Leading Supplier to the Life Science Industry

Transcription

1 Leading Supplier to the Life Science Industry 2011 Full Year Results 25 January 2012 Rolf Soiron (Chairman) and Management Committee

2 Forward-looking Statements Certain matters discussed in this presentation may constitute forward-looking statements. These statements are based on current expectations and estimates of Lonza Group Ltd, although Lonza Group Ltd can give no assurance that these expectations and estimates will be achieved. Investors are cautioned that all forward-looking statements involve risks and uncertainty and are qualified in their entirety. The actual results may differ materially in the future from the forward-looking statements included in this presentation due to various factors. Furthermore, except as otherwise required by law, Lonza Group Ltd disclaims any intention or obligation to update the statements contained in this presentation. slide 2

3 Lonza Continues its Transformation Towards a Global Life Science Leader With the acquisition of Arch in 2011 Lonza achieved another step in its transformation towards a global Life Science company This continuous change characterized the past years and Stefan Borgas has led this process as Lonza s CEO BoD expresses its gratitude for Stefan s valuable contributions In the challenging years ahead Lonza will enter a period of focus and delivery This led the Board of director s to the decision to initiate a change of CEO Rolf Soiron will lead the Management Committee during the transition slide 3

4 Transforming Lonza into a Life Science Company 2005 Revenue by segment 1 Lonza today Total: CHF 2,521 mn Polymer Intermediates 29% Total Organic 2 Fine &Performance Chemicals 35% Exclusive Synthesis & Biopharma 35% Other 1% Lonza Custom Manufacturing 32% Lonza Life Science Ingredients 17% Lonza Microbial Control 46% Pro-forma total sales: CHF ~4,100 mn Reducing gearing over time 120% 100% 80% 60% 40% 20% 0% Investing in Transformation 65% 57% 72% Notes: 1 Prior to reclassification of segments 76% 46% 46% 112% 95% target Lonza Bioscience 5% Business now centred on two global leading growth platforms Increase overall revenue/profit contribution from emerging markets/brics Continue to improve cash generation to reduce gearing and provide strategic flexibility Next step: Active portfolio management to focus Lonza s life-science activities slide 4

5 Building a Leading Life Science Company Acquisitions Mar 2006 UCB Bio products (EUR 120m) Nov 2006 Genentech Porrino facility (USD 150m) Feb 2007 Cambrex Bio- Businesses: Bioscience and Biopharma (USD 460m) Jul 2008 Amaxa May 2010 Moda paperless quality control August 2010 July 2011 Vivante viral Microbial manufacturing Control Disposals Jul 2006 High Tech Film business Oct 2006 Polynt S.p.A IPO Exit route for polymer business Sept 2007 Singapore Isophtalic acid plant sold to Perstorp Group Dec 2007 Majority of Polynt S.p.A holding sold Apr 2008 Remaining stake in Polynt S.p.A sold Aug 2009 Singapore plant disposal to Genentech Dec 2010 Divestment of Lonza Riverside Internal growth through Investments Total Capex : CHF ~1.9 bn (without maintenance CAPEX) Building global production network biopharma investments incl. Singapore Investment in research platforms to develop new technologies (Conjugates, HAPI, Cytotoxic, Cell and Virus Therapy) slide 5

6 Our Enlarged Global Footprint in 2011 Headquarter in Basel, Switzerland Employs >11,000 people 45 production and R&D facilities slide 6

7 Generating Further Value from our Global Leadership in Two Attractive Life Science Platforms slide 7

8 Our Interconnected Platforms Deliver Synergies LCM Process Research Biology Process Research Chemistry Regulations + Governmental relations LSI Chemical Production Formulation Development Safety Health Ecology Media Research Hygiene Application LBS Testing LMC Consumer Branding slide 8

9 2011 An Important Year Strategically 2011 was an important year for Lonza strategically. Lonza ended as stronger and more balanced life science company Our $1.4 billion Arch acquisition has allowed us to create the clear global leader in Microbial Control The completion of our new large-scale monoclonal antibody plant in Singapore has confirmed Lonza s position as the global leader in Custom Manufacturing Our secondary listing of our shares on the Singapore Stock Exchange highlights our commitment to the faster growing market opportunities in Asia We are now the clear global leader in two attractive growing life science markets: Microbial Control and Custom Manufacturing We have a better balanced portfolio less exposed to the growing but volatile pharma CMO business and less dependence on the Swiss franc slide 9

10 2011 Underlying Growth in Sales and EBITDA 2011 underlying growth in sales and EBITDA in current exchange rates achieved despite a number of significant headwinds Combined Microbial Control business performed as anticipated Arch business ended the year as forecasted in the due diligence Strong performance in Custom Manufacturing high capacity utilization and further pipeline growth as pharma industry outsourcing gathers momentum Pro-active approach to mitigating the impact of the strong Swiss franc slide 10

