Ladies and gentlemen, welcome to the Full Year Results 2020 Investor and Analyst Conference Call and Webcast. I am Alice, the Chorus Call operator. I would like to remind you that all participants will be in listen only mode and the conference is being recorded. The presentation will be followed by Q and A session. The conference must now be recorded for publication or broadcast.
At this time, it's my pleasure to hand over to Mr. Pierre LaRouffeur, CEO. Please go ahead, sir.
Thank you. Good morning and good afternoon to you all, and thank you for joining this call. I'm Pierre Henrique, and I have been the CEO of Lonsat since the beginning of November last year. I'm pleased to join you today for my 1st full year results presentation. I'm joined on the call by Rodolfo Savitsky, our group CFO.
Here you will see a short overview of our schedule for today. I will provide a brief overview on performance at group level before handing to Rodolfo to share an update on our full year financial performance. I will then take you through an overview of each of our segments and businesses before providing an update on our 2021 outlook And mid term guidance. We will close the session with the Q and A session. Let's start by taking a look at our group performance and highlights for 2020.
As communicated last year, LSI is being reported as discontinued operation, Meaning that FCBN now represents our continuing operation. We have delivered on our guidance for 2020. The full Lanta business delivered CHF 12.0 percent sales growth at constant currency and CHF 1,400,000,000 core EBITDA. This represents a 31.2% margin. This number reflects the performance of the FTBN segment, Which achieved 12.2% sales growth and a 32.1% core EBITDA margin.
We saw a strong performance across our FBBN business with Biologics as a primary driver of growth. In this year of pandemic, our collaboration with Moderna on the COVID-nineteen vaccine represented a milestone for our business In Biologics, we have started the production of the active substance for the vaccine at both our personal sites in the U. S. As well as in Wisp in Switzerland. Turning to the LSI segment.
We have also achieved a fairly solid performance With 3.4 points sales growth and 20.3 percent margin. In July last year, we took the decision to divest the LSI segment. We have been classified as This continued operation in our 2022 financial results. Having decided to divest the LSI segment, We are now able to focus on the FBBN segment, which will become the future longer. This represents a moment of opportunity As we achieve a clear identity as a single business operating in a single industry, To ensure we are optimally set up to deliver future success, we have spent some considerable time and effort In redesigning our business into 4 division and 5 functions, we have also worked to update our financial reporting So that we can begin to report divisional performance in the future.
Here you would see an additional level on which our businesses have been placed into each of our new division. The new structure is designed to create clarity for customers while improving performance and operational efficiency. It has been developed in response to all customer interact with our business, ensuring that we are set up to deliver the best possible service offering. As the incoming CEO, I would like to take this opportunity to thank Albert Beni And the management team for the extensive work on the structural redesign over the course of last year. It has left the business one place not just for our 2020 results, but to capitalize on future opportunities.
Building on the new structural design, I'm pleased to confirm that the Board of Directors Appointed 3 new members on the Lonza Executive Committee, effective from April 1, 2021. These 3 new leaders will join our current ISTE, which comprises of our CFO Rodolfo I will take a moment To see just a few words about our new addition. Cloud has not been replenished out for just over 1 year And you need the capsule and SF ingredient division. Gordon is a loan pad at around Having been with the business for nearly 20 years, he's leading the small molecule division. Finally, Jean Christophe Ivan Has been with Lonza for 3 years is Ezra's Biologics division as well as the Cell and Gene Therapy and Biologics division.
I would like to congratulate them for their appointment. While making strategic improvement to the structural design and governance of the LOTA business, we have taken the decision to divest the LS5 segment. This will allow the business to find a home where its value can be fully appreciated and its potential can be unlocked. I am pleased to confirm that our first round of the bidding process has concluded and we are already working With a shortlist of high qualified bidder on the second round of the process. We cannot disclose the name of our current bidder, But we do expect to sign a deal in Q1 2021.
We will be sure to provide updates when further development can be shared. On the next slide, we would like also to provide an overview on our major investments in 2020. I will not go into the detail of each project, but this overview provides an indication on our continued CapEx investment. We expect to maintain a similar investment momentum in the coming year to set you on long term growth and success. I think Section 3 has begun to gather momentum at the very beginning of 2020, Loans are from a COVID-nineteen task force with 2 key objectives: keep our people safe and maintain business continuity.
