corporate - jefferies group ag.pdfthe healthcare continuum and the capsugel acquisition ... animal...

Corporate

New York City, USA - June 2017

Jefferies Healthcare Conference

Corporate

Rodolfo Savitzky - CFO

Lonza Group Ltd has its headquarters in Basel, Switzerland, and is listed on the SIX Swiss Exchange. It has a secondary listing on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Lonza Group Ltd is not subject to the SGX-ST’s continuing listing requirements but remains subject to Rules 217 and 751 of the SGX-ST Listing Manual.

Forward-looking statements contained herein are qualified in their entirety as there are certain factors that could cause results to differ materially from those anticipated. Any statements contained herein that are not statements of historical fact (including statements containing the words “outlook”, “believes,” “plans,” “anticipates,” “expects,” “estimates” and similar expressions) should be considered to be forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainty. There are a number of important factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including the timing and strength of new product offerings; pricing strategies of competitors; the company’s ability to continue to receive adequate products from its vendors on acceptable terms, or at all, and to continue to obtain sufficient financing to meet its liquidity needs; difficulty to maintain relationships with employees, customers and other business partners; and changes in the political, social and regulatory framework in which the company operates, or in economic or technological trends or conditions, including currency fluctuations, inflation and consumer confidence, on a global, regional or national basis. In particular, the assumptions underlying Outlook 2017 herein may not prove to be correct. The statements in Outlook 2017 constitute forward-looking statements and are not guarantees of future financial performance. Lonza’s actual results of operations could deviate materially from those set forth in Outlook 2017 as a result of the factors described above or other factors. Investors should not place undue reliance on the statements in Outlook 2017. Except as otherwise required by law, Lonza disclaims any intention or obligation to update any forward-looking statements as a result of developments occurring after this report was made.

2

Additional Information and Disclaimer

Table of Contents

Lonza at a Glance

Financial Highlights 2016

Q1 2017 Qualitative Business Update

Outlook 2017

The Healthcare Continuum and the Capsugel Acquisition

Backup Slides

“A trusted supplier to the pharmaceutical, biotech

and specialty ingredients markets”

Lonza at a Glance

founded

Employees

by the end of

2016Major

manufacturing and

R&D facilities

worldwide

Trademarks

globally

Sales in 2016

in CHFtrademark filings

and more than

one thousand

brands

Target Markets

and Technology Platforms

Consumer

Care

Hygiene, Personal Care,

Home Care, Nutrition

Pharma&

Biotech

Commercial Manufacturing, Clinical

Development, Service Products

(Consumables, Tests, Media, Equipment)

Agro

Ingredients

Animal Feed &

Crop Protection

Coatings &

Composites

Aerospace, Automotive,

Metal Working, Plastics,

Wood Treatment,

Construction & Specialty

Intermediates

Water

Treatment

Recreational Pool &

Spa, Municipal,

Industrial & Surface

Water TreatmentBiological Technology

Fine Chemistry

Formulation & Application Technology

Microbial Control Performance & Testing

Regulatory

Table of Contents

Lonza at a Glance



Outlook 2017


Backup Slides

Full-Year 2016 Financial Highlights

CHF mn FY 2016 FY 2015Change

YoY

Sales 4,132 3,803 8.7%

CORE EBITDA 918 793 15.8%

CORE EBITDA Margin 22.2% 20.9%

EBITDA IFRS 848 780 8.7%

CORE EBIT 651 524 24.2%

CORE EBIT Margin 15.8% 13.8%

EBIT IFRS 486 428 13.6%

CORE RONOA 21.5% 16.4%

Operating Free Cash

Flow408 667 -38.8%

CORE definition: see appendix

Specialty Ingredients

304344 360

390415

13.9%16.3% 16.7%

18.0% 18.4%

0%

5%

10%

15%

20%

25%

30%

0

100

200

300

400

500

600

2012 2013 2014 2015 2016

CORE EBITDA (CHF million) CORE EBITDA margin (%)

Pharma&Biotech

Successful Continuous Improvement

in Both Segments Full-Year 2016

CHF mn FY 2016 % YoY

Sales 2,250 3.8

CORE EBITDA 415 6.4

Margin 18.4%

CORE EBIT 322 8.1

Margin 14.3%

CORE RONOA 22.8%


Sales 1,849 15.9

CORE EBITDA 531 27.0

Margin 28.7%

CORE EBIT 400 40.8

Margin 21.6%

CORE RONOA 23.9%

369 353385

418

53123.8% 24.8%

26.6% 26.2%28.7%

0%

5%

10%

15%

20%

25%

30%

0

100

200

300

400

500

600

2012 2013 2014 2015 2016

CORE EBITDA (CHF million) CORE EBITDA margin (%)CORE definition: See appendix

Table of Contents

Lonza at a Glance



Outlook 2017


Backup Slides

Lonza 2017 with Outstanding First Quarter

Strong start in Q1 paves way for double-digit

organic sales growth for first half year

CORE EBIT growth expected to be even

stronger than sales growth for first half of 2017

Pharma&Biotech with strong performance in

revenue and profitability

Specialty Ingredients with robust growth and

profitability improvement

Outlook 2017 upgraded

10

10

Jun-17Corporate | Q1 2017 Qualitative Business Update | 25 April 2017

Outlook 2017

With this positive start into 2017, and based on the

sound foundation laid in 2016, Lonza is upgrading its

outlook for 2017. The outlook is on a Lonza

standalone basis:

Sales growth upgraded from mid-single digit

growth to high-single digit growth

CORE EBITDA above CHF 1 billion

Double-digit CORE EBIT growth significantly

above sales growth

CORE RONOA above 21.5%

This outlook is based on the present macro-economic

environment, current visibility and constant exchange

rates for the most important currencies in which Lonza

is trading.

