Lonza : Investor Update Presentation

Investor Update

Lonza's Blueprint for the Future

15 October 2020

Aerial view of Hong Kong Downtown

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

Organizational Design

Aerial View of a Crossing in Mexico City

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
Increased competition and complexity of Biopharma industry offering	Refocus the Lonza business
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

Simplicity

Global

Perspective

Workforce

Engagement

High-performing

Organization

A manageable matrix

Standardized and efficient processes and structures

Selected functions and teams defining global frameworks and standards, and guiding innovation

Shared accountability and decision-making. An aligned organization

Clear roles and responsibilities, supported by a balanced 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

Small

Cell & Gene

Commercial /

Human

Health

Biologics

Therapy, and

Operations

Quality

Finance

Molecules

Marketing

Resources

Ingredients

Bioscience

P&L accountability End-to-end delivery to customers

Business model to create competive edge

Global standards, processes and best practices Functional strategies

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		Small
Health Ingredients		Molecules

CapsulesActive

Pharmaceutical

HealthIngredients

Ingredients

Drug Product

Formulation

Biologics

Mammalian

Microbial

Licensing

Bioconjugates

Drug Product

Solutions

Cell & Gene

Therapy,

and Bioscience

Bioscience

Cell and Gene

Therapy

Personalized

Medicine

m-RNA

8

Functions Overview

Deep functional expertise across Business Functions

Operations		Quality		Commercial /
		Marketing

Procurement
		Compliance			Customer and
						Market Intelligence
Manufacturing
		Quality Control
Standards
				Digital Marketing
Supply Chain			Regulatory
				Branding and
						Advertising
Planning
						Technical
						Documentation

Finance

Tax

Treasury

Accounting

IT

Controlling

Human

Resources

Recruitment

Talent

Management

Union Relations

Compensation

and Benefits

9

Office of the CEO

Divisions

Capsules and

Small

Biologics

Cell & Gene

Health

Therapy, and

Molecules

Ingredients

Bioscience

Capsules

Active

Mammalian

Bioscience

Pharmaceutic

al Ingredients

Health

Microbial

Cell and Gene

Ingredients

Drug Product

Therapy

Formulation

Licensing

Personalized

Medicine

Bioconjugates

Drug Product

Solutions

m-RNA

CEO

Corporate Functions

Functions

Operations		Quality		Commercial /				Human
			Finance
		Marketing			Resources

Compliance

Customer and

Tax

Recruitment

Procurement

Market

Intelligence

Manufacturing

Quality

Treasury

Talent

Standards

Control

Management

Digital

Marketing

Supply Chain

Regulatory

Accounting

Union

Relations

Branding and

Advertising

Compensation

IT

Planning

and Benefits

Technical

Documentation

Controlling

10

Management Team

Aerial view of overpass at night

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	MBA (Chicago Booth)	MBA (Open University)	Diploma in Mechanical
Education and	(EPFL Lausanne)
			Thermal process and
qualification		BSc Industrial and Systems
Degree Chemical	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	9 months	17 years	3 years
with Lonza
Professional
experience
snapshot
	MSc Medical
Education and	Management (ESCP	MSc Engineering	MBA (Northwestern
qualification	Business School)	University)
Business Management
snapshot	MSc Biotechnology
(University of Warwick)
	MSc Physics (INSA)
	(University of Grenoble)

13

Our Divisions

2019 Sales Distribution - Divisions

10%

16%

Biologics	47%	Divisions
Sales

27%

Cell & Gene Therapy,

and Bioscience

Small Molecules

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 Group sales

Capsules and Health

Ingredients

Capsules

Health Ingredients

16% of	47% of
Group	Group
sales	sales

Small Molecules		Biologics

Mammalian

Active Pharmaceutical

Ingredients

Microbial

Licensing

Drug Product Formulation	Bioconjugates

Drug Product Solutions

m-RNA

10% of Group sales

Cell & Gene Therapy,

and Bioscience

Bioscience

Cell & Gene Therapy

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)

CHI Portfolio

Capsules

Empty Capsules		Filled Capsules
	(Dosage Form Solutions)

