Lonza Group AG (LONN) Earnings Call Transcript & Summary

Good afternoon to everybody, and thank you for joining us today. Also a warm welcome to those on the phone line. As you already know from the invitation, we wanted to share with you today some details regarding the future of Lonza, its structure, cultural aspirations, reporting processes and also the short-term guidances. I want to be clear that today, we are not going to talk about the long-term strategy of the group. But it is our intention to respond to many comments and queries that are received from investors indicating that Lonza is a kind of black box. We will open the black box, and hopefully, we will bring light into this business portfolio, which look quite dark for many of you. Pierre-Alain Ruffieux will join us very soon, 1st of November, he's still under contract at Roche, which means there are obligations and restrictions. We are very happy he is here today this afternoon for introduction words, but he's not allowed according to the deal with Roche to answer to questions later on, so please don't put him into an uncomfortable situation and respect this rule. Pierre-Alain, welcome, and please introduce yourself.

Good morning, good afternoon. It is really my pleasure to see you in Zurich and to the opportunity to talk to you over the phone. I'm really delighted to be here and my pleasure to take a few moments to share a couple of words. This is my first opportunity to present at the Lonza event, I would like to start with a short personal introduction. As you can hear with my accent, I'm coming from the French-speaking part of Switzerland. I'm currently working at Roche, leading technical operation. In this duty, I'm managing manufacturing, technical development, supply chain, quality as well as regulatory. I'm also part of the management team of the Pharma division. Currently in my scope, I'm leading 12,000 people, which is very similar in terms of scope and capability to the Lonza Pharma Biotech business. Prior to my time at Roche, I spent 12 years at Novartis in different position, finally, leading the quality function and being also part of the pharma executive team. In all these last 10 years, I had the chance to interact with Lonza multiple time as a customer. And I have really appreciated the technical leadership as well as the people, which is really important. And I strongly believe today, with my background in manufacturing, knowing very well the customer perspective and also with my experience in the pharma, that I can bring to Lonza a unique perspective or to further develop our CDMO business and to make it leading over the world. But enough about my person. If I'm here today, it's really also to show my full support of what we are going to see later on. During the interview process, I have the time multiple time to discuss with Albert and his leadership team on our vision for the future of the company. And clearly, I believe that Lonza with a different announcement regarding the carve-out and the divestment of LSI, it's extremely well positioned for the future, especially in the current time. But first, let me share with you a couple of thoughts in this direction. Pending with this modification and what you would see today, I think we are very well positioned for the future as a single player in the CDMO business. But on top of that, what we are seeing today across the world regarding COVID-19, for me, it's a clear change and opportunity for us. If you look back in the past in the pharma business, most of the talk were always between discovery and development, which is, of course, very important and will continue to stay important. But with capability to produce quickly in large amount, [ protein ] and product is very important. And here, I think as Lonza, we are very, very well positioned for the future. Clearly, Lonza assumed lately clearly does sit in this area. And I would like at this time to expand really my big thanks to all Lonza employees, which make every day a lot of effort to make sure we can produce drug for the patient. And this is really unique. You have seen also the business development being very nice with deals like Moderna with the very specific technology. So I believe combining the strength of the people and the capability to manufacture, there is really a golden age for us in the future. Clearly, I'm really convinced with what you will see in a couple of minutes presented by Albert, which is positioning us in a very good situation to harvest all this opportunity. The clear focus with the structure, a culture and reporting will help us to outperform the market. And now I would like to come shortly to a close. I'm really looking forward to join the company in a couple of weeks. I'm currently wrapping up at Roche, taking a couple of days of rest and willing and happy to join in a couple of weeks. With that, I would like to close my introduction and welcome back Albert on the stage. Many thanks to all of you. Albert?