11

Upgraded:

Outlook 2017

Upgraded Outlook on a Stand-Alone Basis

Corporate | Q1 2017 Qualitative Business Update | 25 April 2017

Note: The outlook for the first half of 2017 and for 2017 constitute forward-looking statements. Forward-looking statements

are not guarantees of future financial performance, and Lonza’s actual results could differ materially from those expressed

or implied by these forward-looking statements as a result of many factors, including but not limited to those described

under ‘‘Forward-Looking Statements’’ under “Additional Information and Disclaimer” in this presentation and in “Risk

Factors” in the final offering and listing prospectus published in connection with the Rights Offering.

Table of Contents

Lonza at a Glance



Outlook 2017


Backup Slides

Acquisition Highly Complements Lonza’s Healthcare Continuum

Prescription Drugs Personal Care / Wellness

Patented Prescription Drugs

Generic Prescription Drugs

Over-the-Counter (OTC) Products

Preventive Healthcare Products

Well-Being Products

14

Accelerating Growth Along the Healthcare Continuum

Creates leading integrated solutions provider to the global pharma and consumer

healthcare industries

Enhances competitive position through stronger innovation, combined scale and

market leadership

Addresses needs of customers for integrated, value-added solutions that improve and

accelerate drug and ingredient delivery to patients and consumers

Enhances growth and margin profile with highly complementary product offerings and

synergistic customer base

Combines two highly regarded companies with leading quality and regulatory track records

Creates a Fully Integrated Development, Manufacturing and

Delivery Technology Partner…P

ha

rma

Co

ns

um

er

He

alt

hc

are

Active Ingredient ProductionFormulation Technology and

Dosage Form Drug Delivery

Patient

Chemical

Compounds

Drug Product

Services

Parenterals

(Non-Oral Medicine)

Oral Solids

Pre-Filled Syringes (H1 2017)

Inhaled / Nasal

Dry Powder Inhaler (DPI)

Hard Capsules

Softgels

Tablets

Consumer

CapsugelLonza

Nutraceutical

Ingredients

DNA Cell Small Tank

DevelopmentLarge Tank

Production

Small-Scale

Commercial

Manufacturing Dosage Forms

Delivery Services

Combination Increases Lonza's

Healthcare Continuum™ Share

Specialty

Ingredients Pharma&

Biotech

Consumer

Health &

Nutrition Part of

Specialty

Ingredients

16

… and increases the Proportion of Lonza’s Revenues from the

Lonza Healthcare Continuum™

CY 2016 Revenue of CHF 4.1 bn CY 2016 Revenue of USD 1.1 bn Lonza's

Healthcare

Continuum™

approx. 66%

Lonza's Healthcare

Continuum™(1)

approx. 57%

Specialty

Ingredients

55%

Pharma&

Biotech

45%

Pharmaceuticals

65%

Consumer

Health &

Nutrition

35%

Note: Assumes CHF:USD Exchange Rate of 1.00; Does not reflect US GAAP to IFRS adjustments; CY = Calendar Year

(1) Healthcare Continuum: Comprised of Pharma&Biotech and Consumer Product Ingredients Business Revenues

17

Estimated Business Combination

Lonza

Full Year 2016

(CHF mn)(1),(2)

Capsugel

Full Year 2016

(USD mn)(1),(2)

Pro Forma 2016

(CHF mn)(3)

Revenue 4,132 1,081 5,197

CORE / Adj. EBITDA(1) 918 370 1,259(4)

CORE / Adj. EBITDA Margin(1) 22.2% 34.2% 24.2%

Operational Cash Flow /

Unlevered Free Cash Flow(2)638 241 875

Capital Expenditures 366 76 441

Employees >10,000 >3,600 >13,600

(1) Lonza standalone CORE EBITDA includes stock-based compensation expense. Capsugel standalone Adjusted EBITDA excludes stock-based compensation expense

(2) Lonza standalone corresponds to Operational Cash Flow (CHF408mn) post-Capex (pre acquisitions/divestitures (CHF230mn)). Capsugel standalone corresponds to Unlevered Free Cash Flow post-Capex (calculated as EBITDA (USD332.5mn) less

change in net working capital (USD15.6mn) less Capex (USD76.2mn))

(3) Combination based on Pro Forma Financial Statements disclosed in Offering Circular for "Revenue" and "CORE / Adj. EBITDA". Combination based on sum of Lonza standalone plus Capsugel standalone for "Cash Flow", "Capital Expenditures" and

"Employees". Assumes CHF:USD exchange rate of 0.985

(4) Calculated as Lonza CORE EBITDA (CHF918mn) plus Capsugel Adj. EBITDA (CHF365mn) less adjustments incl. Bend regulatory approval costs, transition, restructuring costs and other items (CHF24mn)