11 Financial Highlights 2011 (Before Acquisitions) Revenues at CHF mn increased by 5.6% in constant exchange rates Solid EBITDA margins of 22.3% (24.0% in 2010), 23.6% in constant exchange rates EBIT (in CHF mn) before acquisitions reported 292 CORE 306 Net debt at CHF increased by 138.9% due to the acquisition Gearing increased to 112% at the end of 2011 from 46% at the end of 2010 CHF 84 mn negative exchange rate impact on EBIT NWC as % of sales 23.9% (25.7% in 2010) RONOA at 9.0% (10.8% in 2010) Solid financing situation, supporting mid- and long-term growth potential: Free cash flow at CHF 171 mn (CHF 362 mn in 2010) CAPEX at CHF 267 mn (CHF 300 mn in 2010) after acquisition slide 11

12 Key Financial Figures (Lonza before Acquisition of Arch) CHF mn FY 2010 FY 2011 Change YoY CER* Sales 2'680 2'505 (6.5%) 5.6% EBITDA (13.1%) 3.7% EBITDA Margin 24.0% 22.3% 23.6% EBIT (21.9%) 0.5% EBIT Margin 14.0% 11.7% 13.3% Financing costs (44) (77) 75.0% Tax rate 13.9% 14.0% Net Income (33.1%) (9.5%) EPS (CHF) basic (33.7%) (10.3%) EPS (CHF) basic CORE (28.3%) (4.8%) Free Cash Flow before acqisitions (52.8%) Change in net working capital 47 (91) Capital Expenditures (14.7%) RONOA 10.8% 9.0% Net Debt 1'108 1' Number of employees 8'280 8' % * constant exchange rate slide 12

13 Key Financial Figures (Lonza after Acquisition of Arch) CHF mn FY 2010 FY 2011 Change YoY CER* Sales 2'680 2' % 13.5% EBITDA (16.5%) (0.2%) EBITDA Margin 24.0% 19.9% 21.1% EBIT (30.2%) (8.8%) EBIT Margin 14.0% 9.7% 11.2% Financing costs (44) (86) 95.5% Tax rate 13.9% 12.0% Net Income (45.8%) (22.9%) EPS (CHF) basic (46.3%) (23.4%) EPS (CHF) basic CORE (25.3%) 0.3% Free Cash Flow before acquisitions (64.9%) Change in net working capital 47 (88) Capital Expenditures (11.0%) RONOA 10.8% 6.9% Net Debt 1'108 2' % Number of employees 8'280 11' % * constant exchange rate slide 13

14 External Headwinds Swiss regulatory environment (CO2, energy cost) Regulatory approval process Lower rate of Innovation in pharma LONZA Exchange rate Raw material price volatility Sovereign debt Threat of recession slide 14

15 EBIT Bridge (Before Acquisition) slide 15

16 Lonza s Interconnected Life-science Platform Life Science Ingredients Microbial Control Custom Manufacturing Bioscience Nutrition Ingredients Performance Intermediates Hygiene & Preservation Water Treatment Materials Protection Personal Care Chemical Manufacturing Biological Manufacturing Development Services Therapeutic Cell Solutions Testing Solutions Research Solutions Wood Treatment slide 16

17 Life Science Ingredients Financial Summary and Highlights Key figures CHF mn 2011 CER (1) Sales % EBIT 40 (22.6%) Margin 5.7% 9.3% EBITDA 104 (10.4%) Margin 14.9% 17.9% EBIT (CHF million) EBIT and margin progression 12.0% 16.2% 12.6% 13.2% 5.7% EBIT (CHF million) EBIT margin (%) 20% 15% 10% 5% 0% EBIT Margin High volumes in 2011 for Nutrition offset by fierce margin pressure due to volatile raw material prices as well as aggressive competition The strong Swiss franc and volatile raw material prices continues to put pressure on margins. Asset utilization remains high. (1) constant exchange rate; slide 17

18 Life Science Ingredients Nutrition Ingredients Nicotinates demand according to expectations Carnipure and Carniking sales on an expected high level New plant in Nansha (CN) started up with a slight delay Meta (metaldehyde) sales were behind plan due to the low infestation of slugs in most parts of Europe Performance Intermediates High Performance Materials business saw strong demand from the electronics, aerospace and construction industries New PMDA plant in Nanjing (CN) is up and running Good demand for chemical commodities but high prices for raw materials in Q2 and Q3 Solid improvement of the agrochemical pipeline New production plant for a agrochemical protection intermediate in Visp (CH) started up on time slide 18