Thank you. So as you realized already, we are coming from the same part of Switzerland. And when I'm in Zurich, I say we are coming from the best part of Switzerland. So let's move to the agenda. First all, thank you, Pierre-Alain, and of course, welcome to the team and the organization. So we will first review the future organization of the future Lonza. We will go through the 4 divisions we will create or we have created. Then Rodolfo will go through the external reporting. I will spend a few words on the important company culture we want to have in this company, concluding and then Q&A. Where are we coming from? Last year, we decided to carve-out the LSI business. With this announcement, the rumor started, and everybody said, "No, they are going to exit this business." So during the period of carving out, we went to the Board -- we had at the Board level various discussion about the future of LSI, and we announced with H1 results that we want to exceed that business and the process will be a sales process. And there are two key reasons. First reason, there were no synergies between LSI and LPBN, and there are fantastic opportunities in the LPBN business. So we wanted to be focused, create one company dedicated to the biopharma business. In parallel, as we had at the Board a clear view of where we wanted to go, we already started during the process of carve-out to prepare all the documents, all the key documents, to be ready for a sales process now. So we prepared a teaser, we prepared a marketing document, and we were quite advanced with information memorandum. The sales process for LSI started basically 2 weeks ago. Now we are at a crossroad. We will be exiting LSI and we will create a new company. To be ready with this new company as of next year, we started already during the second and third quarter to think about the future setup of the future LPBN to be ready in January and not by mid of the year. And it is also very important to have the structure in place before you start because you have to adapt the processes to the new organization. So it's why we had in parallel, the carve-out, the preparation for the exit and the preparation for the new company. There are many different ways to structure an organization and to design how an organization will work. We have a complex and global organization, which will be organized along the following key principles. Precision, the metrics when you are international is almost unavoidable, but we want a manageable metrics. Simplicity through centralized processes and efficient processes. Global perspective with some functions being in charge for global topics. Work engagements through shared accountability and decision-making. And of course, we want a high-performing organization, and this organization will be measured on both on qualitative and quantitative criteria. The organization is built around shared goal rather than tasks and people with limited management layers to minimize hierarchy. It establishes clear priorities by line of business. It facilitates the speed of decision-making. It aligns, very important, the alignment. It aligns the responsibilities, and it maintains a strong relationship between the businesses and the global functions. The business or the company will be organized, structured around 4 divisions and 5 global functions. 4 divisions. Each division has sufficient scale to have control over the resources they need to achieve their goals. At the same time, each division is quite different and so requires a different business model to be successful. 5 global functions that cover all processes and responsibilities, which are global by nature. They are best placed to own the most important strategic element of the value chain, and they are not responsible for the day-to-day business, they look long-term. And there are also important and different skills require between operational and strategic management. So you need different type of person, different type of skills for the daily business versus the strategic responsibility. Here, you will see an overview of each division organized in a set of business units. What is the rationale supporting these 13 business units? They are each distinct businesses that have dedicated assets, and they have different needs and priorities. For example, in terms of innovation, CapEx and geographical expansion. That also serves the biopharma industry at different phases in their product life cycle. Each business unit is also at different development stage. Personalized medicine is embryonic, while small molecules is made mature. And we want, above all, clear accountability and visibility. It is why we created these 13 business units. These 5 global functions should rather be understood as 5 global responsibilities. I define the group global standards, norms and processes for selected key strategic activities and initiatives. Let me give you a few examples: HR defined the group compensation and reward systems for the whole group. IT decide for the group what software and hardware will be used. We don't want a countless of software and hardware. Finance defines one group master data management and data structure. And Marketing defines one group approach for our web presence and external branding. These 5 functional responsibilities are designed to safeguard our one company entity and to avoid a jungle of different systems and activities. As with any new organizational structure, we will encounter challenges in its implementation. We are undergoing a transformation, and we have to keep that in mind. This is a transformation for the organization. And we are undergoing this transformation to achieve this new