Investor Update Lonza’s Blueprint for the Future
15 October 2020
Aerial view of Hong Kong Downtown
1 Introduction
Organizational Design
Our Divisions
• Capsules and Health Ingredients • Small Molecules • Biologics • Cell & Gene Therapy, and Bioscience
External Reporting
Company Culture
Concluding Comments
Q&A
Urban crowd from above
2 Organizational Design
Aerial View of a Crossing in Mexico City
3 The Case for Change
Decision to carve out LSI in 2019 Decision to exit LSI via a sales Different dynamics between LSI and LPBN process
Attractive growth opportunities across all LPBN modalities
Refocus the Lonza business Increased competition and complexity of Biopharma industry offering around the LPBN portfolio
Need to rethink the future set-up of Lonza
4 Design Principles A clear focus on the market and customer
Cohesion A manageable matrix
Simplicity Standardized and efficient processes and structures
Global Selected functions and teams defining global frameworks and Perspective standards, and guiding innovation
Workforce Shared accountability and decision-making. An aligned organization Engagement
High-performing Clear roles and responsibilities, supported by a balanced Organization performance management system
5 Organizational Design
Business Divisions
Four Divisions, each with their own Business Units
Each holds responsibility for its own value chain and P&L
Global Functions
Five Functions supporting the Divisions and Business Units
Responsible for Group standards, policies, principles and governance
Winding road at Faroe
6 Divisions and Functions Overview
CEO Mammalian
Office of the CEO Corporate Functions1
Divisions Functions
Capsules and Cell & Gene Small Commercial / Human Health Biologics Therapy, and Operations Quality Finance Molecules Marketing Resources Ingredients Bioscience
P&L accountability Global standards, processes and best practices End-to-end delivery to customers Functional strategies Business model to create competive edge Partnership approach to divisional support
1 Including: Legal, Communications, Investor Relations, EHS, M&A, Data Management / Digital 7 Divisions Overview A market-led structure to meet evolving customer needs
Capsules and Cell & Gene Small Biologics Health Ingredients Molecules Therapy, and Bioscience
Capsules Active Mammalian Bioscience Pharmaceutical Ingredients Health Microbial Ingredients Cell and Gene Therapy Drug Product Formulation Licensing Personalized Bioconjugates Medicine
Drug Product Solutions
m-RNA
8 Functions Overview Deep functional expertise across Business Functions
Commercial / Human Operations Quality Finance Marketing Resources
Procurement Compliance Customer and Tax Recruitment Market Intelligence Manufacturing Quality Control Treasury Talent Standards Management Digital Marketing
Supply Chain Regulatory Accounting Branding and Union Relations Advertising Planning IT Compensation Technical and Benefits Documentation Controlling
9 CEO
Office of the CEO Corporate Functions
Divisions Functions
Capsules and Cell & Gene Small Commercial / Human Health Biologics Therapy, and Operations Quality Finance Molecules Marketing Resources Ingredients Bioscience
Capsules Active Mammalian Bioscience Procurement Compliance Customer and Tax Recruitment Pharmaceutic Market al Ingredients Intelligence Health Cell and Gene Manufacturing Quality Talent Microbial Treasury Ingredients Therapy Standards Control Management Drug Product Digital Formulation Marketing Union Personalized Licensing Supply Chain Regulatory Accounting Relations Medicine Branding and Advertising Compensation Bioconjugates Planning IT and Benefits
Technical Drug Product Documentation Controlling Solutions
m-RNA 10 Management Team
Aerial view of overpass at night
11 Lonza Group Leadership
Pierre-Alain Ruffieux Rodolfo Savitzky Caroline Barth Stefan Stoffel Chief Executive Officer Chief Financial Officer Chief Human Resources Chief Operating Officer Officer
Tenure Commences 6 years 6 months 30 years with Lonza 1 November 2020
Professional experience snapshot
PhD Biotechnology (EPFL Lausanne) MBA (Chicago Booth) MBA (Open University) Diploma in Mechanical Education and Thermal process and qualification Degree Chemical BSc Industrial and Systems BA European Business Chemical Engineering snapshot Engineering Engineering (University of Sunderland) (Lucern Engineering (EPFL Lausanne) (Tecnológico de Monterrey) College) 12 Lonza Group Leadership
Claude Dartiguelongue Gordon Bates Jean-Christophe Hyvert Capsules and Health Small Molecules Biologics / Cell & Gene Ingredients Therapy, and Bioscience
Tenure with Lonza 9 months 17 years 3 years
Professional experience snapshot
MSc Medical Management (ESCP Education and MSc Engineering MBA (Northwestern Business School) qualification Business Management University) snapshot MSc Biotechnology (University of Warwick) (University of Grenoble) MSc Physics (INSA) 13 Our Divisions
14 2019 Sales Distribution – Divisions
Cell & Gene Therapy, and Bioscience 10%
Small Molecules 16%
Divisions Biologics 47% Sales