Summary 2016

18

Significant Positive Financial Impact Potential

Enhances

Growth Substantial commercial synergies by year 5

Expands

Margins

CHF 30 mn of estimated annual operational synergies potential by year 3

CHF 15 mn of estimated tax syergies potential by year 3

Expands combined CORE EBITDA margins by ~250 bps by year 3

Delivers

Accretion Accretive to CORE EPS in first full year post closing

Enhances

RONOA CORE RONOA >27% in first full year post closing

Improves Cash

Flow

Strong free cash flow generation to rapidly de-leverage and at the same time continue to

fund growth

Maintains

Dividend Dividend policy unchanged

19

Capsugel Transaction Financing

(1) Based on unofficial credit rating assigned by a number of Swiss banks

Acquisition of Capsugel totaling USD5.5bn (incl.

refinancing of existing Capsugel debt)

Equity financing structured to:

Achieve around 3x pro-forma net debt / EBITDA at

closing

Maintain current investment grade rating

Equity financings

ABB of CHF865mn in February 2017, having de-risked

the transaction early

Discounted rights offering of CHF2.25bn with payment &

settlement date on 12 May 2017

Debt financings

CHF2.4 bn to be re-financed in loan and debt capital

markets

Successful debt syndication accomplished

3.9x3.5x

3.0x2.7x

2.1x1.7x

2011A 2012A 2013A 2014A 2015A 2016A At closing 2017E 2018E

20

Proven Track Record of De-Leveraging

Target to de-leverage to around current levels by year 2

Combined 2016 annual operational cash flow of ~CHF 875 million

Targeted net debt / EBITDA ratio of below 3x at year-end 2017

Target Leverage After

Acquisition of Capsugel

Net Leverage (Past and Expected)

Assumes CHF:USD exchange rate of 0.985

Your Questions.

Corporate

Thank you for your attention.

26 July 2017 Half-Year 2017 Results

27 Oct 2017 Third-Quarter 2017 Business Update

Dirk Oehlers

Investor Relations

T +41 61 316 8540

F +41 61 316 9540

[email protected]

Calendar of Events & Contacts

mailto:[email protected]

Table of Contents

Lonza at a Glance



Outlook 2017


Backup Slides


Corporate

25

Pharma&Biotech

Commercial Manufacturing

Pharma&

BiotechB2B

Commercial Manufacturing

Strong sales growth driven by continued high demand in

Mammalian Manufacturing

Continued progress made in strengthening business, with

successul negotiations to extend contracts in terms of

volume and timeframe

New business models, such as strategic partnership with

Sanofi for the construction of a large-scale biologics

production facility, show trust Lonza enjoys among its

customers

Commercial Manufacturing,

Clinical Development Services,

Products (Consumables, Tests,

Media, Equipment)


26

Pharma&Biotech

Clinical Development Services and Bioscience Solutions

Pharma&

BiotechB2B

Clinical Development Services

Business is on track, benefiting from continued strong

demand for tier 1 development and manufacturing

services

Bioscience Solutions / Products

The Bioscience Solutions business was slightly softer

due to quality issues at our Walkersville, MD (USA)

facility; associated with these quality issues, Lonza

received a warning letter on 24 April 2017 from the FDA

relating to technical issues.




Media, Equipment)



27

Consumer Care

Growth driven by acquisition

Positive start to the year

Driven by increased focus on consumer health and

nutrition, and InterHealth acquisition complementing

Lonza offerings as expected

Ongoing demand in hygiene business and continued

momentum in vitamin B3 solutions

Consumer

CareB2B

Personal Care,

Home Care, Hygiene,

Nutrition



Agro Ingredients

Continued negative market impact on Agro

As expected Agro Ingredients continues to be softer due

to reduced demand patterns that persisting in the market

Feed additives and molluscicides businesses continue to

develop well

Agro

IngredientsB2B

Animal Feed &

Crop Protection

28Corporate | Q1 2017 Qualitative Business Update | 25 April 2017


Coatings and Composites

Good performance driven by specialties

Overall strong sales growth driven by Performance

Ingredients and Wood Protection

Performance Ingredients: Healthy demand across all

relevant markets

Wood Protection: Good results thanks to strong demand

across most regions and markets

Coatings &

CompositesB2B



Wood Treatment,


Intermediates



Water Treatment

Sales development driven by industrial water business

Industrial, Commercial, Municipal and Surface Water

(ICMS) business with favorable quarter

Further reduction of seasonality effects due to weather

Water

TreatmentB2B / B2C

Recreational Pool & Spa,

Municipal,


Water Treatment


The Healthcare Continuum

CorporateCorporate

Capital Markets Day –

Introduction to the

Healthcare Continuum

Corporate

Richard Ridinger - CEO







Well-Being Products

The Healthcare Continuum and Its Overall Customer Range

e.g.:

• Roche

• Novartis

• BMS

• Astra Zeneca

• Alexion

• Bayer Healthcare

• GlaxoSmithKline

• Biotech and

Research Start-ups

etc. …..


e.g.:

• Novartis – Sandoz

• Teva

• Pfizer - Hospira

• Sun Pharmaceuticals

• Aspen

• Dr. Reddy’s

etc. …..


e.g.:


• Reckitt Benckiser

• GlaxoSmithKline

• Ratiopharm

• Hexal

• Novartis

etc. …..


e.g.:

• L’Oreal


• Nestlé

• Reckitt Benckiser

• Henkel

etc. …..



e.g.:• L’Oreal

• P&G

• Shiseido

• Beiersdorf

• Estée Lauder

• Henkel

• Nestlé

• Unilever

etc. …..