structure, and this transition period require careful management to ensure that we don't experience any derailments or conflicts. It is also a priority that this transition must be accomplished without undermining the performance of the business. This transformation, this transition should not be used in an excuse, assuming the business performance is not aligned with the expectations. Members of our management team have a solid experience and a strong track record in the CDMO and pharma industry. I don't go into too many details. You heard Pierre-Alain, he has a background of Novartis and Roche. There are some people who are coming from Novartis. This is the same case for Rodolfo, Patrick and Gabriel and then Novartis and, of course, Lonza. Caroline, Head of HR, has also a Novartis background; and Stefan Stoffel, with the -- in charge of all the operation is a true Lonza, I would say, employee. Claude, coming from Thermo Fisher, is in charge of the Capsules business; Gordon, in charge of the Small Molecule, also a Lonza career. And finally, Jean-Christophe Hyvert is responsible for 2 divisions. We, as said before, there are 4 divisions, and you see 3 head of divisions. The reason is that we want to combine within 1 person -- to put under the leadership of 1 person these 2 division to make sure that we unlock synergies and that we improve the cross-divisional collaboration. Now let's take a look at the black boxes and -- in 2 of our divisions. We have a broad portfolio of products, technologies and services, with 47 of total sales derived from the fast-growing Biologics division. The industry-leading Capsules business, combined with a small Health Ingredient business account for 27% of total sales. The Mature Small Molecules division accounts for around 16% of total sales. And finally, 10% of total sales come from the innovation-driven cell and gene therapy in Bioscience division. The sales distribution of the business units is represented by the size of the boxes, which are placed in descending order within the divisions. But now careful, I want to note that the size of the business unit boxes do not show the exact size of sales distribution, but provides a general indication. So if you try to say, this is the size of the total division, and I have the sales report, if you try to calculate the sales of this business, you will fail. It's an indication and I repeat, this is a descending order. Very important to get that. There are at least 2 truths here. We have no sales with mRNA this year, and we have no sales with personal medicine. There, the size of the boxes can be misleading if you make some calculations. Capsules and Health Ingredient division. Lonza's Capsules and Health Ingredient business is the trusted partner in innovative capsules and dosage form solution and health ingredients for pharmaceutical and nutrition companies. The Capsules business portfolio has 2 sub businesses. First, it is the empty capsules for pharma and nutrition; and second, the liquid-filled capsule with our unique capabilities to encapsulate multi-particulate ingredients into liquids. These dosage form solutions are almost exclusivity for the nutrition industry. There are 3 main offerings in our Health Ingredient business, healthy aging, sports nutrition and digestive and immune health. In the Pharma Capsule business, now I take the industry perspective, in the Pharma Capsule business, Lonza is the innovation and quality leaders. We have a comprehensive range of differentiated solutions and an unmatched end-to-end support. We have 2 offerings in the Nutrition Capsule business. We are present with a broad product portfolio of empty capsules. We have also unique technologies and capabilities for dosage form solutions. We have 3 main offerings in Health Ingredients, which I already described on the previous slide. We serve more than 5,000 global customers who ultimately enable hundreds of millions of patients and consumers to live healthier lives. We produce around 230 billion capsules annually in 10 dedicated sites. We are located close to our customers, which representa significant competitive advantage versus some of our key competitors or customers -- sorry, competitors who are producing only in 1 or 2 countries. Because of our exposure in the Pharma and Nutrition industries, the division went through more than 300 successful external audits in 2019 alone. The overall solid growth in pharmaceutical consumption is the main growth driver for pharma capsules. Demographic trends, better health concerns and nutrition supplements as a protection against specific health issues are driving the growth for nutrition capsules. Most of our competitors are volume-driven, competing on price and not on innovation and end-to-end services. Our top priority with this business is to accelerate our profitable growth with an above-average industry growth rates. To achieve this, we will reinforce our focus on developing new innovative capsules. We will increase our capsules capacity as we are short on capacity today, we are sold out. And in both businesses, Capsules and Health Ingredients, we have introduced new measures and targets to continuously improve our operational efficiencies. On this slide here, you can see our ambition. We intend to grow the Capsules business by 3% to 4%, in excess of the market growth. And we intend also to outperform the Health Ingredient market with our 6% to 8% estimated annual average growth rates. Let's move now to the Pharma and Biotech business or businesses. Our role in the biopharma industry is to cover a wide range of services. Our services allowed the industry to move from the discovery of a gene sequence at