We are pleased to see that we have managed to achieve both. As many of our employees have become used to home working And while our lab and factory workers quickly adapt to more stringent safety and EGN requirements. Lonza has maintained business continuity and in many markets has been acknowledged as a supplier of essential medical therapies You see here a snapshot of customers collaborating with us on new projects Related to COVID-nineteen over the course of the year. LSI has also played its part in helping to control the pandemic. Currently, 16 of Lonza Microbial Control Solutions have been approved by the U.
S. Environmental Protection Agency In May 2020, we confirmed a 10 year agreement with Moderna on its ARM M and A platform. This agreement provided for the manufacture of the active substance for Moderna COVID-nineteen vaccine. Thanks to our preplanned capacity, we were able to move from contract negotiation to production in just 8 months. The project has shown the commercial value of our ABX offering, which helps to meet our customer needs I will now hand over to Rodolfo To take us through the details of the full year financial.
Thank you, Pierre Alain. Good morning and good afternoon. Our numbers today look different from our previous results because we are reporting LSI as discontinued operations for the first time. It means that our operating results reflect the performance of Lonza as a pure play healthcare business. However, one thing remains consistent compared to previous mid year and end year presentations.
Our numbers continue to indicate very strong performance. Before we begin to review the Lonza results excluding LSI, Let me just make a few comments on the results for the overall Lonza Group. This is the pharma and specialty ingredient segments Still together. For Lonza Group, we guided for sales growth in constant currency above mid single digit And a stable core EBITDA margin. Our results today show almost double digit sales growth, 9.5% in constant currency and Corumita margin close to 28% 28%, yes, 50 basis points above prior year.
These results were supported by the strong performance of both the Pharma and Specialty Ingredients segments. So in short, we fully delivered on our guidance. Now let's turn the page And take a moment to review the results of Lonza continuing operations that is Lonza excluding Elisa. Let me underscore the headlines already mentioned by Pierrella. The results are strong With sales growth in constant currency of 12% and core EBITDA margin of 31.2%.
You may recall Our guidance for the FPPN segment was sales growth of high single digit to low double digit, So results came well ahead of guidance. The small margin decline of 50 basis points was anticipated And it reflects the investments behind our growth initiatives. We see a stark difference between the sales growth in constant currency and reported currency. This is because the Swiss franc appreciation against all our major currencies U. S.
Dollar, euro and U. K. Pound had a major impact on reported sales. Importantly, our combination of balance sheet hedges and natural hedges mitigated the exchange rate impact on margins. During our H1 2020 results presentation, I mentioned that the growth projects had negatively impacted 1st half core EBITDA margin by 1.7 percentage points and we expected a further negative impact of 3 to 3.5 percentage points in the second half.
Well, we managed to mitigate the impact of growth projects to negative 1.2 percentage points for the full year. For perspective, the year on year margin impact of this investments project was negative 40 basis points As we of course also had growth projects in 2019. Importantly, while We had efficiency measures equivalent to almost 70 basis points of sales. They were compensated by negative product mix. I will discuss this margin bridge in more detail in the next slide.
First, let me complete the financial summary here by saying that we also had very strong cash flow and ROIC Results for the year and we will review this later in the presentation. This graphic provides an indication of the different major levers, which impacted our core EBITDA margin. Let me start with the investment impact. Pierre Lan has shared a snapshot of how our investment behind growth projects progress in 2020. For all of these projects, we need to start hiring and training the employees who would ramp up the facilities before we commence manufacture.
This means that most of these operating costs are expensed before we start to deliver revenues. To put this into context, we increased our number of FTEs in 2020 by more than 1,000 FT feet
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feet feet feet feet feet feet feet feet feet feet feet feet feet feet Es, most of these new hires support our growth. Turning to our productivity, we continue to see efficiency gains in our manufacturing operations. Cost containment measures, In administrative areas allowed us to maintain flat overhead year on year despite the significant growth in sales. Some of these measures also benefit from tailwinds from COVID-nineteen like the significant reduction in costs associated with travel. We had some negative impact related to business mix.
For example, cell and gene therapy continues to grow significantly And so has a negative impact on the margin mix. We need to keep in mind though that these high growth business units We'll have a positive impact on ROIC and margin once they achieve a critical scale and stabilize operations. We're particularly proud of our cash flow results. Our operating free cash flow was CHF 0.5 billion In 2020, it was up 36% versus the prior year. On net working capital, we already have made Progress in accelerating collections, eliminating over dues, we are extending payment terms and paying on time.