Well-Being Products


Lonza’s Business Areas

Mammalian Development

& Manufacturing

Microbial Development &

Manufacturing

Emerging Technologies

Bioscience Solutions

Small Molecules Development

& Manufacturing

Personal Care

Hygiene

Nutrition and

Functional Food


Shape sizes not representative


Strengthening Lonza’s Offering and Adding Puzzle Pieces


Assay Solutions

Microbial Clinical

Development

Cell Therapy

Clinical

Development

Viral Therapy

Clinical

Development

Endotoxin

Detection

Chemical Clinical

Development

Chemical Commercial

Manufacturing

HAPI

Bioconjugation

Clinical

Development

Viral Therapy

Manufacturing

Parenteral

Drug Product

Delivery

Cell Banking

Human Food

Concepts

Analytical Services

Process

DevelopmentCell Culture

Products

Skin Care

Formulation

Concepts

Emollients

Preservation

Personal Care

Vitamins Surfactants

Preservation

Home Care

Hair Care

ActivesFood Emulsifiers

Hair Care

Formulation

Concepts

CytotoxinsExpression Systems

(Licensing)

Cell Therapy

Commercial

Manufacturing

Mammalian Clinical

Development

Electrophoresis

Bioconjugates

Commercial

Manufacturing

Functional

Food Actives

Skin Care

Actives

Biocides

Disinfectants

Cell Line Construction

Transfection Devices /

QC Testing Solutions

Microbial

Commercial

Manufacturing

Mammalian

Commercial

Manufacturing

Primary Cells

MediaStability

Testing




Assay Solutions

Microbial Clinical

Development

Cell Therapy

Clinical

Development

Viral Therapy

Clinical

Development

Endotoxin

Detection

Chemical Clinical

Development

Chemical Commercial

Manufacturing

HAPI

Bioconjugation

Clinical

Development

Viral Therapy

Manufacturing

Parenteral

Drug Product

Delivery

Cell Banking

Human Food

Concepts

Analytical Services

Process


Products

Skin Care

Formulation

Concepts

Emollients

Preservation

Personal Care


Preservation

Home Care

Hair Care


Hair Care

Formulation

Concepts


(Licensing)

Cell Therapy

Commercial

Manufacturing

Mammalian Clinical

Development

Electrophoresis

Bioconjugates

Commercial

Manufacturing

Functional

Food Actives

Skin Care

Actives

Biocides

Disinfectants




Microbial

Commercial

Manufacturing

Mammalian

Commercial

Manufacturing

Primary Cells

MediaStability

Testing

Cell Therapy

Commercial

Manufacturing

Suite in Portsmouth, NH

under construction




Assay Solutions

Microbial Clinical

Development

Cell Therapy

Clinical

Development

Viral Therapy

Clinical

Development

Endotoxin

Detection

Chemical Clinical

Development

Chemical Commercial

Manufacturing

HAPI

Bioconjugation

Clinical

Development

Viral Therapy

Manufacturing

Parenteral

Drug Product

Delivery

Cell Banking

Human Food

Concepts

Analytical Services

Process


Products

Skin Care

Formulation

Concepts

Emollients

Preservation

Personal Care


Preservation

Home Care

Hair Care


Hair Care

Formulation

Concepts


(Licensing)

Cell Therapy

Commercial

Manufacturing

Mammalian Clinical

Development

Electrophoresis

Bioconjugates

Commercial

Manufacturing

Functional

Food Actives

Skin Care

Actives

Biocides

Disinfectants




Microbial

Commercial

Manufacturing

Mammalian

Commercial

Manufacturing

Primary Cells

MediaStability

Testing

Parenteral

Drug Product

DeliveryOperational in Q4 2016




Assay Solutions

Microbial Clinical

Development

Cell Therapy

Clinical

Development

Viral Therapy

Clinical

Development

Endotoxin

Detection

Chemical Clinical

Development

Chemical Commercial

Manufacturing

HAPI

Bioconjugation

Clinical

Development

Viral Therapy

Manufacturing

Parenteral

Drug Product

Delivery

Cell Banking

Human Food

Concepts

Analytical Services

Process


Products

Skin Care

Formulation

Concepts

Emollients

Preservation

Personal Care


Preservation

Home Care

Hair Care


Hair Care

Formulation

Concepts


(Licensing)