the beginning of the value chain through the final drug product for the patient at the end. Often taking many years, it is a long and very complex journey, requiring a broad range of expertise, know-how and assets of different scale. The breadth of our offerings mean we are a critical technology partner for pharma and biotech customers. We have a unique and extensive range of modalities. Let's start with a review of our Small Molecules business. This is an attractive segment for Lonza. We have extensive know-how and capabilities, which meet growing demand. Lonza can support on all the steps to bring a small molecule to markets. First, we can support on the manufacturing of the drug substance or active pharmaceutical ingredient using synthetic chemistry. Next, the drug substance is formulated with exceptions that ensure bioavailability. And the formulation is then paired with the appropriate oral dosage form like tablets or capsules to create the finished drug product. Particularly, we also own the know-how and have the necessary assets for the particular engineering production steps, which is very important in the production of a drug product. This slide tells the same as the previous slide, it's slightly presented differently. We have the ability to offer an integrated drug substance to drug product solutions, including the very important product engineering and the packaging -- the particle engineering and the packaging. There are thousands of small molecule producers, but only a few with the end-to-end capability and a global reach, a few names here, Thermo Fisher, Recipharm, Catalent, Cambrex and Siegfried in Switzerland. We have a network of 8 sites to meet our customer needs. Each of these sites is shown on the map together with their role and capability. In the U.S., we have the assets for particle engineering, but no manufacturing site for drug substance. Small Molecules revenues contribute -- continue to grow robustly with a strong and sustained pipeline of new drug candidates. We are seeing that the new small molecule drugs are moving towards more complex chemical structure. It also seems that we may see more reshoring in the future caused by manufacturing and supply chain security concerns. We stand to benefit from these trends. To ensure we are prepared, we will continue to focus on securing more early phase clinical programs, maintain our strength in particle engineering technology and continue to invest in highly potent APIs. It's maybe important to spend a few time on this so-called HPAPI molecule. A growing proportion of the drug development pipeline is made up of more complex, highly potent APIs, representing today more than 30% of the drug development pipeline in Small Molecules. These HPAPIs require a lower dose for the patient and show fewer side effects, which is why the growth rates are very high. Smaller pharma companies are driving the development of innovating small molecules, but don't have the necessary manufacturing know-how and assets. Such company will now typically work with an external partner such as Lonza. These companies benefit from our state-of-the-art facilities, which safely handle highly potent APIs. Because of our strengths in this business, because of our strength on HPAPIs, the trend, the high-growth rates on this business, we are convinced, we are confident that we can significantly outperform the market and deliver on average 9% to 10% growth rates in the future. Mammalian. The mammalian cell-based derived molecules are the largest and strategically most important segment that represent 2/3 of the cell biological molecules. Lonza has a strong global mammalian network with late-stage discovery, preclinical, clinical and commercial capabilities. Our offering starts right after the late-stage discovery phase with our applied protein services. Here, we analyze the different genes where we receive from our customers and make recommendations about the best gene sequence candidate for the next development steps. We start right after discovery. We also offer our vector development know-how and manufacturing. The selection and manufacturing of the wholesales is typically also incorporated in our offering. Lastly, we have all the capabilities and assets to follow a molecule through a preclinical and clinical steps, including the commercial production of drug substance. With our drug product services, we help our customers to develop the final drug products. Said differently, right after discovery, we have basically all the know-how, all the capabilities and all the assets to follow the molecules up to -- the final drug products. On Mammalian, we have 9 dedicated sites across 3 continents to serve the markets. Cambridge is our center of excellence for the important applied protein services business, which I shortly already described before. Our center of excellence for drug product services is located in Basel and all other sites are producing mammalian cell-based products, [ the plant ] in China is under construction. As shown here, our mammalian manufacturing network is a mix of small scale, mid-scale and large-scale assets that include also disposable standard steel equipment. In Visp, we have the [ 2x20, 000 ] with a Sanofi joint venture and the Ibex Design and Develop with [3x1, 000 ] and [3x2, 000 ]. I would like to share a few words about the status of the Ibex facilities and business in Visp. The basic concept of Ibex is widely accepted and attracts much customer interest. Recently, we have won a series of important contracts. All available Ibex design and developed capacity is almost entirely contracted for the next 2 years. 