mission. Engagement index well above 80%. Very important that we, I mean, on the 1st of April, we introduced a completely new target operating model. There's a lot of change, and 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 a strategic enterprise account management and many other changes, we have been able to even increase this a good figure, times two for big pharma clients and by 50% for small- and mid-size pharma companies. End-to-end execution excellence. So our view on what can be an attractive offering besides the individual nodes of drug substances, drug product, which is integration, drug substance and aseptic drug product manufacturing, significant increase of activities of such integrated offerings in the biologic space. Integration capabilities, two obvious examples, Synaffix, acquired in 2023 with integration and this business running at full steam, already in Q1 2024, and of course, Vacaville, one and a half 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 one 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 made 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.
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 two. 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%-7% a year in terms of value.
Then there's 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, 1-2%. Active market selection. So that's our choice, our decision where to invest into which technology, in which subsegments of this underlying pharma market we wanna address. And by carefully choosing the most attractive spaces, we actually add another 1-2% growth increment, which leads to a growth of 8%-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, actually enables us to outgrow by another 2-3%. So that's our view, based on the conditions that we see today to Lonza, on average over time, there's a growth potential of 10-13% available.
That's actually what you have seen at the very first slide being kind of our historic performance as well. This is the centerpiece of our so-called Lonza CDMO organic growth model. I've spoken about choices that we made at Lonza. On the top, we actually see that, I mean, the pharma market itself, $1.2 trillion, and the clinical pipeline of more than 7,000 molecules growing at 9%, while the underlying market growth at 7%. Lonza did make choices over the last years in terms of which technologies to serve, and 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 round about $100 billion growing at the previously mentioned 8-10%. 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.
If we look at two KPIs here for large pharma top 20, first of all, for the time horizon from 2015 to 2025, I'm kind of assuming actual, and then further out to 2030, just the absolute CapEx amounts spent by those pharmaceutical companies, we actually see a historic CAGR of round about 3%. And also based on consensus forecasts of Bloomberg, this is going to be 3% over the next five years as well. 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%. Also no visible significant change. That's big pharma. And there's the other portion, very important of the pharmaceutical universe, which is small biotechs and mid-size pharma.
Here we kind of got back to the pharmaceutical pipeline and asked ourselves who's contributing what. And here we see that actually the number of molecules, innovative molecules being contributed by small biotechs, mid-size companies is actually growing over time to, and it's expected, or 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, and 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.
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. 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 sites, but you essentially see that there is a significant presence. It's actually true since 25 and 30 years already in the U.S., East Coast, West Coast.
There's obviously also a strong presence and quite an amount of capacities within Lonza in Europe, but also in Asia. That is the outcome, of course, of many, many years of investments. Considering the last five 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 US. 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 or phase one 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 at 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 our 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 of 23 growth projects.
For one, a commercial high-potent API manufacturing 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. Also in Visp, a large-scale mammalian drug substances manufacturing facility, 120,000 liters. Obviously a large CapEx project started GMP production in 2025. 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 finish services. Here we are investing in a medium-sized CapEx project in Stein into highly flexible filling lines, different technologies. This capacity is expected to start in 2027 with peak sales in the early 2030s. It is 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 $1.1 billion at the time, 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 2030s. Let's quickly go through some highlights of that acquisition. We, and that we kind of knew, acquired a very capable, a 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, Lonza network.
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. 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, four contracts signed, more in the making. I myself will actually go with two potential clients or two clients to Vacaville tomorrow and on Thursday and look forward to actually present this great site to potential new products, potential new customers. High quality assets. 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 turning 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 have rarely experienced in my whole career. Spoken by a senior external head of manufacturing, 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, dividends. 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, CapEx or M&A. 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. 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 2028.
The majority of this amount of money will actually go into future growth. 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%-10% plus the growth increment, plus the Lonza Engine increment of 2%-3%. In order to actually turn those opportunities into value, we need to continuously invest into our systems, maintenance, mid- to high single-digit percentages of sales, and into growth, low teens of sales. If we do that, and as long as the conditions are as we see them today, our CDMO organic growth model kind of expects a constant exchange rate sales growth of low teens on average over time and an expanding core EBITDA margin. Margin growth ahead of sales.