Pharma

Pharma

Nutrition

Nutrition

Health Ingredients

Distinctive offerings for consumer health

UCII®		Carnipure®
Healthy aging		Sports
(joint health)		nutrition

ResistAid™	Others
Digestive and

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

Pharma Capsules

Capsules

Nutrition Capsules

Health Ingredients

Empty Capsules

Innovation and quality leader

Strong support along regulatory pathway

Differentiated solutions

• Immediate release
• Modified release
• Others

Empty Capsules

Multipurpose and functional capsules

Broad product portfolio for the supplement market

Modified release and ingredient performance optimization

Filled Capsules

(Dosage Form Solutions)

Unique technologies and capabilities for liquid filled hard capsules

Formulation services

Analytical and stability testing

Addresses major consumer health concerns and needs

• Sports nutrition
• Joint health
• Digestive and immune

Highest safety and quality standards

Regulatory support

19

Cohasset,ss t, USA

Greenwood, USA

Benicia, USA*

Fort Smith, USA*

Puebla, Mexico

• To be fully integrated to Greenwood, USA and decommissioned by end of the year

Network and Assets

Bornem / Komec	Colmar, France
Helsen, Belgium

230

Billion capsules

produced For 5,000 annually

global

customers

Capsules

Nutritional Ingredients

Capsules and Nutritional Ingredients

Sagamihara, Japan

Suzhou, China

Nansha, China

Jakarta, Indonesia

Delhi, India

20

Market Overview

Drivers for Demand in Pharma Capsules

Overall growth in Pharmaceutical demand

Many new molecules are heat sensitive, eliminating tableting as an option

End-patient preference drives and defines the oral dosage market

Capsules Selected Competitors

ACG, India

Qualicaps, USA (Owned by Mitsubishi)

Suheung Capsules, South Korea

CapsCanada, Canada

Drivers for Food Supplements' Demand

Demographic Trends

Growth of older/ageing demographic groups

Health condition

Joint health concerns account for ~70% of medical indications at 65+ years

COVID-19

Significant increase in demand for health nutrition supplements

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

Capsules	2 - 3%
Estimated Growth

CAGR 2020 - 2023

Health Ingredients

Estimated Growth	5 - 6%
CAGR 2020 - 2023

Lonza2

Capsules	3 - 4%
Estimated Growth

CAGR 2020 - 2023

Health Ingredients

Estimated Growth	6 - 8%
CAGR 2020 - 2023

1 Based on volume

2 Revenue growth

23

Pharma & Biotech

Our Contribution to the Value Chain

Pharma/Biotech

Lifecycle

Discovery			Development			Manufacturing		Market
Basic	Drug		Pre-clinical	Clinical		Commercial		Commercial
Research	Discovery		Testing	Testing		Production		Sales

Clinical Development

					Selected Modalities
					Mammalian
					Microbial		Cell & Gene Therapy
Lonza			Small Molecules		Bioconjugates		Bioscience
					Drug Product Solutions		Personalized Medicine
					mRNA
					Technical Development

25

Small Molecules

Small Molecules Offering

Drug Substance

API/HPAPI

Drug Product

Formulation		Oral Dosage Form

Full range of APIs

Market leader on HPAPIs

Increasing early phase development project acquisition

Supply finished dosage form services to the pharma industry

Particle engineering: granulation, micronisation, spray drying

Tablets

Encapsulation

Filled into sachets

27

End-to-End Services and Know-How

	Drug Substance (DS)	Particle	Drug Product (DP)
	Engineering
Drug	Early	Commercial	Particle	Formulation	Clinical Trial	Packaging
Discovery	Phase	DS	Engineering	Development	Development
		Late		Enhanced		Commercial
		Phase		Formulation		DP

Sales and Marketing

Lonza

	Selected competitors
•	ThermoFisher	•	Recipharm
•	Catalent	•	Siegfried
•	Cambrex

28

Network and Assets

Bend, USA

• Spray drying

Quarkertown, USA

• Micronization

Tampa, USA

• Tablets
• Powder Filled Capsules

Edinburgh, UK

• Liquid filled hard capsules

Ploermel, France

• Soft gel and liquid filled hard capsules

Visp, Switzerland

• API and HPAPI

Monteggio, Switzerland

• Micronisation

Nansha, China

• API

Particle Engineering and Drug Product development and manufacturing Particle Engineering development and manufacturing