19 Lonza s Interconnected Life-science Platform Life Science Ingredients Microbial Control Custom Manufacturing Bioscience Nutrition Ingredients Performance Intermediates Hygiene & Preservation Water Treatment Materials Protection Personal Care Chemical Manufacturing Biological Manufacturing Development Services Therapeutic Cell Solutions Testing Solutions Research Solutions Wood Treatment slide 19

20 Microbial Control Financial Summary and Highlights Key figures CHF mn 2011 CER (1) Sales % EBIT (8) (115.8%) Margin (1.6%) (1.1%) EBITDA 14 (63.5%) Margin 2.9% 3.4% Consolidation of the Microbial Control business for November and December 2011 Business Leadership and Integration team operational Focus on synergies and cross-selling of both portfolios to achieve results Over next months focus is on innovation Business performed at expected levels (1) constant exchange rate; slide 20

21 Microbial Control Regulatory Capability, Formulation Expertise and Distribution Channel Drive the Business Water Treatment Distribution Channels Hygiene Wood Preservation Regions Formulation Regulatory Active Markets Health Materials Protection Food Protection Industrial Biocides Personal Care slide 21

22 2011: Creating the World Leader in Microbial Control Microbial Control: 2011 pro-forma Revenue breakdown Materials Protection + industrial biocides Hygiene & Preservation Water Treatment Microbial Control Acquisition Creates a global leader in Microbial Control Combined sales of USD 1.6bn in an addressable market of c.usd 10bn Strengthens and balances Lonza s portfolio Wood Protection Personal Care Performance Intermediates - Expands life sciences platform - Balances solidly growing, volatile CMO business - Improves natural currency hedge Creating value from year one EPS and EVA accretive and significant RONOA improvement at low CAPEX level slide 22

23 Microbial Control 2011 Business Business performed as expected despite influencing factors: Raw material price volatility Foreign exchange impact Slow down in Q4 demand Short-term destocking at customer in December After a slow start in Q1, antidandruff volumes rebounded to achieve record demand for the year Highlights In October we opened the Alpharetta, GA (USA) Innovation and Technology Center incorporating innovation labs focusing on the innovation pillars Supplied fire retardant wood for 2012 Olympic games complexes and bridges in the UK We received the InCosmetics Asia award for Regenistem Lonza Microbial Control Suzhou plant was awarded Best Supplier Award 2011 by a major customer slide 23

24 Microbial Control Integration Update Integration and business leadership team in place and operational Assumptions confirmed Synergies of USD 50 mn from year 2 Cross selling of USD 40 mn from year 3 Integration cost equally split in 2011 / 2012 The innovation focus for the next 18 to 24 months will be on developing new formulations Implement standard processes across organization (Finance, Supply Chain, EHS, Regulatory, HR, Communications, Legal, Manufacturing, etc.) slide 24

25 Lonza s Interconnected Life-science Platform Life Science Ingredients Microbial Control Custom Manufacturing Bioscience Nutrition Ingredients Performance Intermediates Hygiene & Preservation Water Treatment Materials Protection Personal Care Wood Treatment Chemical Manufacturing Biological Manufacturing Development Services Therapeutic Cell Solutions Testing Solutions Research Solutions slide 25

26 Custom Manufacturing Financial Summary and Highlights Key figures CHF million 2011 CER (1) Sales 1' % EBIT % Margin 17.6% 18.8% EBITDA % Margin 30.3% 31.3% EBIT (CHF million) EBIT and margin progression 15.8% 18.5% 16.9% 17.5% 17.6% % 20% 10% 0% EBIT (CHF million) EBIT margin (%) EBIT Margin Strong performance driven by Biological Manufacturing where capacity utilization was above 85% (ex Singapore) New Singapore plant now operational with several new products and profitable capacity utilization Outsourcing trend led to a record number of inquiries, proposals and new project wins across all businesses and technologies Increased customer satisfaction, as expressed in higher Lonza Promoter Score score in all businesses 1 constant exchange rate slide 26

27 Custom Manufacturing Business Highlights Chemical Manufacturing High capacity utilization in 2011 (~78%) but unfavorable product mix Expansion of early phase manufacturing capacity in Nansha (China) Strong early phase pipeline development especially in peptides Successful introduction of new commercial-scale conjugation technology and decision for further expansion in 2012 Investments in new technologies in Visp on track (CHF 25 mn) Commercial-scale Cytotoxic facility Large-scale continuous flow cgmp production suite (microreactor technology) slide 27

28 Custom Manufacturing Chemical Manufacturing: Pipeline & Utilization Project Pipeline Number of projects preclinical phase I phase II + III launched End 2005 End 2006 End 2007 End 2008 End 2009 End 2010 End 2011 Capacity Utilization in % slide 28