27% Capsules and Health Ingredients
* Sales figures, expressed in % are approximate and based on full-year 2019 results at actual exchange rate (AER). The split reflects the 3rd party net sales of the LPBN segment in 2019 and excludes any net sales presented under Corporate 15 Sales Distribution of Divisions and Business Units Business Unit sales listed in descending order for each Division
27% of 16% of 47% of 10% of Group Group Group Group sales sales sales sales
Capsules and Health Cell & Gene Therapy, Small Molecules Biologics Ingredients and Bioscience
Mammalian Active Pharmaceutical Bioscience Ingredients Capsules Microbial
Licensing Cell & Gene Therapy Drug Product Formulation Bioconjugates
Health Ingredients Drug Product Solutions
m-RNA Personalized Medicine
* Sales figures, expressed in % are approximate and based on full-year 2019 results at actual exchange rate (AER). The split reflects the 3rd party net sales of the LPBN segment in 2019 and excludes any net sales presented under Corporate 16 ** The size of the boxes for each Business Unit are intended to provide an indicative (but non-specific) view of the size (by proportion of sales) Capsules and Health Ingredients (CHI)
17 CHI Portfolio
Capsules* Health Ingredients
Filled Capsules Empty Capsules (Dosage Form Solutions) Distinctive offerings for consumer health Pharma
Pharma UCII® Carnipure® Healthy aging Sports (joint health) nutrition Nutrition
Nutrition ResistAid™ Digestive and Others immune
* The size of the boxes for each Business Unit are intended to provide an indicative (but non-specific) view of the size (by proportion of sales) 18 CHI Offering & Capabilities
Capsules Health Ingredients
Pharma Capsules Nutrition Capsules Addresses major consumer Filled Capsules Empty Capsules health concerns and needs Empty Capsules (Dosage Form Solutions) • Sports nutrition • Joint health Innovation and quality Multipurpose and functional Unique technologies and leader capsules capabilities for liquid filled • Digestive and hard capsules immune Strong support along Broad product portfolio for Highest safety and quality regulatory pathway the supplement market Formulation services standards
Differentiated solutions Modified release and Analytical and stability Regulatory support ingredient performance testing • Immediate release optimization • Modified release • Others
19 Network and Assets
Bornem / Komec Helsen, Belgium Colmar, France
Cohasset,Cohasset, USAUSA Sagamihara, Japan
Greenwood, USA Suzhou, China
Benicia, USA* 230 Nansha, China Billion capsules produced annually Fort Smith, USA* For 5,000 Jakarta, Indonesia global customers Delhi, India Puebla, Mexico Capsules
Nutritional Ingredients * To be fully integrated to Greenwood, USA and decommissioned by end of the year Capsules and Nutritional Ingredients 20 Market Overview
Drivers for Demand in Pharma Capsules Drivers for Food Supplements’ Demand
Overall growth in Pharmaceutical demand
Many new molecules are heat sensitive, eliminating Demographic Trends tableting as an option Growth of older/ageing demographic groups
End-patient preference drives and defines the oral dosage market Health condition Joint health concerns account for ~70% of medical indications at 65+ years CapsulesCapsules SelectedSelected CompetitorsCompetitors
ACG, India COVID–19 Qualicaps, USA (Owned by Mitsubishi) Significant increase in demand for health nutrition supplements Suheung Capsules, South Korea
CapsCanada, Canada
21 Key Priorities
Accelerate profitable growth
Drive differentiation with capsules • Focus on innovative capsules • Quality leadership • Cutting edge capsule dosage forms and services
Increase capsules capacity
Focus on high-growth, high-margin Joint Health and Nutrition markets
Continuous implementation of operational efficiencies
22 CHI Growth Rates
Market1 Lonza2
Capsules Capsules Estimated Growth 2 – 3% Estimated Growth 3 – 4% CAGR 2020 – 2023 CAGR 2020 – 2023
Health Ingredients Health Ingredients Estimated Growth 5 – 6% Estimated Growth 6 – 8% CAGR 2020 – 2023 CAGR 2020 – 2023
1 Based on volume 2 Revenue growth 23 Pharma & Biotech
24 Our Contribution to the Value Chain
Discovery Development Manufacturing Market
Basic Drug Pre-clinical Clinical Commercial Commercial Pharma/Biotech Research Discovery Testing Testing Production Sales Lifecycle
Clinical Development
Selected Modalities
Mammalian
Microbial Cell & Gene Therapy Small Molecules Lonza Bioconjugates Bioscience
Drug Product Solutions Personalized Medicine mRNA
Technical Development
25 Small Molecules Small Molecules Offering
Drug Substance Drug Product
API/HPAPI Formulation Oral Dosage Form
Full range of APIs Supply finished dosage Tablets form services to the pharma industry Market leader on HPAPIs Encapsulation
Particle engineering: Increasing early phase Filled into sachets granulation, micronization, development project spray drying acquisition
27 End-to-End Services and Know-How
Particle Drug Substance (DS) Drug Product (DP) Engineering