3 important deals have been signed for Ibex Dedicate, another one is in advanced negotiation. Finally, on Ibex, the ramp-up of the Sanofi joint venture facility is expected in Q4 this year, with Lonza's available capacity already contracted. This recent snapshot of construction in this will give you a sense of the scale of our Ibex facilities. From the right, the new lab. Next to the new lab, the Ibex building 1 with the wing #1 Ibex Design and Develop. The wing #2 called Ibex Dedicate. And on the left-hand side, the Sanofi, the 50-50 joint venture with Sanofi. To achieve our ambition, we require the following key priorities: first, increase the number of early phase mammalian molecules by reinforcing our applied [ protein ] services; add incremental capacity, we are basically running at full capacity; leverage the Ibex concept; successful market penetration in China; deliver continuous process improvement; build a presence in commercial fill and finish, we don't have today; and very important as well, continue to hire, to develop and to keep the best talent in the industry. Our sales distribution along the value chain is summarized on this slide. Preclinical and Phase I represent 8% of the total mammalian sales, clinical Phase II and III, 22% and commercial, 70%. The sales distribution is very healthy, gives us a high level of visibility and also a high level of resilience. Today, we have at Lonza, 290,000 liters of capacity installed and running at almost full capacity. By end of this year, we will have an installed capacity of around 330,000 liters. And we are already evaluating and planning additional capacities for small, mid and large scale. Final decision will be taken very soon. The demand today, the market demand has outgrown the capacity for mammalian cell-based biomanufacturing. And I think the growth drivers are already well-known and understood. Solid demand for basic biologics. Biosimilars are gaining an importance. Capital funding is increasing. Increased speed of regulatory approval will facilitate the growth rates of these biomolecules, COVID-19 and the related issues is creating additional demand. And maybe at one point in time, the future impact of Alzheimer, which will require significant new capacities. Today's total estimated capacity of 5.8 million liters will increase to more than 7.7 million liters by 2024, which means an addition of at least 2 million liters. The key question is, of course, whether the industry is adding too much capacity? And are we creating an overcapacity by 2023 onwards? Inevitably, nobody knows the exact answer today. However, the base demand will continue to be strong. And extra growth will come from China. Biosimilars, there were more than 50 project in the pipeline, COVID-19 related projects, innovation and potentially on Alzheimer's therapeutics. Now if we take a cycle of 6 to 8 years in this industry, there will always be a few years with a lack of capacity, like now, and a few years with some overcapacity. This is unavoidable and need to believe this industry can manage over 6 to 7 years, a well-balanced supply demand, this is dreaming. It's just impossible. Now if you ask me what is preferable? We prefer having, on a continuous basis some extra capacities, which gives you flexibilities to attract new businesses and also gives you more safety in your operations. So some extra capacities is not bad. It is, to some extent, welcomed. Our market overview can be summarized in a few statements. Drug companies will continue to outsource, good for CDMO. Startups and small companies must outsource. They don't have the know-how, they don't have the capabilities, they don't have the assets, good for CDMOs. The one-stop shop is the best strategic choice also for our customers. And the CDMO industry may continue to consolidate as it is clearly an attractive industry. This is our ambition. We intend to outperform as well the market share. We believe we have the capabilities. We have everything in place to deliver double-digit growth rates in the future. Microbial. Microbial expression of biological molecules represent the second largest segment in the biologics market after mammalian. Lonza's microbials are produced exclusively in Visp with the following key assets: a clinical development lab, including analytical development and process analytics; small-scale manufacturing; large scale manufacturing; and on top of that, the Ibex Dedicate to address tailored microbial solutions for customers. So we have everything in our hands in Visp to be a successful player on microbials. One of our key priorities is to build a stronger early phase pipeline by focusing more on pre-IND molecules. We understand that we must expand our development and manufacturing capacity in this area to make -- to meet the growing customer demand. Customizable microbial molecules are prime candidates for the Ibex Dedicate solution. This is a priority for us to ensure we can meet customer needs in the Ibex Dedicate monoplants. 