29 Custom Manufacturing Business Highlights Biological Manufacturing Better than expected number of new contracts signed in biochemical, microbial and mammalian technologies Examples: Development and manufacturing agreement with Genmab for naked antibodies and cytotoxic conjugation components API supply agreement with Elan for ELND005, currently in phase 2 study for the treatment of Alzheimer s disease On-going activities to expand pipeline in Asia especially Japan with the help of the new Singapore facility Slough site expansion is on track for completion by the end of 2012 slide 29

30 Custom Manufacturing Business Highlights Development Services Flexibility of the Light Path Discovery and Light Path Development Services offering attracting many new biotech and pharma customers Strengthening of overall service and customer portfolio through new offerings and wider global footprint Establishing a Development Services Center of Excellence in Asia (Singapore) in H Novel plasmid DNA microbial production platform launched Humanization services introduced and well received Critical steps made in proprietary next generation GS System Lonza sets industry record, producing the largest published amount of therapeutic antibody in a single batch on large commercial scale Singapore facility s 20k reactor achieves 4.5g/L titer at harvest on large commercial scale Made with Lonza s industry-leading v8 media and GS System slide 30

31 Custom Manufacturing Biological Manufacturing & Development Services: Pipeline & Utilization Project Pipeline (Number of projects) Capacity Utilization (in %) preclinical phase I phase II + III launched End 2005 End 2006 End 2007 End 2008 End 2009 End 2010 End Excluding Singapore slide 31

32 Lonza s Interconnected Life-science Platform Life Science Ingredients Microbial Control Custom Manufacturing Bioscience Nutrition Ingredients Performance Intermediates Hygiene & Preservation Water Treatment Materials Protection Personal Care Wood Treatment Chemical Manufacturing Biological Manufacturing Development Services Therapeutic Cell Solutions Testing Solutions Research Solutions slide 32

33 Bioscience Financial Summary and Highlights Key figures 30 EBIT and margin progression 20% CHF mn 2011 CER (1) Sales % EBIT 13 0% Margin 6.4% 5.9% EBIT (CHF million) % 8.60% 11.9% 6.6% 6.4% 15% 10% 5% EBIT Margin EBITDA % 0 0% Margin 13.9% 13.1% EBIT (CHF mn) Margin 11.8% increase in sales (CER) driven by Cell and Viral Therapy growth EBIT flat - pre-investment in geographic expansion & investments in new products & services Solid development of Endotoxin Testing sales Weaker research solutions business due to lower government spending slide 33

34 Bioscience Bioscience Therapeutic Cell Solutions key focus area Strong increase in Cell/Viral Therapy revenue: Bottom line result below expectations due to project delays in Q1/2011 Houston expansion on track: operational Q2/2012 Singapore facility construction / validation on track Mesoblast (Australia) - Global manufacturing agreement signed Testing Solutions Endotoxin base business grew in all regions, in Asia double digits MicroCompass TM launch delayed until H1/2012 due to hardware delay from supplier MODA sales behind expectations due to Pharma customer CAPEX restrictions Streamlined Moda business in Q4/11 to focus on strategic development in Cell Therapy Research Solutions Solid growth in Asia and in EU(in local currency) with newly launched products. Mature products under margin and volume pressure Lower sales due to reduced government funded research spending Expansion of Cell Biology offering slide 34

35 Bioscience Project Pipeline New Products and Therapeutic Clients New Products (Research Solutions, Testing Solutions & Therapeutic Cell Solutions) Therapeutic Clients (Therapeutic Cell Solutions) 30-Jan-12 slide 35

36 Summary was an important year for Lonza strategically to form a stronger and more balanced life science company Lonza is now the global market leader in two attractive markets (Microbial Control and Custom Manufacturing) Lonza has delivered underlying growth at stable margins Increased project pipelines, completed capacity expansion and larger geographical footprint provide the basis for sustainable organic growth slide 36

37 Outlook Focus and delivery are key: Microbial Control integration until mid 2013 Good order book visibility and good capacity utilization in Custom Manufacturing Solid project pipeline will contribute to growth The acquisition of Arch delivers overall earnings growth which will translate into significant EPS growth as well And beyond 2013: Technology driven new business opportunities to deliver growth in 2013 and beyond Opportunities in BRICS Improved shareholder returns through high free cash flow generation and sustainable tax free dividend slide 37

38 Calendar of Events and Contacts Important Lonza Group dates 25 January 2012 Full year results April 2012 Annual General Meeting 25 April 2012 First quarter 2012 business update 25 July 2012 Half year 2012 results 31 Oct 2012 Third quarter 2012 business update Contacts Dominik Werner Dirk Oehlers Corporate Communications Investor Relations T T F F dominik.werner@lonza.com dirk.oehlers@lonza.com slide 38

39 Leading Supplier to the Life Science Industry 2011 Full Year Results 25 January 2012 Rolf Soiron, Chairman and Management Committee slide 39

40 Further Information slide 40

41 EBIT Bridge (after Acquisition) slide 41