For 2025, we actually upgraded our annual guidance, together with a half-year results in July to a constant exchange rate sales growth of 20-21%, including around CHF 500 million revenues from Vacaville and a core EBITDA margin of 30-31%. 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, I 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. As a reminder, if you'd like to ask a question, you can raise your hand and we'll find a microphone to make its way to you even. 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, you know, four contracts signed, more in the making. We had four contracts in Q3.
So what's the latest there in terms of contracting momentum? Sounds like customer interest is still high.
Yeah, customer interest is high. And that probably is due, 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 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, that you've had a successful FDA audit.
So I think there was a 483. It sounds like that's all resolved now in terms of operations as usual.
Yeah. I mean, to put that into 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 or no observation. But I mean, as a matter of fact, it's typical that there are some observations. In this case, in Vacaville, there 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, 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 very, very good outcome for ourselves, for Vacaville, and also for our clients.
Great news.
And last question for me on Vacaville, it would be you've had four 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, sales stable over the midterm?
Yeah, 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 that 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 500 million plus or minus Swiss francs 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 CDMO 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, a more efficient asset, and this site in terms of revenues will then take off probably starting around 2028 and fully flourish beyond 2030.
You know, 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, just look back over the last 15 months, how do you feel now about the 10%-13% CDMO growth? And what are the key drivers to be able to achieve the upper end of that range versus the, the low, the lower end?
Yeah, 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.
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 and 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 CDMO 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.
In looking into 2026, appreciate we hear more in a few weeks from now, but what are the key drivers that we should bear in mind in terms of 2026 CDMO growth for the top line and also margin?
Yeah, it's actually an easy answer because we can't talk about it until the 28th. 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 2026 and beyond. 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 $500 million 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 2026, so far looks good. Also the funding in biotech, which is a small part of our business, seemed 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, so 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 done 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? Mm-hmm.
Okay. Yeah, 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 molecules work is important for us to have this pull through to learn about what's gonna be needed in the future.
So it's a business that we wanna 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 two to three quarters to actually materialize. Why? Because companies are getting the money. They need to review their development plans, they need to issue RFPs, companies come back, so this usually takes time, and the earlier the phase, the smaller these amounts are, so these are at the beginning, early development 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 US competition, and you touched on it in terms of, you know, pharma investments and concerns over insourcing versus outsourcing, but maybe broadening that to even the CDMOs that we've seen invest in the US after you invested in Vacaville and maybe trying to catch up with you. What are your latest perspectives there? You put in a slide that you're leading, leading share in the US. So how are you thinking about the competition that's emerging in the US from likes of Fujifilm and Samsung and any impact that we should be thinking about for you?
Yeah, obviously we don't comment on what other companies do. Of course, see it, observe it, and if need be, 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. The US, 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 leading in the US.
That's clear. And I suppose on the tariff front, I think we've had a few months now to digest any potential impacts for a lot of the large cap pharma maybe who've 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?
Yeah, 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, I mean, 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, it actually 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. No, it's a calm, rational approach. We are having the right discussions and are in many cases able over time to offer solutions to that rightful desire of our clients.
I maybe I'll close with one last question on CHI. You've mentioned the legal entity to carve out is complete.
So, latest perspectives there on the exit process and potential timing and maybe to think about the deployment process. You've put the funnel on the slide as well, but how you're thinking about the balance between business development versus investing internally.
Yeah. For you, Philippe.
Yeah, 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 through 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 works well. In terms of the exit process, that's really a private process between us and the potential new shareholders.
That we will inform you whenever we have something more to say on this. No change on that front versus where we were in Q3. 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 that's coming back. We feel very good about also the margins coming back when sites are more utilized. Overall, the business I think is really performing as we planned. That is, I think, 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 at time. So thanks very much, Wolfgang. Thanks, Philippe. Thanks everyone for joining.
Thank you.