Drug Product development and manufacturing

Drug Substance development and manufacturing

29

Industry Overview and Lonza Key Priorities

Industry

Accounts for ~70% of global pharmaceutical sales

6,000 molecules in development

Move towards more tailored and complex APIs

Reshoring of the supply chain

Lonza

Adapt business model for smaller companies to secure

new early-phase clinical programmes

Retain leadership position in particle

engineering technology

Balance of asset scales and location

Continuing investment in Highly Potent API

270	19 of top	350
commercial	20 Pharma	Pre-clinical and
Lonza customers
products in 2019	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
CAGR 2020 - 2023		CAGR 2020 - 2023

9 - 10%

1 Based on volume

2 Revenue growth

32

Biologics:

Mammalian

Applied Protein

Services

Cell Line

Development and

Manufacturing

Clinical

Development and

Manufacturing

Clinical

Commercial

Manufacturing

Drug Product Services

Commercial

Manufacturing

Mammalian Offering

Late stage discovery, early stage development

Gene sequence analysis

Vector development and manufacturing

Selection and manufacturing of host cells

Full service drug substance and drug product development and manufacturing

Drug substance

Parenteral drug product services

Drug product (small scale)

34

Pre-clinical

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
2. Under construction, operational Q2/Q3 2021

Network and Assets

Clinical	Clinical	Commercial
Development	Manufacturing3	Manufacturing4

3 Drug Substance and Drug Product		Core		New capabilities
4 Drug Substance				35

Mammalian Network Capacity - 330 Kiloliter (KL) by end of 2020

Portsmouth, USA

• 3 x 5 KL / 5 x 20 KL / 4 x 6 KL

Hayward, USA

• 2 x 1 KL / 1 x 2 KL

Slough, UK

• 6 x 1 KL

Visp, Switzerland

• 2 x 20 KL / 3 x 1KL / 3 x 2KL

Porriño, Spain

• 4 x 10 KL

Guangzhou, China1

• 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

Examples

Strong small-scale pipeline

Most capacity is contracted for the next two years

Ibex® Dedicate

Examples

Large microbial contract

Moderna

Kodiak - Bioconjugation

Advanced negotiation for Bioconjugation with an Asian customer (identity undisclosed at this time)

Plant ramp-up expected from Q4 2020

Lonza's reserved capacity is already contracted

37

Ibex® Complex in Visp, CH

Sanofi JV Facility

Ibex® Design & Develop

Ibex® Dedicate

38

Key Priorities

Increase early phase sales, strengthen Applied Protein Services

Increase end-to-end offering for small and large Pharma and Biotech

Leverage Ibex®

Add incremental capacity

Geographic expansion

Asset-specific process improvements

Build presence in commercial Fill & Finish

		Pre-clinical and
		Phase 1
	8%
		22%
	2019 sales	14%
70%	distribution
	Clinical -

Phase 2 + 3

Commercial

39

Lonza Mammalian Fermentation Capacity in Kiloliter (KL)

290

30

Now

Small/Mid-scale (<10 KL)

Large-scale (>10 KL)

Anticipated

1Under construction, operational Q2/Q3 2021

330

70

End of 2020

Additions by December 2020

• 4 x 6 KL in Portsmouth, USA
• 3 x 1 KL + 3 x 2 KL in Visp, CH
• 2 x 1 KL + 2 X 2KL in Guangzhou, CN1
• 2 x 20 KL in Visp, Sanofi JV

Anticipated /

To Validate

2023 - 2024

Additions by 2023 - 2024

• Small and mid-size capacities
• Large-scalefacility (ies)

40

Mammalian Growth Drivers and Estimated Production Capacity

Growth Drivers

Solid base line demand in therapeutics

Biosimilars - geographic adoption of

new therapeutics

Venture capital funding expected to continue

Improvements to platform processes

Increased speed of regulatory approvals

COVID-19 has driven a higher level of demand

than anticipated

Future impact of Alzheimer's therapeutics?

