Stifel resumes coverage of Lonza with 'hold' citing short-term challenges

Allakos

17/05/2023 10:29

** Stifel resumes coverage of Lonza Group  LONN.S  with a
"hold" rating, saying while it remains among the market leaders
in the medium to long term, investors "underestimate the
short-term challenges" facing the Swiss contract drugmaker
    ** The brokerage cites high comparative base effects from
2022 through Allakos  ALLK.O  one-off payments and the
"significantly high-margin" Moderna  MRNA.O  contract phase out
    ** It adds the group's Cell & Gene division is "in weaker
shape" than a year ago and notes emerging biotech companies are
"under more pressure" due to higher interest rates and the
"SVB-induced venture capital funding shock"
    ** Stifel expects a core EBITDA margin of 29.5% for Lonza in
FY 2023, below average analysts' estimate of 30.6% according to
a company-compiled consensus
    ** "We believe that in the current environment, with a more
cautious market for earlier stage projects, it could well be
that even our below-consensus estimates are somewhat at risk,"
Stifel says
    ** It notes that while Lonza has a "state-of-the-art margin
profile" compared with most European or U.S. peers, this
positive comparison is "beginning to erode" compared to Asian
rivals, after South Korea's Samsung Biologics  207940.KS 
reached about 10% higher core EBITDA margin in 2022 than Lonza
Biologics

 (Reporting by Anna Mackenzie)
 ((Anna.mackenzie@thomsonreuters.com))