Cell Therapy

Commercial

Manufacturing

Mammalian Clinical

Development

Electrophoresis

Bioconjugates

Commercial

Manufacturing

Functional

Food Actives

Skin Care

Actives

Biocides

Disinfectants




Microbial

Commercial

Manufacturing

Mammalian

Commercial

Manufacturing

Primary Cells

MediaStability

Testing

Functional

Food

ActivesOperational in Q4 2016

Adding Oral Delivery Technologies to Our Healthcare Continuum

Prescription Drugs

Assay Solutions

Microbial Clinical

Development

Cell Therapy

Clinical

Development

Viral Therapy

Clinical

Development

Endotoxin

Detection

Chemical Clinical

Development

Chemical Commercial

Manufacturing

HAPI

Bioconjugation

Clinical

Development

Viral Therapy

Manufacturing

Parenteral

Drug Product

Delivery

Cell Banking

Human Food

Concepts

Analytical Services

Process


Products

Skin Care

Formulation

Concepts

Emollients

Preservation

Personal Care


Preservation

Home Care

Hair Care


Hair Care

Formulation

Concepts


(Licensing)

Cell Therapy

Commercial

Manufacturing

Mammalian Clinical

Development

Electrophoresis

Bioconjugates

Commercial

Manufacturing

Functional

Food Actives

Skin Care

Actives

Biocides

Disinfectants




Microbial

Commercial

Manufacturing

Mammalian

Commercial

Manufacturing

Primary Cells

MediaStability

Testing

Dosage Forms /

Delivery Systems

Delivery

Services

Development

Services

Personal Care / Wellness


Overlap with Agro Feed


& Manufacturing


Manufacturing


Bioscience SolutionsHygiene


Small MoleculesPersonal Care

Nutrition and

Functional Food

Agro FeedProduct group, technology and

asset overlap



Overlap with Coatings & Composites


& Manufacturing


Manufacturing


Bioscience SolutionsHygiene

Nutrition and

Functional Food


Coatings & CompositesAsset and product group overlap

Small MoleculesPersonal Care



Overlap with Water Treatment


& Manufacturing


Manufacturing



Small Molecules

Personal Care

Nutrition and

Functional Food


Water TreatmentMarket and technology overlap

(especially industrial)

Hygiene



Conclusions

Entering the next cycle

Sound options for

sustainable strong

organic growth

KPI improvements for

both segments are

expected

All businesses will

contribute to value creation

Healthcare Continuum is

investment focus

Lonza Today

Healthcare Continuum

Conclusions

Pharma&Biotech and Consumer Care

Cover the Whole Healthcare Continuum

Pharma&Biotech Consumer Care

Personal Care

Preventative

Healthcare /

Supplements

Healthy

Living /

Wellness

Prescription Drugs

OTC

Hygiene

We offer solutions for the whole healthcare

continuum from personal care to

prescription drugs

Health & Wellness spans many Pharma and

“Fast Moving Consumer Goods” markets.

Our technologies and manufacturing expertise

make us uniquely positioned to be a leading

supplier to these markets.

Deep-Dive into Segments

Pharma & Biotech

Lonza Pharma & Biotech

Overview

OurVision Delivering the Medicines of Tomorrow, Today

3 Continents

15 Sites

7 Modalities Research

Products

Development Manufacturing

Development and Manufacturing Services at Unparalleled

Breadth of Modalities in CMO Industry…


Bioconjugates

Viral & Cell Therapy

Chemical Technologies

Small Molecules, Including

HAPI, Cytotoxics

Biologics

in Mammalian or Microbial

Expression Systems

D IS C OV E RY D E V E L OP M E N T M A N U FA C TU R E D IS TR IB U T ION

basic

research

disease

discovery

drug

discoverydrug

development

clinical

supply

fill and finish marketing

sales

distribution

commercial

supply

…Complementing Our Services with an Attractive Product

Business

D ISC OVERY D EVEL OPMEN T MAN U FAC TU R E D ISTR IBU T ION

basic

research

disease

discovery

drug

discovery

drug

development

clinical

supply

fill and finish marketing

sales

distribution

commercial

supply

Cell Culture

Primary & Stem Cells

Transfection

Systems and ServicesBulk / Custom Media

Research &

Processing Use

QC Testing

Solutions and Systems

Lonza Supports >250 Clinical Development Programs

Currently in 2016

1 Includes mammalian and microbially expressed medicines, antibody drug conjugates, cell and viral therapy2 Includes small molecule chemical drugs, HPAPI, peptides

Source: Lonza

# of Clinical

Programs

Supported by

Lonza in 2016

Small Molecules1

Large Molecules2

Small

Molecules2

Large

Molecules1

63

191

Lonza Supplies >50 Commercial Medicines

Across a Broad Set of Modalities in 2016

# of commercial

medicines

supplied by

Lonza in 2016

small

molecule

medicines1

large

molecule

medicines2

3120

1 Includes chemicals, HPAPI, peptides

2 Includes mammalian and microbially expressed medicines, antibody drug conjugates, cell and viral therapy

Source: Lonza

Lonza Generates Revenues1 from ~40% of

Biologics Approved Between 2011-15

All FDA-Approved Novel Biologics Medicines Since 2011

1 Through development, manufacturing services and/or licensing/royalties2 NME: new molecule entity

Source: FDA Center for Drug Evaluation and Research CDER, 2011-2015

Percentage of NME2

Biologics Generating

Revenues for Lonza

38%

Key Challenges of Our Industry

Speed Flexibility Innovation

Agile Development &

Manufacturing

Rapid Responses

to Demand Fluctuations

Technology and

Business Models

Shortened

Development Timelines

Increased

UnpredictabilityPrice / Cost Pressure

Offer to the market

Strategic Focus in Specialty Ingredients:

From Fringe to Core in the Healthcare Continuum

Water

Treatment

Agro Ingredients

Coatings and

Composites

Hygiene /

Preservation

Personal

Care

Nutritional

Supplements

Healthcare

ContinuumMedicine

Leveraging Our Anti-Microbial Expertise

Operating in 15 highly regulated anti-microbial fields of

application in 4 target markets

Providing 25 technology platforms from single ingredient

to turnkey solution, fully serviced with application

technology and regulatory support

Building on the Most Comprehensive Portfolio in the Market

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

1 ●2 ● ● ● ● ●● ● ● ● ●●3 ● ● ● ● ●● ● ● ●4 ●5 ● ● ● ● ● ● ● ● ●●6 ● ● ● ● ● ● ● ●●7 ● ● ● ● ● ● ● ●●8 ● ● ● ● ● ● ● ●●9 ● ● ● ●10 ● ● ● ●● ● ● ● ●11 ●● ● ●●12 ●13 ●● ●14 ●● ●15 ●● ● ● ● ● ●16 ● ● ● ● ●17 ● ●● ● ● ● ●● ● ●18 ● ● ● ● ●19 ●20 ● ● ● ● ●21 ●● ● ● ● ● ●22 ● ●● ● ● ● ●23 ●24 ●25 ●

# of Regulated Anti-Microbial Applications

# o

f Lonza technolo

gy p

latform

s

Coatings&Composites Water TreatmentAgro IngredientsConsumer Care

Understanding Market Leadership

Most-trusted industry partner in regulated anti-microbial

applications around the globe

Most-innovative solution provider in an ever-changing

market environment

Most-motivated industry participant, continuously investing

into new platforms to address unmet customer needs

Responsibility to Innovate for Sustainable Added Value

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# of Regulated Anti-Microbial Applications

# o

f Lonza technolo

gy p

latform

s

Coatings&Composites Water TreatmentAgro IngredientsConsumer Care

No.1 in

institutional

disinfection

No.1 in

anti-fouling

No.1 in

anti-dandruff


Consumer Care

Consumer

CareB2B

Personal Care,

Home Care, Hygiene,

Nutrition

Addressing needs on the

healthcare continuum,

thanks to our strong

expertise in biotechnology,

formulation technology and

the regulatory environment.

Personal Care:

Antidandruff actives (e.g. Omadine™)

Emulsifiers & emollients

Bio-active cosmetic ingredients (e.g. anti-aging

& skin-tone enhancement)

Nutritional Ingredients:

Vitamin B3, L-Carnitine & Emulsifier

for food, and OTC pharmaceutical

applications

Hygiene:

Highly regulated antimicrobial solutions

for disinfection and preservation


Agro Ingredients

Agro

IngredientsB2B

Animal Feed &

Crop Protection

Offering versatile actives

through established

customer relations,

expertise in biocides

technologies and regulatory

environment.

Active Ingredients:

Crop protection products (Zelam)

Meta™-based molluscicides for slug & snail

control

Proprietary adjuvants & preservatives

Microbial control pre- and post-harvest

treatments

Custom Manufacturing:

Agro-chemical active ingredients,

advanced intermediates, fermentation

manufacturing

Animal Nutrition:

Animal nutrition actives (vitamin B3, carnitine,

arabinogalactane) & feed ingredients



Coatings &

CompositesB2B



Wood Treatment,


Intermediates

Offering a wide range of

protectants, modifiers and

performance ingredients

that improve the life span,

quality and properties of

our customers products.

Materials Performance & Protection:

Building Products

Antimicrobial Solutions

Marine Antifouling

Composite Materials

Performance Ingredients:

Intermediates

Functional chemicals

Oil & Gas chemicals

Hydrazine propellant and derivatives

Wood Protection:

Preservatives and treatments

Fire retardants

Water repellants

Mold inhibitors

Sapstain control solutions


Water Treatment

Water

TreatmentB2B / B2C


Municipal,


Water Treatment

Capitalizing on growing

need for clean water

through industrial and

residential water solutions.

Industrial, Commercial,

Municipal and Surface Water (ICMS)

Feeder systems for drinking water

Agricultural water treatment

Disinfection of industrial water

Optimization of cooling systems

Residential Water

Sanitizers and maintenance products for pools

and spas

2016 Full-Year Results

Corporate

Corporate

2016 Full-Year Results

25 January 2017

Corporate

Richard Ridinger - CEO

Full-Year 2016

CHF mn FY 2016 FY 2015 Change YoY

Sales 4,132 3,803 8.7%

CORE EBITDA 918 793 15.8%

CORE EBITDA Margin 22.2% 20.9%

CORE EBIT 651 524 24.2%

CORE EBIT Margin 15.8% 13.8%

EBITDA 848 780 8.7%

EBITDA Margin 20.5% 20.5%

EBIT 486 428 13.6%

EBIT Margin 11.8% 11.3%

Financing Costs -112 (85)