Capacity Expansion in kiloliter (KL)

+33%

N 7,7001

N 5,800

2020

2024

Today - full capacity

utilization

1Based on announced capacity increases, without Lonza's future expansion

41

Market Overview

Market

Selected Key Manufacturers

More than 2/3 of the pipeline comes from small and mid-sized Biotechs

Sustained need for large-scale manufacturing capacity

Trend towards small-scale bioreactors combined with single-use technologies

Increasing pipeline of new molecular formats and more complex molecules

Pharma companies

• Roche
• J&J
• Novartis
• Boehringer Ingelheim
• Sanofi
• Amgen
• Biogen

CDMO companies

• Lonza
• Samsung Biologics
• Wuxi Biologics
• Boehringer Ingelheim
• Fujifilm
• 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

Offering

More than 30 years of experience

From clinical to commercial supply

Regulatory expertise to support IND

and BLA

Proprietary XS Technologies® platform includes Pichia pastoris, Escherichia coli and Bacillus expression systems

Microbial Offering

Network and Assets

Clinical development and manufacturing

Commercial manufacturing

Ibex® Dedicate for tailored ownership and risk

Visp,sharing models

Switzerland

Installed capacity: 1 x 70 L, 1 x 1 KL, 2 x 15 KL

New mid-scale manufacturing to be operational in 2021 (Ibex® and multipurpose)

45

Key Priorities

Leverage Lonza's proprietary expression systems

Expand development capacity to grow pre-clinical and early phase customers

Expand manufacturing capacity for full scope (small, mid and large scale)

Pre-clinical and

Phase 1

10%

	2019 sales	25%
65%	distribution
	Clinical -

Phase 2 + 3

Leverage Ibex® Dedicate

Commercial

46

Industry Overview

Represents ~30% of total Biopharma

More than 2/3 of microbial derived biotherapeutics are from small/mid-sized Biotechs

Increasing number of complex molecules produced in microbial systems

Industry growth driven by outsourcing

Moderate capacity expansion

A few companies dominate the commercial manufacturing space

Installed Capacities 2020 E

690,000 liters

Total

370,000 liters		320,000 liters
CDMO		Pharma

Selected Players

•	Lonza		•	Merck KGaA
•	Fujifilm		•	Roche
•	AGC Biologics		•	Novartis
•	Wacker		•	UCB
			•	GSK

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 interest from our customer

Lonza or customer

Vector (e.g. Plasmid or virus) from Lonza

Gene for a desired protein is combined

with a DNA sequence

Host cell from

Nucleus

Lonza

The recombinant DNA sequence is inserted into a host cell - cell bank

Culture media

from Lonza

The host cell is grown in culture to reproduce the desired protein

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

Offering

Proven track record

Supports the majority of commercially

approved ADCs

Competency around complex moleculesVisp,

Switzerland

Capacity expansion

Most integrated "under one roof"

supplier

Network and Assets

Bioconjugation

• Clinical development and manufacturing
• Commercial manufacturing

Highly Potent API

• API development and manufacturing

Mammalian and Microbial

• Clinical and commercial development
• Clinical and commercial manufacturing

Ibex® Dedicate

• 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

Drug

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

Final Medical Drug Product

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

Large and growing pipeline with all biologics being parenteral

New molecular formats require more specialized DP formulation know-how

Development of orphan drugs with narrower indications

Vials currently dominate; alternative delivery technologies are increasing

Competitive Landscape

Fragmented and disparate competitor community

Selected value chain competitors

• Wuxi

• Catalent

• Patheon

Selected specialized competitors

• Vetter

• KBI

• Corialis

Big pharma

• Internal know-how and assets

59

End-to-End Offering Extension

Built a leading offering over four years

Started in November 2016

Created leadership in science and regulatory know-how

Large number of customers are integrated with the Business Unit to provide end-to-end offering

>200

FTEs

>80

Customers

>100

Molecules

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
	Visp		CAPEX
		•	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® facility

64

Moderna with Most Advanced mRNA Platform

23 development candidates

Pre-clinical

Phase 1

Phase 2

9 9 4

Moderna has the most advanced mRNA platform

Moderna has one of the most advanced COVID-19 vaccine development programs

Phase 3	Commercial
	Launch
mRNA 1273
preparation

Moderna is not only a COVID-19 vaccine company

Moderna has 23 development candidates across a range of infectious diseases and therapeutic areas