We still have the opportunity to optimize our inventories, but given potential supply chain disruptions during the pandemic, we decided to maintain our inventory levels. Working capital, therefore, remained flat at 16% of sales. CapEx levels exceeded guidance. We surpassed our own expectations in accelerating the construction schedules of several growth projects. Just for perspective, CapEx spending in the last quarter was 20% higher than the average spending in the prior 3.
Finally, we saw a higher level of customer funding for some of our projects that you see under other in the chart, which helped to mitigate the impact Around 70% of our CapEx expenditure was deployed on investments To drive long term business growth. In this graphic, we made a distinction between normal growth projects and strategic growth projects. Normal growth projects provide incremental capacity or manufacturing site modifications to support commercial program. Strategic growth projects represent major investments in new businesses, geographies, technologies or step increases in capacity. Among these strategic growth projects, we have included the expansion of clinical mammalian capacity in Wansu, China, mid scale mammalian capacity in U.
S. Preclinical services and clinical mammalian drug substance and drug product in IVXX Design And develop in our JV with Sanofi in Switzerland, just to name a few. Looking at these examples, You can see the majority of funding was invested in mammalian manufacturing, which is explained by the CapEx intensive nature of this business. Nonetheless, we also continue to make significant investments in small molecules, drug substance, conjugation, Cell and gene therapy suites and capsules production. Importantly, all these investments continue to build our enterprise value.
They carry attractive rates of return and growing levels of more than 30% after operations ramp up. I should also note that many of these investments are made against already partially or fully contracted commercial programs, so the project risk is relatively low. When we first saw the global impact of the pandemic back in March 2020, Ensuring liquidity headroom became a top priority given the high economic uncertainty. I'm glad to confirm that even at this challenging time, we did not foresee any funding problems whatsoever. Still within our homework and refinance facilities, increased credit lines and extended maturity profile.
With the very strong cash flow generation last year despite investments in growth programs and the acceleration of our EBITDA, Our net leverage continued to decrease. We remain fully committed to maintaining our investment grade rating, Which is now more strongly underpinned by the favorable net leverage metric. This leads me to the last slide in this section. We are still steadily increasing our ROIC metric towards our mid term guidance of double digit by 2023. ROIC properly captures the attractive margins of our base business and the attractive returns of our growth investment initiatives.
We talked about core EBITDA in the first line and here we move to net operating profit after tax or NOKAT. Both metrics are highly correlated this year, but we will face increased depreciation in future years impacting NOPAT Once our many growth projects commence operations. Our tax rate remained below 10%, which reflects a combination of Favorable country profitability mix, but also several one timers such as the impact of the Canton of Valle in Switzerland tax reform. For perspective, the overall rate for the Lonza Group now including LSI once more was 11.7% With a tax rate above 20% for LSI operations. We will now guide the tax rate for Lonza Excluding LSI of around 16% to 18% going forward.
As we continue to invest the high growth in the future, we will also maintain a strong focus on efficiency in both our existing operations And our investment initiatives. We are clear that ROIC progression and strong investments are not mutually exclusive when both sales growth And margin improvement remain clear focus areas. And now let me hand back the presentation to Piana.
Thank you, Rodolphe. Let me now provide a brief update on LPBN. Our Pharma segment delivered a strong performance in 2020 with the Biologics business as a key driver, of course. As mentioned before, our SPBM business is proven to be resilient to the potential impact of COVID-nineteen. Our facilities remain open and our supply chain was managed to ensure that business continuity was maintained across the segment.
Moreover, our LCBN business is worked with diligence and focused over the course of the year To expand the service offering to customer. We also saw the businesses expanding their production capacity Also, we remain cautious as we navigate through the 2nd wave of the pandemic. We remain confident that we can drive our current sales growth momentum into 2021. You will see here that we have supported on our 5 key LPBN business for consistency with previous financial update. Of course, we will disclose divisional results with our 1st Alfaq results later this year.
This overview of FPBM customer projects provides a snapshot of our new wins and our organic growth. Many new customer contracts have a reason for new focus on commercializing treatment to control the COVID-nineteen pandemic. We have also seen a high level of continued commercial appetite for our Ibex preplanned offering and facilities. This has been particularly attractive to microbial and bio conjugate customer. Looking at our other wins across 2020, we are working across the value chain for many complex molecules, While improving our business for new customers in cell engine therapy areas.