Drug Early Commercial Particle Formulation Clinical Trial Sales and Packaging Phase DS Engineering Development Development Discovery Marketing
Late Enhanced Commercial Phase Formulation DP
Lonza
Selected competitors
• ThermoFisher • Recipharm
• Catalent • Siegfried
• Cambrex
28 Network and Assets
Edinburgh, UK
• Liquid filled hard capsules Bend, USA Ploermel, France
• Spray drying • Soft gel and liquid filled hard capsules
Quarkertown, USA Visp, Switzerland
• Micronization • API and HPAPI
Monteggio, Switzerland Tampa, USA • Micronization • Tablets • Powder Filled Nansha, China Capsules • API
Particle Engineering and Drug Product development and manufacturing Drug Product development and manufacturing
Particle Engineering development and manufacturing Drug Substance development and manufacturing
29 Industry Overview and Lonza Key Priorities
Industry Lonza
Adapt business model for smaller companies to secure new early-phase clinical programmes
Accounts for ~70% of global pharmaceutical Retain leadership position in particle sales engineering technology
Balance of asset scales and location 6,000 molecules in development
Continuing investment in Highly Potent API
Move towards more tailored and complex APIs
270 19 of top 350 Reshoring of the supply chain 20 Pharma commercial Pre-clinical and products in 2019 Lonza customers clinical molecules in 2019
30 The Rise of Highly Potent API Molecules
Growing demand for more complex and highly potent APIs (HPAPIs)
New way to use small molecules to deliver innovative patient therapies
Interest in HPAPI drugs is largely driven by oncology research
New medicines with lower dose requirements and fewer side effects
Particle engineering is particularly important
Need for well-trained workforce with strong commitment to a culture of safety
31 Small Molecules Growth Rates
Market1 Lonza2
Estimated Growth 4 – 5% Estimated Growth 9 – 10%
CAGR 2020 – 2023 CAGR 2020 – 2023
1 Based on volume 2 Revenue growth 32 Biologics: Mammalian Mammalian Offering
Late stage discovery, early stage development Applied Protein Gene sequence analysis Services Vector development and manufacturing
Cell Line Development and Selection and manufacturing of host cells Manufacturing
Clinical Full service drug substance and drug product development and Development and Manufacturing manufacturing
Clinical Commercial Drug substance Manufacturing
Drug Product Solutions Parenteral drug product services
Commercial Drug product (small scale) Manufacturing 34 Network and Assets
Clinical Clinical Commercial Pre-clinical Development Manufacturing3 Manufacturing4
Visp, Switzerland1
Basel/Stein, Switzerland
Portsmouth, USA
Hayward, USA
Cambridge, UK
Slough, UK
Porriño, Spain
Tuas, Singapore
Guangzhou, China2
1 Ibex® Solution – under construction, operational Q1 2021 3 Drug Substance and Drug Product in Visp, Switzerland Core New capabilities 35 2 Under construction, operational Q2/Q3 2021 4 Drug Substance Mammalian Network Capacity – 330 Kiloliter (KL) by end of 2020
Slough, UK
• 6 x 1 KL
Visp, Switzerland
• 2 x 20 KL / 3 x 1KL / 3 x Portsmouth, USA 2KL
• 3 x 5 KL / 5 x 20 KL / 4 x 6 KL Porriño, Spain
• 4 x 10 KL Hayward, USA Guangzhou, China1 • 2 x 1 KL / 1 x 2 KL • 2 x 1 KL / 2 x 2 KL
Tuas, Singapore
• 2 x 2 KL / 4 x 20 KL
1 Under construction, operational Q2/Q3 2021 36 Ibex® Complex in Visp, CH Ibex proposal has been validated and wins significant new contracts
Ibex® Facility Sanofi JV Facility
Ibex® Design & Develop Ibex® Dedicate
Examples Examples Plant ramp-up expected from Q4 2020 Strong small-scale pipeline Large microbial contract
Most capacity is contracted Moderna Lonza’s reserved capacity is for the next two years Kodiak – Bioconjugation already contracted
Advanced negotiation for Bioconjugation with an Asian customer (identity undisclosed at this time)
37 Ibex® Complex in Visp, CH
Sanofi JV Facility Ibex® Design & Develop Ibex® Dedicate
38 Key Priorities
Increase early phase sales, strengthen Applied Pre-clinical and Protein Services Phase 1
Increase end-to-end offering for small and large Pharma and Biotech 8%
® Leverage Ibex Solutions 22% 2019 sales 14% Add incremental capacity distribution 70% Clinical – Phase 2 + 3 Geographic expansion
Asset-specific process improvements Commercial
Build presence in commercial Fill & Finish
39 Lonza Mammalian Fermentation Capacity in Kiloliter (KL)
Anticipated / To Validate
330 290
30 70 Now End of 2020 2023 – 2024
Additions by December 2020 Additions by 2023 – 2024 Small/Mid-scale (<10 KL) • 4 x 6 KL in Portsmouth, USA • Small and mid-size Large-scale (>10 KL) • 3 x 1 KL + 3 x 2 KL in Visp, CH capacities • 2 x 1 KL + 2 X 2KL in Guangzhou, CN1 • Large-scale facility (ies) Anticipated • 2 x 20 KL in Visp, Sanofi JV
1Under construction, operational Q2/Q3 2021 40 Mammalian Growth Drivers and Estimated Production Capacity
Growth Drivers Capacity Expansion in kiloliter (KL)
Solid base line demand in therapeutics +33%
Biosimilars – geographic adoption of new therapeutics
Venture capital funding expected to continue N 7,7001 Improvements to platform processes N 5,800