65

Cell & Gene Therapy, and Bioscience Division

Bioscience

Bioscience

Discovery

Bioscience

Media

Bioscience

Testing

Bioscience Informatics

Bioscience Offering

Support customers in disease research, drug discovery and development, including cell and gene therapy

Primary human cells and stem cells from various tissues Optimized cell culture media

Nucleofection® transfection device

Cell Culture Media support the growth of plant/animal cells in vitro

Used at various stages in the development and production for large molecule therapeutic, cell and gene therapy

Automated and integrated solutions for Endotoxin Testing to ensure safety of injectable drugs

Integrated software platforms to streamline quality control processes for biologics and cell and gene therapies (MODA)

68

Rockland, USA

• Electrophoresis

Wayne, USA

• MODA, Software

Walkersville, USA

• Cell Culture Media
• Endotoxin Assays

Durham, USA

• Primary Cells - isolation of human and animal primary cells from tissue and blood

Network and Assets

Copenhagen, Denmark

• Chromatography,

Agarose

Verviers, Belgium

• Cell Culture Media

Cologne, Germany

• Transfection

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

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

1 batch = 1 patient

Product examples

• Kymriah® (Novartis)
• Yescarta® (Gilead)
• ZYNTEGLO™ (Bluebird Bio)
• Tecartus™ (Gilead)

Complexity and high costs of manufacturing / logistics

Allogeneic Cell Therapy

1 batch = multiple patients

"Off-the-shelf" model (bulk)

Centralized manufacturing

Currently no industrialized processes

Viral Vector Gene Therapy

Viruses are used as "vehicles" to deliver genes into patients to restore functional cells

"Off-the-shelf" model

Different types of viruses are used: Adenovirus, Adeno Associated Virus (AAV) and Lentivirus

73

Experience

Process

Development

Viral Vector Production

Market Access

Unmatched CGT Experience

20+ years of GMP experience; acquisition of Cambrex in 2007

2 commercial products

• 120 projects

250 and 2,000 L suspension production

• 160 CGT customers globally

74

Network and Assets

Portsmouth, USA

• Cell therapy

Houston, USA

• Cell therapy
• Viral vector
• Process development
• Largest dedicated cell & gene facility in the world

Geleen/Maastricht, NL

• Cell therapy

Tokyo, Japan1

• Cell therapy

Tuas, Singapore

• 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

Transformational efficacy of CGT is established

Accelerated approval pathways

Manufacturing is challenging: manual, unscalable and slow processes

Selected competitors: Hitachi, ThermoFisher/ Brammer, Oxford BioMedica, Wuxi, MilliporeSigma, Fujifilm, Catalent / MasterCell & Paragon

2019		2021		2025

5 products approved;	20+ to be approved;	70 - 90 approvals
800 Active INDs	200 INDs/year
on file

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

A challenge to scale the manufacturing process

Variation in starting patient material

Need to bring manufacturing closer to patient

COGs and therapy costs are unsustainable

Pricing: problem not solved

The economics don't work today

Develop a system to answer the needs

for manufacturing automation,

scale-up, process control and COGs

Lonza Cocoon®

Solution

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

Cocoon Sales

CDMO Services

Development /

Manufacturing

Partnerships

Opportunity

Cocoon and Cassette supply

CDMO services

Jointly accelerating therapy path to clinical trials and commercialization

Partners / Customers

Industry and academic clinical centers

Industry customers

Biopharma companies

Revenue Sources

Sales of Cocoons, Cassettes etc.

Payment for CDMO services

Product royalties

Milestones

Therapy product manufacturing in Cocoon (CDMO)

82

First Cancer Patient Treated Using Cocoon® Platform

83

End-to-End Offerings

Agricultural area and thoroughfare

End-to-End Offerings

DiscoveryPre-clinical

Licensing

Bioscience: Media

Bioscience: Cells

Biologics

Small Molecules

Cell & Gene Therapy

IND

Clinical Supply

Commercial

Lonza clinical development and

commercial solutions

85

From Gene to IND to Drug Substance and Drug Product

Example integration of Cambridge, Slough and Basel / Stein

Cambridge

UK

Slough

UK

Basel / Stein Switzerland

Site receives genes from customers Genes are analyzed

Recommendations are made from in silico and in vitro analysis, which predicts the 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