We are also focusing on long term sustainability of our business. From an environmental perspective, We are continuing to move to renewable energy supply. We are also reducing our industrial motor intensity, Our global energy consumption and our carbon footprint. We have worked to create a safe and inclusive environment for our employees And with local community investment to support in controlling the pandemic. Now I would like to provide a short update on each of the 5 key businesses within LTVN.
Let's start with Small Molecule. We have seen a robust market in 2020, largely driven by combined focus on oncology and specialized medicine. Small companies currently hold a large proportion of the pipeline with high propensity to households. Phase to market is also becoming even very important as an increasing number of new market approvals The Small Molecules business has benefited from a robust approach to supply chain planning and a quick adaptation to virtual customer engagement. Moreover, The business is growth with the new project wins as well as launching new service offerings.
We are working to maintain this growth momentum in the long term with the approval of new investment to increase capacity And extend our customer offering into early phase development. The small molecule business delivered high end single digit Sales growth as well as supporting a margin increase over the last year. We currently anticipate double digit sales growth in 2021, In the biologic market, We saw continued strong demand for large scale capacity in mammalian last year. The trend towards Also seeing continued to gather momentum, especially in mammalian where small and mid sized biotech firms We also see increased market demand in BioPhronterygates Where dedicated facilities and expertise is playing a critical role. We have mentioned it before As the market has seen a surge of new drug candidates for COVID-nineteen, we have seen more than 1300 clinical trials Over the course of last year, a CDMO partner like Lonza are playing an important role in bringing these new discoveries to market.
Loans had saw an increase in new customer and programs during 2020. Specifically, there were a light high level of interest in our IDEX dedicated offering From customers looking to expand their midscale microbial capacity, we saw high utilization across clinical and commercial From small to large scale, this demand will enable us to commit to further capacity expansion in drug substance as well in product product services over the coming year. The business supported strong financials for 2020 We still closed in the mid-ten but lower operating margin for the year. As mentioned by Rodolfo, Reflecting the cost related to growth projects. As we move into 2021, we anticipate double digit sales growth For the 1st consecutive year, this will be supported by key strategic growth initiatives across the business.
Turning to our cell and gene therapy business. We have seen market growth Driven by your focus on regenerative treatment for COVID-nineteen. This focus has meant that other therapy has become a lesser priority. More widely, we see rapid pipeline expansion in the cell engine therapy market. With more than 2,000 active therapies in development And more than 1,000 clinical trials in regenerative medicine.
We also see cell and gene therapy making strides towards commercial viability. There have now been 5 landmark commercial approvals for cell and gene therapy over the last 2 years. With new customers has allowed us to expand our service offering, And we have also worked to expand our vein to vein supply chain. This has extended our offering beyond manufacturing To meet the wider needs of our cell engine therapy customer. We are clearly the leading cell engine therapy offering in the CDMO space And the business supported strong sales growth above the market.
Margin and operational improvement was achieved as we saw increased We expect to see further margin improvement in the coming years as asset utilization continue to pick up And further efficiency are achieved. The business is set up for success, and we are continuing to drive progress towards a positive margin. The bioscience market showed solid level of demand from all customer communities. This was combined by some challenging challenge arising from the pandemic. We saw reduced demand levels for certain bioscience product In Q2 last year, as many academic and research institutes were forced to close during the lockdown.
However, we were very pleased to see demand return to pre pandemic level in the second half of the year. The business experienced a solid level of organic growth from existing customers over the course of 2020. It has also reviewed its commercial operation to improve customer experience and operational efficiency. Ionocyan supported high single digit sales growth for the year along with margin gains driven by efficiency improvement. Looking to 2021, we anticipate low double digit sales growth.
This was supported by continuing digital investments An innovation to maintain and extend our existing customer relationship. Last but not least, we come to our capsule and health ingredients business. We saw a in market demand for nutrition in 2020 driven by the pandemic. However, the market saw lower demand for capsule As many patients decided to postpone elective treatment due to the COVID-nineteen. This was partially offset By infillment for certain OTC medication.