Increased speed of regulatory approvals
COVID–19 has driven a higher level of demand than anticipated 2020 2024 Today – full capacity Future impact of Alzheimer’s therapeutics? utilization
1Based on announced capacity increases, without Lonza’s future expansion 41 Market Overview
Market Selected Key Manufacturers
Pharma companies CDMO companies More than 2/3 of the pipeline comes from small and mid-sized Biotechs • Roche • Lonza
• J&J Sustained need for large-scale manufacturing • Samsung Biologics capacity • Novartis • Wuxi Biologics • Boehringer Ingelheim Trend towards small-scale bioreactors combined with • Boehringer Ingelheim single-use technologies • Sanofi
• Amgen • Fujifilm Increasing pipeline of new molecular formats and more complex molecules Biogen • • Patheon
42 Mammalian Growth Rates
Market1 Lonza2
Estimated Growth 7 – 8% Estimated Growth 10 – 14%
CAGR 2020 – 2023 CAGR 2020 – 2023
1 Based on volume 2 Revenue growth 43 Biologics: Microbial Microbial Offering
OfferingOffering Network and Assets
More than 30 years of experience Clinical development and manufacturing
Commercial manufacturing From clinical to commercial supply
Ibex® Dedicate for tailored ownership and risk Visp, sharing models Regulatory expertise to support IND and BLA Switzerland
Installed capacity: 1 x 70 L, 1 x 1 KL, 2 x 15 KL
Proprietary XS Technologies® platform includes Pichia pastoris, Escherichia coli New mid-scale manufacturing to be operational and Bacillus expression systems in 2022 (Ibex® Solutions and multipurpose)
45 Key Priorities
Pre-clinical and Phase 1 Leverage Lonza’s proprietary expression systems 10%
Expand development capacity to grow pre-clinical and early phase customers 2019 sales 25% distribution Expand manufacturing capacity for full scope 65% Clinical – (small, mid and large scale) Phase 2 + 3
Leverage Ibex® Dedicate Commercial
46 Industry Overview
Represents ~30% of total Biopharma Installed Capacities 2020 E 690,000 liters More than 2/3 of microbial derived biotherapeutics are Total from small/mid-sized Biotechs 370,000 liters 320,000 liters
Increasing number of complex molecules produced in CDMO Pharma microbial systems
Selected Players
Industry growth driven by outsourcing • Lonza • Merck KGaA • Fujifilm • Roche Moderate capacity expansion • AGC Biologics • Novartis • Wacker • UCB A few companies dominate the commercial manufacturing • GSK space
47 Microbial Growth Rates
Market1 Lonza2
Estimated Growth 7 – 8% Estimated Growth 9 – 10%
CAGR 2020 – 2023 CAGR 2020 – 2023
1 Based on volume 2 Revenue growth 48 Biologics: Licensing The Concept Starts with Lonza’s Expression System
Gene for Protein of Host cell from Nucleus Culture media interest from our customer Lonza from Lonza
Lonza or customer
Vector (e.g. Plasmid or virus) from Lonza
Gene for a desired protein is combined The recombinant DNA sequence The host cell is grown in culture with a DNA sequence is inserted into a host cell – cell to reproduce the desired protein bank
Expression System: Vector + Host cell + Media + Know-how
50 The Licensing Business
More than 200 customers for around 600 molecules
80% of revenues from royalties with balance from annual fees, milestones and other payments
Sales and marketing focused on early stage innovators – first contact with Lonza
Our Mammalian Gene Expression Systems (GS) account for the majority of revenues
The Business Unit portfolio also includes microbial expression systems (XS) and viral vector technology (Lentiviruses and Adeno-Associated Viruses)
In 2019 we launched GS piggyBacTM to enhance production of complex proteins
51 Biologics: Bioconjugates Bioconjugates Overview
Biopharmaceuticals developed by attaching two molecules together, of which one is a biomolecule
Powerful anti-cancer therapeutics exploiting the high specificity of a monoclonal antibody (selection of the cell tumor) with enhanced tumor cell-killing capacity by attaching a highly cytotoxic agent
Main class of bioconjugates are the Antibody Drug Conjugates (ADCs)
Extensive manufacturing infrastructure required, alongside trained professionals
53 Bioconjugates Offering
OfferingOffering Network and Assets
Proven track record Bioconjugation • Clinical development and manufacturing • Commercial manufacturing Supports the majority of commercially approved ADCs Highly Potent API • API development and manufacturing Competency around complex molecules Visp, Switzerland Mammalian and Microbial • Clinical and commercial development Capacity expansion • Clinical and commercial manufacturing
Ibex® Dedicate Most integrated “under one roof” supplier • Tailored ownership and risk sharing models
54 Bioconjugates Growth Rates
Market1 Lonza2
Estimated Growth 6 – 8% Estimated Growth 10 – 12%
CAGR 2020 – 2023 CAGR 2020 – 2023
1 Based on volume 2 Revenue growth 55 Biologics: Drug Product Solutions (DPS) DPS Offering
Drug Product Solutions (DPS)
Drug Product Services
Expertise in formulation of API with excipients
Analytical capabilities