The host cell is opened and the vector with the gene is introduced The host cell is grown

A cell line is selected for the manufacture of the Drug Substance

Drug Product Services

Formulation and analytics for developing the Drug Product

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 Clining (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 Platform Assay Evaluations Pilot Batch (non cGMP)

Non GMP manufacture of of DP for Toxicology Non GMP DP release testing Non GMP DP stability testing

Simulated preclin. Administration compatibility 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

Cambridge, UK

Slough, UK

Basel / Stein, CH

Outsourced

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,

Site

Visp,

Switzerland

Basel / Stein,

Switzerland

Geleen,

Netherlands

Portsmouth,

USA

Tuas,

Singapore

Selected CAPEX Projects 2020 - 2023 (1/2)

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 50:50 large-scale biologics commercial manufacturing

Capacity expansion of Small Molecules

Capacity expansion of bioconjugation

Capacity expansion of Microbial development and manufacturing

Manufacturing of mRNA for COVID-19 vaccine

Expansion of parenteral drug product development services

Expansion of facility for drug product manufacturing

Expansion of Cell & Gene Therapy manufacturing

Mid-scale (6K) for commercial monoclonal antibodies manufacturing

Manufacturing of mRNA for COVID-19 vaccine

Expansion of development services for mAb

91

Site

Houston,

USA

Hayward,

USA

Guangzhou,

China

Nansha,

China

Bend,

USA

Many sites

in focus

Selected CAPEX Projects 2020 - 2023 (2/2)

Project / Technology

Capacity expansion of Cell Therapy manufacturing

Single-use technologies for clinical and commercial manufacturing of mAb

Small-scale clinical and early commercial Mammalian offerings

Increase capacity for Small Molecules

Increase capacity in spray drying for Small Molecules

Increase capacity for empty capsules

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

Sales AER / CER

CORE EBITDA/

margin

Capex

Cash flow

ROIC

CORE EPS

Net Debt/

CORE EBITDA

Divisional Performance Indicators

Considerations on segment reporting

DivisionGroup

Performance by modality group for Sales,

CORE EBITDA margin and Capex

-	Key focus on growth, profitability, liquidity
and capital return at Group level

-

Elimination of CORE EBIT and CORE RONOA

-	APMs to align reporting to the steering model

-

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
EBITDA margin		25.8%			25.8%			28.8%
CORE EBITDA margin		27.0%			26.7%			28.8%
		Old CORE Definition
CORE EBITDA margin		27.3%			27.4%			29.1%
Delta ppts		30			70			30

1. Based on Lonza Continuing operations excl. Water Care
2. 2018 financials not restated for the impact of IFRS16

Moderate impact of CORE adjustments on financial results in the past - to be further reduced under new CORE policy

CORE adjustment threshold increased to only exclude significant one-off events

96

Different Financial Profile for Lonza after Divestment of LSI

Bridge to new reporting structure

FY 2019 financial performance overview (Indicative figures)

CHF mio	Lonza1		LSI Discontinued		Future Lonza
	Operations2
		5,920	1,693	4,227
Sales
% CER growth vs. PY		7.3	(2.5)	11.7
CORE EBITDA		1,620	302	1,318
% margin		27.4	17.8	31.2
Capex		786	91	695
% Sales		13.3	5.4	16.4
Operational		495	136	359
Free Cash Flow
ROIC		9.1%	9.7%	8.9%

Future Lonza vs. current

Lonza Group

Sales growth and margin accretive

Higher Capex driven by growth project investments

Maintained strong operational free cash flow

Future Lonza ROIC more rapidly 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

Accelerated CORE EBITDA increase behind strong sales growth and high operating leverage

Capex investments required to support long-term growth leveling over time

Capital Allocation

Organic growth projects

Selected acquisitions

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
January 2021	May / June 2021	July 2021	organizational structure, LSI as
discontinued operations

Update of FY 2020 and H1 2020 Sales, CORE EBITDA, EBITDA and Capex figures in new organizational structure in May / June 2021

FY 2020 results in		Selected FY 2020 and		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		<2y		~1y
	Revenue profile
		(5-10y in Biologics, 5-7y in SM)
				Rendering of services/
Main revenue recognition		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