Tax Rate 19.3% 19.0%

Profit for the Period 301 277 8.7%

EPS (CHF) Basic 5.73 5.30 8.1%

EPS (CHF) Basic CORE 8.43 6.81 23.8%

Operational Free Cash Flow 408 667 -38.8%

Change in Net Working Capital 78 139

Capital Expenditures -366 264 38.6%


Net Debt 1,584 1,660 -4.6%

Number of Employees 10,130 9,829

66

Financial Highlights

CORE definition: see appendix

Steady and Continued Improvement

from Full-Year 2012 to 2016

2,301 2,103 2,011

1,660 1,584

2012 2013 2014 2015 2016

Net Debt in CHF million

17.619.8 20.4 20.9

22.2

2012 2013 2014 2015 2016

CORE EBITDA margin in %

11.0 12.3

14.3 16.4

21.5

2012 2013 2014 2015 2016

CORE RONOA in %

3.35x

2.77x 2.70x

2.09x1.73x

2012 2013 2014 2015 2016

Net Debt / EBITDA

CORE definition: See appendix


304344 360

390415

13.9%16.3% 16.7%

18.0% 18.4%

0%

5%

10%

15%

20%

25%

30%

0

100

200

300

400

500

600

2012 2013 2014 2015 2016


Pharma&Biotech

Successful Continuous Improvement

in Both Segments Full-Year 2016


Sales 2,250 3.8

CORE EBITDA 415 6.4

Margin 18.4%

CORE EBIT 322 8.1

Margin 14.3%

CORE RONOA 22.8%


Sales 1,849 15.9

CORE EBITDA 531 27.0

Margin 28.7%

CORE EBIT 400 40.8

Margin 21.6%

CORE RONOA 23.9%

369 353385

418

53123.8% 24.8%

26.6% 26.2%28.7%

0%

5%

10%

15%

20%

25%

30%

0

100

200

300

400

500

600

2012 2013 2014 2015 2016

CORE EBITDA (CHF million) CORE EBITDA margin (%)CORE definition: See appendix

Positive Results Across the Board: Sales grew by 8.7% to CHF 4.13 billion with

excellent CORE EBIT of CHF 651 million (+24.2%)

Remarkable Pharma&Biotech Results: Sales grew by 15.9%, leading to substantially

higher CORE EBIT of CHF 400 million, up 40.8%

Strong Improvement in Specialty Ingredients: Sustained strong performance posted

for the fifth year in a row with CORE EBIT increasing by 8.1%

Increased Dividend for Shareholders: Dividend of CHF 2.75 per share for 2016

proposed by Lonza’s Board of Directors

Enhanced Structure for EC and Changes to BoD: Fridtjof Helemann, CHRO,

appointed to EC; Thomas Ebeling resigns from and Albert Baehny nominated to BoD

Full-Year Results 2016

Highlights


Sales growth of 8.7% in reported currency (8.2% in constant exchange

rates) to CHF 4.13 billion

CORE EBITDA growth of 15.8% to CHF 918 million

CORE EBIT growth of 24.2% to CHF 651 million

CORE EPS growth of 23.8% to CHF 8.43 (CHF 6.81 in 2015)

CORE RONOA improved significantly to 21.5% (16.4% in 2015)

Deleveraging on track with solid cash generation, resulting in a

net debt/EBITDA ratio of 1.73x, despite the InterHealth acquisition

Financial Results

All KPIs Significantly Improved


Key Figures CORE EBITDA and Margin Progression

Pharma&Biotech Financials

Full-Year 2016

CHF mn FY 2016 FY 2015 % YoY

Sales 1,849 1,596 15.9

CORE EBITDA 531 418 27.0

Margin 28.7% 26.2%

CORE EBIT 400 284 40.8

Margin 21.6% 17.8%



369 353385

418

53123.8% 24.8%

26.6% 26.2%28.7%

0%

5%

10%

15%

20%

25%

30%

0

100

200

300

400

500

600

2012 2013 2014 2015 2016


Remarkable sales increase of 15.9% (15.8% in constant exchange rates)

Exceptional CORE EBIT development was driven by commercial excellence and strong operational execution

Several major long-term, strategic manufacturing agreements announced, including Kodiak Sciences, bluebird

bio and Clovis Oncology

Pharma&Biotech

Mammalian Manufacturing, Chemical and Microbial Manufacturing

Pharma&

BiotechB2B

Mammalian Manufacturing

Strong momentum in mammalian was complemented by a

significant upwards trend in all other technologies / modalities

Expanded capacity using single-use disposable technology at

our Tuas site in Singapore

Continued to address long-term market needs with innovative

business models

Chemical and Microbial Manufacturing

Made considerable progress, further developing new business

models and securing long-term commitments

Sold peptides business, a niche business for Lonza, to focused

competitor in field




Media, Equipment)

Pharma&Biotech

Clinical Development & Licensing, Emerging Technologies and Bioscience Solutions

Pharma&

BiotechB2B

Clinical Development and Licensing

Continued strong growth in early-phase small-molecule

market; extensive project pipeline gives confidence in future

Added several new products using our GS Gene Expression

System™, bringing total number of approved therapeutics to

31, representing 32% of all FDA-approved biologics in 2016

Started operation of our new Drug Product Services

Laboratories in Basel (CH) in October




Media, Equipment)