Stability and usability of final therapeutics Final Medical Drug Drug Product Substance Fill & Finish
Acquisition of Novartis Stein (CH) facility
Drug product clinical fill & finish
Vials (liquid), vials (lyo), prefilled syringes
New capacity in Visp (CH) in 2021
57 Analytical Expertise Overview
Analytical methods for formulation development Particle characterization
Visible particles
Turbidity
UV Light obscuration
pH Flow imaging microscopy
Osmolality Electrical zone sensing
Residual moisture Resonant mass measurement
Methionine oxidation Nano tracking analysis
Surfactant content Dynamic light scattering
Injection force Others
Viscosity
Others
58 Industry Overview
Industry Competitive Landscape
Fragmented and disparate competitor community
Large and growing pipeline with all biologics being Selected value chain competitors parenteral • Wuxi • Catalent • Patheon
New molecular formats require more specialized DP formulation know-how Selected specialized competitors
Development of orphan drugs with narrower • Vetter • KBI • Corialis indications
Vials currently dominate; alternative delivery Big pharma technologies are increasing • Internal know-how and assets
59 End-to-End Offering Extension
Built a leading offering over four years >200 FTEs
Started in November 2016 >80 Customers Created leadership in science and regulatory know-how >100 Molecules Large number of customers are integrated with the Business Unit to provide end-to-end offering
November 2016 2020
60 DPS Growth Rates
Market1 Lonza2
Estimated Growth 7% Estimated Growth 20%
CAGR 2020 – 2023 CAGR 2020 – 2023
1 Based on volume 2 Revenue growth 61 Biologics: mRNA Strategic Collaboration with Moderna on mRNA platform
Ten year strategic collaboration agreement on mRNA and lipid nano-particles
Moderna is the leading developer of mRNA-based new therapeutics and vaccines
Lonza will gain access to all mRNA-based projects from Moderna’s innovation pipeline
Current focus is the COVID–19 vaccine candidate mRNA 1273
63 COVID–19 Vaccine Candidate mRNA 1273 – Lonza’s Role
One Drug Substance production line Portsmouth Annual capacity 100 mio doses USA CAPEX funded by Moderna: ~CHF 70 mio
First Drug Substance batch targeted for end October 2020
Three Drug Substance production lines
Annual capacity 300 mio doses
CAPEX Visp • Moderna: two lines; ~CHF 140 mio Switzerland • Lonza: one line; ~CHF 70 mio First Drug Substance batch targeted for early November 2020
Production located in Ibex® Dedicate facility
64 Moderna with Most Advanced mRNA Platform 23 development candidates
Pre-clinical Phase 1 Phase 2 Phase 3 Commercial
Launch mRNA 1273 9 9 4 preparation
Moderna has the most advanced mRNA platform Moderna is not only a COVID–19 vaccine company
Moderna has one of the most advanced COVID–19 Moderna has 23 development candidates across a range of vaccine development programs infectious diseases and therapeutic areas
65 Cell & Gene Therapy, and Bioscience Division Bioscience Bioscience Offering
Support customers in disease research, drug discovery and development, including cell and gene therapy Bioscience Primary human cells and stem cells from various tissues Discovery Optimized cell culture media Nucleofector® transfection device
Bioscience Cell Culture Media support the growth of plant/animal cells in vitro Used at various stages in the development and production for large molecule Media therapeutic, cell and gene therapy
Bioscience Automated and integrated solutions for Endotoxin Testing to ensure safety of injectable Testing drugs
Bioscience Integrated software platforms to streamline quality control processes for biologics and Informatics cell and gene therapies (MODATM)
68 Network and Assets
Rockland, USA • Electrophoresis Copenhagen, Denmark • Chromatography, Agarose Wayne, USA
• MODA, Software Verviers, Belgium
Walkersville, USA • Cell Culture Media • Cell Culture Media • Endotoxin Assays Cologne, Germany Durham, USA • Transfection • Primary Cells – isolation of human and animal primary cells from tissue and blood
69 Market Overview
Global addressable Research Products market estimated at around CHF 950 mio1
• ~ CHF 300 mio in standard cell culture media for research use
• ~ CHF 300 mio in primary cells and cell specific media
• ~ CHF 150 mio in transfection
• ~ CHF 200 mio – others
Lonza serving academic, government institutions, biotech startups and large pharma
1 Markets in which we play 70 Bioscience Growth Rates
Market1 Lonza2
Estimated Growth 6 – 8% Estimated Growth 10 – 12%
CAGR 2020 – 2023 CAGR 2020 – 2023
1 Based on volume 2 Revenue growth 71 Cell & Gene Therapy (CGT) CGT Overview and Lonza Participation
Autologous Cell Therapy Allogeneic Cell Therapy Viral Vector Gene Therapy
1 batch = 1 patient 1 batch = multiple patients Viruses are used as “vehicles” to deliver genes into patients to restore functional cells Product examples “Off-the-shelf” model (bulk)
“Off-the-shelf” model • Kymriah® (Novartis) Centralized manufacturing