The CHI business experienced high utilization across existing assets, which led to increased lifetime for capsule products. With this in mind, we have approved investment to expand our capacity by around 15%. We are planning to bring this asset online before the end of this year. The TSI business reported high single digit sales growth for the full year, mainly driven by its nutritional offering. In 2021, we anticipate that interest in our nutritional offering will remain high as the pandemic continue.
In this context, we anticipate low single digit growth until our new assets come online. Now let me make a moment to share an overview of performance in the LSI segment for 2020. LSI reported a strong sales growth, accompanied by core business EBITA margin improvement. The segment was largely able to maintain business continuity through the pandemic. Despite these challenges, The pandemic drove sustained high demand for Microbi contract solution through the year.
In 2020, The LSI segment portfolio show resilience across the top and bottom line, supported by a market oriented organization And a strategic focus on efficiency. Here, you will see an overview of business performance In the LCS division of LSAT. We saw very strong performance in hygiene, Supported by new long term customer agreement. The Home and Personal Care business saw increased interest in its transmission However, there were reduced market demand for skincare, haircare and food. The Wood Protection business experienced increased demand, leading to a strong performance.
Placing and Coating, material protection and crop protection were all negatively impacted by various market challenges, Many of which arose from COVID-nineteen pandemic. Despite these challenges, The crop business protection is going to expand into North America, Latin America and Southeast Asia over the course of 2020. In the SCS division, the Composite Materials business faced some headwinds The Electronic and Aviation sector were negatively impacted by COVID-nineteen. However, the business saw solid demand In the industrial sector and strong project pipeline in certain geographies and applications, The CDMO business performance was driven by the successful scale up of new projects in Vippe, Supporting by indicator of growth in the Fermentation business. Performance intermediate and chemicals reported good performance, which was driven by increased production volume And supported by price increase in vitamin B3.
The business felt some headwinds from the slowdown in customer electronics Looking towards 2021, the business expects solid demand in the first half of the year As we come to the end of our business review, We would like to take a moment to share our outlook 2021 and our midterm guidance. Starting with our outlook for the current year. We are guiding for low double digit sales growth. This is a combined By improved margin in line with our recently announced mid term guidance trajectory for 2023. We have managed the impact of COVID-nineteen last year, and our outlook for the coming year assumes we will continue to do the same.
I also want to share a short reminder of our 2023 midterm guidance, which was shared last October. We are working to deliver double digit sales growth each year until 2023. At this time, We expect to achieve a 33% to 35% core EBITA margin and double digit ROIC. As we noted before, our growth level would be supported by continued investment in growth projects as a key driver of long term success. As we look to the U.
S, we are cautiously confident about business performance. We clearly understand that the pandemic continues to evolve and bring uncertainty. However, we have proved to be robust And resilience to the challenge over 2020, and we anticipate that we will continue to manage any new challenges in the months to come. 2021 is a year in which Lonza will finally divest LSI and become a single business working in a single industry. Looking inside the business, we will focus on ensuring we have the best possible system and processes As we implement our new business structure and we will focus on our operational efficiency.
We will also continue to maintain momentum in our CapEx investment to support long term growth. Regarding this investment, we will work also to build on our success in attracting industry leading talent. We know that this is a critical component of future success as new assets come online. Our expanded executive committee will help us to refresh our approach to management. The coming year is also an appropriate time To end on a personal note, I'm pleased and proud of our progress in 2020, And I'm confident that we can use this as a strong foundation to drive further success in the coming year.
Please bring our presentation to a close. I would like to thank you all for your time and attention. We now have time for question and answer. I will hand over to call operator to tell us who would ask the first question.
We will now begin the question and answer session.
I have 2, please. So the first one, Pierre Hallaire, having got your feet under the table as CEO for a little bit now, having essentially come from a client, I guess what are some of your observations having joined the business from the client side? How was it relative to expectations? When you look at operations, there anything that you think you might consider changing or alternatively that surprised you? I'm just curious on your initial feedback having come from the client side.
And then the second question is around capital deployment and things post LSI. Maybe a little bit more detail, if we can, on how you guys are thinking about that in terms of Either returns to shareholders or M and A. And on the latter, are we still focused on finding fill and finish assets? Is that still something that's Important for you guys and do you feel you need that to be competitive or is it
just nice to have?
Super. Thanks. Thank you. So as you know, I'm in the company for a little more than 90 days. And clearly, what I have appreciated as a client working with Lonza being the speed of providing solution as well as the expertise.