Pharma&Biotech

Clinical Development & Licensing, Emerging Technologies and Bioscience Solutions

Pharma&

BiotechB2B


Made excellent progress in cell and viral therapy technologies,

which resulted in a substantial pipeline increase

Strong demand from well-funded biotech and big pharma

customers


Delivered solid growth compared with last year, based on

favorable product portfolios

Acquired Triangle Research Labs (TRL), further strengthening

position as leader in cell discovery




Media, Equipment)

Key Figures CORE EBITDA and Margin Progression

Specialty Ingredients Financials

Full-Year 2016

CHF mn FY 2016 FY 2015 % YoY

Sales 2,250 2,167 3.8

CORE EBITDA 415 390 6.4

Margin 18.4% 18.0%

CORE EBIT 322 298 8.1

Margin 14.3% 13.8%


CORE definition: See appendix CER: Constant Exchange Rate

304344 360

390415

13.9%16.3% 16.7%

18.0% 18.4%

0%

5%

10%

15%

20%

25%

30%

0

100

200

300

400

500

600

2012 2013 2014 2015 2016


Sustained strong performance with sales increase of 3.8% (3.1% in CER)

CORE EBIT growth of 8.1% to CHF 322 million resulted from continued successful operational and value-

chain improvements

Good progress made with ongoing improvements in product mix and portfolio optimization


Consumer Care

Sales Growth Driven by Nutrition and Hygiene

Acquired InterHealth Nutraceuticals to strengthen current

offerings and help expand into new areas, such as cognitive

and diabetic health

Continued to see strong performance in human nutrition

portfolio, driven by L-Carnitine, vitamin B3 compounds and

food emulsifiers

Grew Hygiene business by focusing on continuous

replacement of Triclosan in handwash additives with new,

innovative solutions

Personal Care continued to strengthen footprint and offerings

in emerging markets

Consumer

CareB2B

Personal Care,

Home Care, Hygiene,

Nutrition


Agro Ingredients

Industry Downturn Has Impact on Agro Ingredients

Had a solid start into first quarter of 2016, thereafter softer

demand for rest of the year, as expected

Experienced slowdown based on over-stocking in end markets

and reduced investments by agrochemical industry

Focused business on specialty applications and products

Recorded solid growth in specific molluscicide product for slug

and snail control

Agro

IngredientsB2B

Animal Feed &

Crop Protection



Good Performance Driven by Wood Protection

Experienced solid market demand across most offerings

Fueled by strong U.S. and Canadian economies, Wood

Protection business in North America led way with sales

growth in solid wood preservation markets

Observed growth across all relevant markets for Performance

Intermediates

Achieved positive growth in Building Products

Coatings &

CompositesB2B



Wood Treatment,


Intermediates


Water Treatment

Sales Improved Compared with Last Year

Delivered improved results in Residential Water business

compared with last year, due to good performance in North

America

Made continued progress with Industrial, Commercial,

Municipal and Surface Water (ICMS) business in South

American markets

Continued to decrease the weather dependency of the Water

Treatment business portfolio by strengthening and enlarging

the ICMS portfolio

Water

TreatmentB2B / B2C


Municipal,


Water Treatment

Closer Than You Think™

A Brief History of Lonza

1897 Foundation of Lonza in Swiss Alps

1909 Move to Visp / manufacture of synthetic fertilizers

1965 Start up of Naphtha Cracker in Visp (CH)

1983 Start of biotechnology research activities in Visp (CH)

1996 Acquisition of Celltech Biologics, expanding into mammalian cell

cultures and monoclonal antibodies

2007 Acquisition of Cambrex’s Research Bioproducts and Microbial

Biopharma business

2008 Acquisition of amaxa

2010 Acquisition of MODA, Vivante and Algonomics

2011 Acquisition of Arch Chemicals

2012 Divestment of Performance Urethanes and Organics business

2015 Acquisition of Zelam and Diacon

2016 Acquisition of InterHealth and Triangle Research Lab

2017 Divestment of Peptides business

Emerging Technologies Summary

Bio-Conjugates Cell Therapy Viral Therapy

RadioimmunoconjugatesAntibody-polymer

conjugates

Antibody-drug

conjugatesCells collected

Cells

processedCells multiplied

in the lab

Cells re-injected

to patient

• Product: complex molecule

• Bio-conjugates are complex structures where

a stable covalent link is formed between two

molecules, at least one of which is a

biomolecule

• ADCs are a sub-segment of the larger

bio-conjugate family where an antibody is

conjugated to a cytotoxic drug

Product: cells

Two types:

Autologous product is from one donor

to one patient (patient-specific)

Allogeneic product is from one donor

for many patients

Product: virus or virally-modified cells

Two types:

In-vivo therapy is where virus particles

are injected into the patient

Ex-vivo therapy is where viral-modified

cells are injected into the patient

Enabling targeted, next-generation curative therapies through providing high quality and innovative

process development and manufacturing services.

CORE Results as Defined by Lonza

83

Lonza believes that disclosing CORE results of the Group’s performance enhances

the financial markets’ understanding of our company because the CORE results

enable better comparison across years.

Therefore, the CORE results exclude exceptional items such as restructuring

charges, impairments and amortization of acquisition-related intangible assets,

which can differ significantly from year to year. For this same reason, Lonza uses

these CORE results in addition to IFRS as important factors in internally assessing

the Group’s performance.


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