• Yescarta® (Gilead) Different types of viruses are used: Currently no industrialized Adenovirus, Adeno Associated • ZYNTEGLO™ (Bluebird Bio) processes Virus (AAV) and Lentivirus • Tecartus™ (Gilead)
Complexity and high costs of manufacturing / logistics
73 Unmatched CGT Experience
20+ years of GMP experience; acquisition of Cambrex in 2007 Experience 2 commercial products
Process > 120 projects Development
Viral Vector 250 and 2,000 L suspension production Production
Market Access > 160 CGT customers globally
74 Network and Assets
Geleen/Maastricht, NL
• Cell therapy Portsmouth, USA
• Cell therapy Tokyo, Japan1
Houston, USA • Cell therapy
• Cell therapy • Viral vector • Process development
• Largest dedicated Tuas, Singapore cell & gene facility in the world • Cell therapy
1 The facility is owned and operated by Nikon CeLL innovation Co. Ltd. under Nikon-Lonza Partnership 75 Industry Overview
CGT is a laboratory-based science that is growing into an industry 2019 2021 2025
Transformational efficacy of CGT is established
Accelerated approval pathways
Manufacturing is challenging: manual, unscalable and slow processes
5 products approved; 20+ to be approved; 70 – 90 approvals 800 Active INDs 200 INDs/year Selected competitors: Hitachi, ThermoFisher/ on file Brammer, Oxford BioMedica, Wuxi, MilliporeSigma, Fujifilm, Catalent / MasterCell & Paragon
76 Key Priorities
Secure long-term sustainable growth
Align capacity expansion with growth ambition
Improve operational execution and reduce costs
Maintain technology leadership
Invest in top talents: identify, build and retain
77 CGT Growth Rates
Market1 Lonza2
Estimated Growth >20% Estimated Growth 20 – 25%
CAGR 2020 – 2023 CAGR 2020 – 2023
1 Based on volume 2 Revenue growth 78 Personalized Medicine Challenges in Autologous Cell Therapy
Manual and complex manufacturing process Develop a system to answer the needs for manufacturing automation, A challenge to scale the manufacturing process scale-up, process control and COGs
Variation in starting patient material
Need to bring manufacturing closer to patient
COGs and therapy costs are unsustainable
Pricing: problem not solved Lonza Cocoon® Solution The economics don’t work today
80 Meeting the Challenges in Autologous Cell Therapy
Cocoon® system answers the needs for manufacturing scale-out, costs, quality and process control
Costs • Space efficiency • Automation • Ability to scale-out
Quality • Process control and analytics • Few manual steps
Opportunity • Strong pipeline with over 500 products in development • Robust pre-clinical pipeline
Quantity • Ability to scale-out and create hubs
81 Commercial Potential of Cocoon® Platform
Model Opportunity Partners / Customers Revenue Sources
Cocoon Sales Cocoon and Cassette supply Industry and academic clinical Sales of Cocoons, Cassettes etc. centers
CDMO Services CDMO services Industry customers Payment for CDMO services
Product royalties Development / Jointly accelerating therapy Biopharma companies Milestones Manufacturing path to clinical trials and Partnerships commercialization Therapy product manufacturing in Cocoon (CDMO)
82 First Cancer Patient Treated Using Cocoon® Platform
83 End-to-End Offerings
Agricultural area and thoroughfare
84 End-to-End Offerings
IND
Discovery Pre-clinical Clinical Supply Commercial
Licensing
Bioscience: Media
Bioscience: Cells Lonza clinical development and commercial solutions Biologics
Small Molecules
Cell & Gene Therapy
85 From Gene to IND to Drug Substance and Drug Product Example integration of Cambridge, Slough and Basel / Stein
Site receives genes from customers Cambridge Genes are analyzed Recommendations are made from in silico and in vitro analysis, which predicts the UK behavior of the genes. This ensures that the best genes are selected The empty vector(s) are developed
The host cell is selected and produced Slough The host cell is opened and the vector with the gene is introduced UK The host cell is grown A cell line is selected for the manufacture of the Drug Substance
Drug Product Services Basel / Stein Formulation and analytics for developing the Drug Product Switzerland Involved from the outset with Slough site
86 Drug Product Development Example integration of Cambridge, Slough and Basel / Stein
Manufacturability assessment Vector construction Transfection and Cloning (Rapid Scope) Material supply for formulation Formulation study USP evaluation DSP evaluation ELISA transfer ELISA qualification cGMP Cell Banking Cell Bank Testing for adventitious agents Cambridge, UK Platform Assay Evaluations Pilot Batch (non cGMP) Slough, UK Non GMP manufacture of of DP for Toxicology Non GMP DP release testing Basel / Stein, CH Non GMP DP stability testing Simulated preclin. Administration compatibility Outsourced Photostability testing Reference standard characterisation Pilot DS stability cGMP documentation cGMP batch GMP DS stability Virus Reduction study GMP DP manufacture GMP DP release testing GMP DP stability testing Simulated clinical administration compatibility CMC data pack for IND
87 Strong Pipeline Building
Aerial view of a traffic roundabout.