And clearly, in my 1st 90 days, I was still getting the confirmation of that. So I think we have a really strong technical expertise, capacity To respond to the need and we clearly plan to build on that for both very large clients As well as small biotech. So for things to change, it's probably too early to mention, But I clearly see opportunity to continue on our journey for continuous improvement, and I think we can deliver on that dimension. Rodolfo, you take the second one regarding the LS side proceed?
Yes, happy to do so, Pierre Alain. So At this stage, we would not like to disclose any specifics. Again, as Yes. Piaan mentioned that we expect signing in quarter 1. And after that, we will provide a little bit more Details on that.
I mean, in general, I would say the priorities for investments haven't changed, and we have communicated that during the analyst update. Our number one priority is investments in organic growth, right? Here is where we see very high rates of return, very high ROICs When the businesses ramp up, so that remains a priority. And we have also shared in different sessions that we have interest in complementing our Audio with some verticals, fill and finish, right, in parentel that could be an interesting addition. So these remain Priorities for us, but we will communicate more details in your time.
Super. Thank you for taking the questions.
Can we get the next question, please?
The next question comes from the line of Jo Walton with Credit Suisse. Please go ahead.
Thank you. I have 2 sort of strategic and one quick modeling question for us. If you look at your longer term margin target of 33% to 35%, I wonder if you could tell us a little bit about what the bounds are on either side there. Given that you're showing double digit sales growth, it seems mean Certainly at the bottom end of that range in terms of the margin expansion that you could have. So I wonder if you could just tell us a little bit about the background Given that you are presumably going to be making margin gains on your base business and also turning cell and gene therapy from Barely viable to very high margin over time.
So just a little bit about how those margins could work, please. And if you could also just tell us a little bit about whether you've changed your views on the Moderna impact Over this year, I believe at the Capital Markets Day, the planned revenue was something like CHF 110,000,000. So just give us a sense of how that might flex Up or down for this particular year. And the modeling question is just, should we exclude the corporate business going forward? You've Given us your new structure, you gave us LPBN, you gave us corporate and you stripped out LSI.
For modeling, should we just tip the corporate into the base business going forward? Many thanks.
So let me start with the last question in terms of the modeling. If you look at the discontinued operations results, it's basically the Lonza Group I'm simplifying excluding LSI. Of course, there were A few adjustments we did related to some agreements for Water Care that now have been allocated to LSI out of corporate. But in essence, it's Lonza by Noceri. So for corporate purposes, that gives you a good reference point.
Let me briefly just take now in reverse order. It's probably easier like that. In Moderna, we haven't changed our view. What we have communicated in October still stands. And therefore, our expectations in terms of Production and revenue for the year is the same.
And then I would say the more strategic question, which is around the margin, it's Again, it's what we communicated in October and you see it also reflected in our results. On the one hand, we have an expanding base business. If there's throughput opportunities, you have seen in the waterfall, this is a business where we can drive significant And this is clearly top of the agenda of P and L. And so the combination of throughput, efficiency, we expect See an acceleration in margin expansion on the base business. Of course, that allows us to fund growth initiatives, right?
This is a big opportunity for long term growth. But in general, the combination of, let's say, expanding the base business and reinvesting some of that We'll translate into a trajectory that will get us to the 33% to 35% margin. Importantly, As Pierre Lain mentioned in his guidance, we're guiding for improved margins in this year. So Already you see a first step in the trajectory. And then I'll get the question or Pierre Lang will get the question, is it linear?
Is it a hockey stick? Well, it's neither. It's not 100% linear, but it definitely is not a forecast. We will make progress continuously to proceed.
Thank you.
The next question comes from the line of Richard Vosser with JPMorgan. Please go ahead.
Hi, thanks for taking my questions. 2, please. First is looking at the sequential growth through LPM through 'twenty one, first half versus second half. We've obviously seen About 13.6% growth in the second half of twenty twenty for that business. Should we expect to see an acceleration Or a weaker first half because of the Capsules business impact, just some thoughts And maybe also just adding into that, the phasing of the Moderna contribution, is that phased into the first half Or the second half, please.
And then finally, just thinking about the AstraZeneca antibody agreement, is there any sort of contribution that we can think about from that in the guidance? Thanks very much.
