Lonza Earnings: Strong Commercial Demand Drives Growth and 2023 Outlook Maintained

Lonza provided a first-quarter 2023 qualitative update indicating positive results, and the company is tracking our expectations. Management will release additional details when it reports its half-yearly results in July. The company has benefited from strong commercial demand across its biologics and small molecules businesses, and it has experienced softer demand for pre-clinical and phase 1 services in its cell and gene segment due to biotech funding constraints given macroeconomic headwinds. Lonza’s performance is in line with its full-year trajectory, so management reiterated its 2023 outlook. We maintain our fair value estimate of CHF 620 per share and view shares as moderately undervalued, currently trading in 3-star territory about 9% below our fair value estimate. We maintain our narrow economic moat rating and stable moat trend.