88 Strong Pipeline Building
Contracted business in Biologics and Small Molecules is up high double-digit versus 2019, driven by new assets coming on line and strong market demand
New customer acquisition across Biologics, Small Molecules and Cell & Gene Therapy continues with >30% increase over 2019
New projects in Biologics and Small Molecules up >30% versus 2019
New projects in Cell & Gene Therapy up >20% versus 2019
89 Investment Projects 2020 – 2023
Car, taxi, and bus traffic on road intersection at night in Hong Kong downtown district, Selected CAPEX Projects 2020 – 2023 (1/2)
Site Project / Technology
Ibex® Design – pre-clinical to clinical Phase 1 Ibex® Develop – clinical phase 2 to commercial Ibex® Dedicate – fully customizable. 50:50 JV Sanofi-Lonza for large-scale biologics commercial manufacturing Visp, Capacity expansion of Small Molecules Switzerland Capacity expansion of bioconjugation Capacity expansion of Microbial development and manufacturing Manufacturing of mRNA for COVID–19 vaccine
Basel / Stein, Expansion of parenteral drug product development services Switzerland Expansion of facility for drug product manufacturing
Geleen, Expansion of Cell & Gene Therapy manufacturing Netherlands
Portsmouth, Mid-scale (6K) for commercial monoclonal antibodies manufacturing USA Manufacturing of mRNA for COVID–19 vaccine
Tuas, Expansion of development services for mAb Singapore 91 Selected CAPEX Projects 2020 – 2023 (2/2)
Site Project / Technology
Houston, Capacity expansion of Cell Therapy manufacturing USA
Hayward, Single-use technologies for clinical and commercial manufacturing of mAb USA
Guangzhou, Small-scale clinical and early commercial Mammalian offerings China
Nansha, Increase capacity for Small Molecules China
Bend, Increase capacity in spray drying for Small Molecules USA
Many sites Increase capacity for empty capsules in focus Increase capacity for dosage form solutions
92 External Reporting
Vineyards by the lake - Lavaux, Switzerland
93 Increased Reporting Granularity Principles for external reporting
Increase granularity by modality for investors
Ensure external reporting fully reflects new divisional structure from 1 January 2021
Focus on key financial metrics by reducing number of Alternative Performance Metrics (APMs)
Tighten CORE definition to only exclude material one-time effects
Increase qualitative disclosures to facilitate accurate interpretation of financial performance
Pedestrian and bicycle paths in the green summer park.