Okay. So I will start with the AstraZeneca antibody. But definitively, this will contribute to the general growth we are expecting for next year. Jean Lucret, do you want to take the next one?
Yes, happy to. So the Moderna contribution will be, let's say, reasonably Balance between H1 and H2, again, it's more it doesn't have anything to do with production ramp up. That's a bit of a separate So it's just the way the financials and the contract are structured. And then in terms of the Growth in the Pharma segment between H1 and H2, this is very important as we start reporting in more detail By division this year, here you do see variability from quarter to quarter, sometimes depending on Release for certain commercial programs. So here definitely you cannot extrapolate the trend.
The guidance that we are giving remains. I will not go now into a guidance by half 1 and half 2. We say low teens in terms of sales growth, but here please do not assume that if you would have a quarterly numbers that you could completely a progression because it depends very much in terms of when certain contracts are completed and released and sometimes the contracts are big And they can fall in quarter 1 or for whatever reason they can fall in quarter 2 and that distorts the progression.
Great. Thank you very much.
Next question, please.
The next question comes from the line of Casey Alcapla with Goldman Sachs. Please go ahead. Hello.
Thank you for taking my questions. I have 2, please. On your capsules Business, you recently announced that you would be exiting the soft gels and the liquid filled capsules part of the pharma market. Can you give us a sense of the revenue size of these businesses? And how should we think about your commitment to the hard capsules part of the pharma business?
Is that something that we should expect to be part of Lonza going forward? Or are there any divestment plans there? The second question to Pierre Elaine. It's probably a bit unfair to last year this question given it's only been a few months that you've been in your new role, but I'll still ask. Can you comment on the competitive dynamics that you're seeing in the biologics CDMO market?
Because if I look at Your closest competitor at an absolute level, consensus expects your competitor to add more dollars to their biologics business over the next 2, 3 years, Danford, Lonza, is it because of differences in Capacity availability, geographical exposure, anything that you can provide in terms of details here, please? Thank you.
Thank you. So regarding your first question, we are definitively strongly committed to the CHI business. This being said, we are always reviewing every single part of the business, and we may divest a small proportion If it's not attractive enough, and I think you should see this whole fashion, it's just a small adjustment. So We are actually committed to the CHI business. We don't comment on the financial part of that, But especially as transaction is not closed currently.
Regarding your question on competitors, Again, I would not answer as a non class CEO, but more from a previous customer from 2 different perspectives. I think what is unique at Lambda compared to some of our competitors, we offer the full range of services In multiple different technology moving from biospecific to cell engine therapy and large scale malignancies. So I think this is only one differentiator factor. The second one, if you see about capacity, Lonza has very large capacity part of the leader and we have a strong experience which is very important too. So as you said properly, our competition is growing, but we have 2 key strong strategic advantages.
Thank you.
The next question comes from the line of James Quigley with Morgan Stanley. Please go ahead.
Hi there. Thank you for taking my questions. I've got 2 sort of operational ones and one on the dividend. So In the past, you mentioned about drug product services and finish and commercial scale finish is being sort of the missing piece of the offering. But what about sort of Investing in this business organically.
The price of the assets in the field is probably taking a bit of a bump With COVID-nineteen and the need for vials and filling service, etcetera, so how are you thinking about The CapEx that will be required to do this organically, is this part of a potential plan? And logistically, how could you think about this? Would it be Global sense of excellence or could you go for a sort of a Portsmouth site of this site and a Singapore site? So any thoughts along those lines would be great. And secondly, looking sort of into the market, there's been some concern recently about sort of large capacity additions or some of your competition.
Could you comment on this from a sort of a capacity utilization perspective? We don't have much visibility here between sort of the pharma companies and the CDMOs Other than sort of fairly rough numbers suggesting that sort of industry wide capacity utilization might be in the mid to high 50s or so. So where would sort of pharma companies typically be in terms of Where would you guys be? I know you're not going to give us numbers in terms of actual utilization, but what would you consider as being full up allowing For some buffer capacity as well. And then how does that sort of tie into or at what point Should we then become concerned or at what level should we become concerned for capacity utilization across the industry and any impact on the Pricing environment.
And then finally, on the dividends, the first time in a number of years, I think 4 or 5 years that you've raised the dividend, It's not really a big cash drain, but is this now sort of a move towards a progressive dividend policy? Could we start to see The dividend continues to increase year on year given that you are or as the margin and the investments and the cash flows improve? Thanks.
Thank you, James, for your questions. Regarding the first one, I was really pleased to see the process What we have done at Lanta regarding the DPL fill and finish. You probably recall the acquisition of the pilot from Novartis as well as other scientists developing formulation in battle. So I think we make really nice In this dimension, as you probably know, CapEx for fill and finish are definitely Much smaller than CapEx for substance. So we are clearly committed to grow that part.
Your question on capacity is probably more complex to answer. Ali, I will probably refer you to the history in the last 5 to 10 years. Clearly, we see overall a strong growth of the market, so demand is increasing. And if you have a look on the pipeline of the big There is many products requiring more capacity. Yes, the facility is always a big jump, But we are carefully confident on that.
As mentioned by Rodolfo, when we build new capacity, A significant proportion is already committed to customers and is participating to our growth. Alifo, do you want to take the one on dividend fees?
Happy to. So on dividend, our guidance has We say between 25% 40% of net income, we will continue to distribute. And Of course, we cannot anticipate what happens with the following year. But in general, when you see the trend, We keep the dividend stable because the range is quite wide between 25% 40% of net income. So we keep the dividend stable For a couple of years, and then we typically increase to stay within the range.
You should expect the same in the future.
Great. Thank you.
Next question, please.
The next question comes from the line of Peter Welford with Jefferies. Please go ahead.
Hi. Thanks for taking my questions. I've got a couple actually, the partly clarity for clarification. Just turning back to Joe's question on the mRNA vaccine. Curious there just with regards to the revenues where you said you We're maintaining the estimates from before.
Should we read from that that the additional doses that Moderna is talking about well above The CHF 400,000,000 are going to be made by them themselves and you're not taking part in that? Or is this more to do with the way the contract is Structured and you mentioned the booking of revenues and therefore, not necessarily the doses correspond to revenues on your side. Secondly then, just on Cell and Gene Therapy. You talked about margin increasing during 2021 on efficiencies and utilization. Just wondering if you're sticking with I think you said breakeven by the end of this year.
So should we therefore still assume that 2021 is likely overall to Loss making for that division, I wonder if you can comment at all on how we should think about the margin profile for that business this year. And then finally, just with regards to the bidders for LSI, I totally appreciate, obviously, with the confidentiality.
But I wonder if
you can give us any sort of idea of the mix The type of bidders that are on the shortlist, should we be thinking of these at all as strategic? Are these financial? Or what sort of bidders should
we think about here? Thank you.
No, thank you, Peter, for your question. I would start with your first one on LSI. Definitively, at this stage, we cannot comment on the EBITDA. And as mentioned in the presentation, We expect signing in Q1. Regarding cellular engine therapy, We provided a detailed update last October.
As you rightly remind, We are making progress towards brekivant in the next 12 months, and we will report more in updated results By me, the year for ENGIEF. So the full year, Pershing just want to take the one on Moderna?
Yes, happy to. So Peter, here the point is I repeat a bit what I said. What we have communicated in October has not changed So the fact that the numbers, the doses that we can communicate have not changed is simply because that's the case, right? I think for other communications regarding the number of doses that Moderna is sharing With the external world, there you need to refer to Moderna because you need to remember that we, of course, are part of their supply chain, but They are in charge of the full supply chain and that means they have they may have additional in house manufacturing, etcetera. So I mean for You need to talk
today. Okay. So I will take one final question, please.
The last question for today comes from the line of Naresh Chouhan with Intrum Health. Please go ahead.
Hi there. Thanks for taking my question. Just one left please for Pierre Alain. You came from a company where Innovation was obviously a core of the business and high risk was part of the business model. And so given Lonza has a very strong position with its clients From a manufacturing perspective, would you also consider building a contract research capability like 2 of your peers have done to late also As you participate in the upside of your clients' clinical trial successes and also potentially drive more volume for the Biologics business.
Thank you.
Okay. It's probably too early to discuss that. I'm currently focusing really on learning the organization, the business, the customer. What I can say at this stage clearly is the strength of Lonza, it's probably expertise and difficult to make And we'll probably continue to build on that. And if there is any chance to that, we will be happy to update you in a future call.
Thank you.
Okay. With that, I will actually need to thank all of you for joining the call today. It's really been a pleasure speaking to you.
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