94 Divisional Performance Indicators Considerations on segment reporting
Division Group
Sales AER / CER
Performance by modality group for Sales, CORE EBITDA/ CORE EBITDA margin and Capex margin
Capex
Key focus on growth, profitability, liquidity Cash flow – and capital return at Group level
ROIC – Elimination of CORE EBIT and CORE RONOA CORE EPS – APMs to align reporting to the steering model
Net Debt/ CORE EBITDA –
95 Convergence of CORE and Reported Financials Impact of CORE adjustments on EBITDA
Impact of CORE EBITDA adjustments on Lonza profitability1
20182 2019 H1 2020
New CORE Definition Moderate impact of CORE adjustments on financial results in the past – to be EBITDA margin 25.8% 25.8% 28.8% further reduced under new CORE policy CORE EBITDA margin 27.0% 26.7% 28.8%
Old CORE Definition CORE adjustment threshold increased to only exclude significant one-off CORE EBITDA margin 27.3% 27.4% 29.1% events
Delta ppts 30 70 30
1 Based on Lonza Continuing operations excl. Water Care 96 2 2018 financials not restated for the impact of IFRS16 Different Financial Profile for Lonza after Divestment of LSI Bridge to new reporting structure
FY 2019 financial performance overview (Indicative figures)
LSI Discontinued Future Lonza vs. current Lonza1 Future Lonza CHF mio Operations2 Lonza Group
Sales 5,920 1,693 4,227 Sales growth and margin accretive % CER growth vs. PY 7.3 (2.5) 11.7
CORE EBITDA 1,620 302 1,318 Higher Capex driven by growth % margin 27.4 17.8 31.2 project investments
Capex 786 91 695 % Sales 13.3 5.4 16.4 Maintained strong operational free cash flow Operational 495 136 359 Free Cash Flow Future Lonza ROIC more rapidly ROIC 9.1% 9.7% 8.9% increasing behind growth projects
1 Based on Lonza Continuing operations excl. Water Care 2 LSI 2019 segment financials as proxy for LSI Discontinued Operations 97 Behind a Strong Balance Sheet Cash generation and capital allocation priorities
Cash Generation Capital Allocation
Accelerated CORE EBITDA increase behind strong Organic growth projects sales growth and high operating leverage Selected acquisitions Capex investments required to support long-term growth leveling over time Dividends
Commitment to Strong Investment Grade Rating
98 New Reporting Structure to be Reflected in H1 2021 Financial Results New reporting structure timeline
Reporting timeline FY 2020 results reported in current organizational structure, LSI as January 2021 May / June 2021 July 2021 discontinued operations
Update of FY 2020 and H1 2020 Sales, CORE EBITDA, EBITDA and Capex figures in new organizational structure in May / June 2021
Selected FY 2020 and FY 2020 results in H1 results in new H1 2020 financials in current structure structure H1 2021 results to be reported in new new structure organizational structure (with restated H1 2020 financials)
99 Complementary Financial Models by Business Divisional financial models
CDMO Commercial CDMO Clinical Product Business
Long-term contracts Revenue profile <2y ~1y (5-10y in Biologics, 5-7y in SM)
Main revenue recognition Rendering of services/ Batch release Shipment consideration1 batch release
Operating leverage
Growth project impact (Opex)
Capital intensity
Quarterly results variability
1 Other specific revenue recognition criteria may apply 100 Portfolio of Attractive Businesses LPBN baseline
Capsules & Health Small Molecules Biologics1 Cell & Gene, and Ingredients Bioscience
Sales Split ~25% ~15% ~45% ~10% H1 20202
Approx. CORE EBITDA ~35% ~25% ~35% Break-even H1 2020
1 Excluding Licensing 2 Licensing attributable to ~5% of total sales 101 Attractive Financial Trajectory for all Divisions 3-year projections
Capsules & Health Small Molecules Biologics1 Cell & Gene, and Ingredients Bioscience
Sales CAGR High-single-digit Low-to-mid single- 2020 - 2023 to Low double-digit Double-digit digit (CER) Low-double-digit
CORE EBITDA margin 2023 trajectory ambition
1 Excluding Licensing 102 2023 Financial Guidance
Balance short term margin vs. long-term growth ~ 33% – 35% Double-digit CORE EBITDA Sales Growth Double-digit sales growth driven by Biologics, Small Margin Molecules and Cell & Gene Therapy businesses
Improved CORE EBITDA margin despite investments in growth projects
Capex to remain at 2019 level in 2021 and 2022 as investment cycle continues Double-digit ROIC Double-digit ROIC driven by growth and margin expansion
103 Company Culture
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104 What Culture Means at Lonza
A CORE set of shared values, A force field to unite and galvanize beliefs, habits and behaviors the whole employee community
The Company Spirit
A touchpoint to guide the behavior Must be earned and built and mindset of individual employees
105 The Values that Define our Culture
Collaborative based on mutual trust Collaboration Collective contribution to the whole
A focus on performance and results Accountability Highly aligned, committed and accountable teams and individuals
Pragmatic, motivated and conscientious Focus Market and customer-centric business Attentive to developing our best talent
High standards of integrity and probity Integrity Constructive attitude
Non-hierarchical management style Openness Encouraging different views and open communication
106 Building our Culture through Leadership Behaviors
Champion company values
Calm, resilient and consensual approach
Predictable, but responsive to change
Encourage and embrace new ideas and perspectives
Encourage creative and constructive dissidence
Grounded and down-to-earth
Nurture, develop and grow future talent Urban crowd from above
107 Conclusion
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108 Our Business Today
Resilience Growth
Robust pipeline across our modalities All Divisions show attractive growth levels
Large Pharma is increasingly less likely to Contribution to the value chain – following invest in production facilities the molecule from late stage discovery to final drug product
Small Biotech companies rely on manufacturing partners to deliver path to High entry barriers arising from reputation, commercialization quality, reliability, complexity and high initial investment costs
109 The Lonza Business Blueprint A fully aligned structure and culture
Structure Culture
Full divisional P&A Accountability accountability
Functional collaboration to Collaboration create one Lonza business
End-to-end customer delivery Customer focus
Global standards processes Integrity and best practices
Enhanced and harmonized Openness financial reporting process
110 Immediate Priorities
Single Dedicated Smooth and industry focus focus on seamless and single transformation leadership business and delivery transition identity
111 Q&A
People crowd motion through the pedestrian crosswalk