65% of total sales are generated in the commercial phase and 35% in preclinical and clinical phases, giving us, again, an excellent visibility about the future revenue flow and also the capacity utilization. We feel also comfortable that we can do better than the market share and deliver high single digit, low double-digit growth rate in the coming years. Let's move to licensing. Lonza's licensing business unit is not selling a physical product or a service, but the right to use our technology and mainly our flagship mammalian technology called Expression System, GS. The GS system is a collection of pieces that makes the concepts. And the most important pieces of the concept are the vectors, the host cell and the [ comprehensive method ] to grow the host cell. So basically, what we do, just after discovery, we try to convince research institute to use this platform of products, of units to develop their products along with the preclinical and clinical phases. Again, we are licensing and not selling products, in selling these concepts. A licensing business unit enables over 20 customers to develop drugs for patients through our proprietary manufacturing technologies and know-how. Our current performance, of course, reflects successful approvals and revenue growth for product under license. The licensing income is noncyclical and provides a stable profit contribution to the group. The Molecule pipeline determines the long-term health of the business units. Sales and marketing efforts focused on encouraging early stage innovators to adopt Lonza technologies. If successful, these early efforts may deliver royalties only after 6 to 8 years. This is the product life cycle of a drug. It is a patient game, but it is a highly profitable game as well. Bioconjugates. Lonza Bioconjugate are produced exclusively in Visp, where we have different manufacturing assets. We need 3 types of assets for the production of the bioconjugates. First, the protein conjugation; second, the highly potent API; and third, the microbial or mammalian biomolecules. So said differently, a bioconjugate is a combination of a small molecules with a large molecule, in between there is a bridge, and this is this bio -- this protein conjugation. Our under one roof competency means that we are uniquely placed to handle the full spectrum of development and manufacturing services. We are confident in our forecasted growth rates. We are supported by, first, continuing an increasing move towards outsourcing from the pharma industry. Second, a moderate capacity expansion despite a solid innovation pipeline with more than 300 ADCs currently under development. Third, the need for specialized assets and expertise, which we have. And finally, the leading position occupied by Lonza business with a unique integrated offering. Now let's move to Drug Product solutions, next business units. This business unit has been established to provide customers with an integrated service. In the first step, we offer the formulation know-how of APIs with exceptions, and the analytical method of all required pharmacopeia. In total, more than 20 different physiochemical characterizations are needed. This is our Drug Product Services. In addition to this lab service, we offer clinical and small scale commercial fill and finish know-how and capability. What I just described on the drug product services may sound very simple. You have a lab and you carry out a few formulations and you now have a formulation. Let me show you without comments, the list of the analytical methods needed to comply with the regulations. And on the particle topic only, there are more than 6 different required analysis. This is a highly complex regulated and science-based business. I show it not to impress you because I can't go into the details myself, but it is to demonstrate the high entry barriers if you want to participate into that business. Highly complex, highly detailed, highly regulated, and only a few players can afford to have access to this know-how. As already discussed before, the market for biologics is growing in all segments. Mammalian, Microbial and Bioconjugates, all of these generate similar growth levels for Drug Product Services. They are needed. The very specific expertise requirement and increasing pipeline has led to a growing move toward outsourcing because of that complexity. Finally, new molecular format require even more specialized analytical and formulation know-how. The big pharma have, of course, an in-depth know-how and capabilities in fill and finish as well as a few highly focused and specialized company like Vetter and KBI, and some of our CDMO competitors are also active and strengthened their offering like WuXi, Catalent and Patheon. We created this business unit in November 2016, realizing the need for our organization to add these services to better serve our customers. Today, we are serving more than 80 customers, and we have a team of [ 200 ] people. In between, we acquired the fill and finish capability of Novartis in Stein, Basel. We feel also very confident in this business unit that with all our capabilities of know-how, our talents and the labs that we can outperform the market and deliver high double-digit growth rates in the coming next years. mRNA. Let's now take a moment to consider this new field for Lonza. mRNA produces instructions to make proteins that may treat or prevent diseases. Essentially, mRNA based medicines are sets of instructions, which direct cells to produce specific proteins. Over the last 10 years, Moderna leveraged the fundamental role that mRNA plays in protein synthesis. In doing so, they have developed own technologies with the potential to treat or prevent diseases that today are not addressable, and this is very important to keep in mind. I'll come to that later on. And this is why we decided to enter into a 10-year global strategic collaboration with Moderna. Of course, the COVID-19, the current COVID-19 vaccine candidate plays a very important role in our business today and in our discussion with the capital market. We are proud to be able to participate in this process to ensure that we are able to return to normality as soon as possible. But it is very important for me to stress the next comments. Our efforts are not around profit optimization, but the larger purpose to help the society. Profit is not the focus for us here with this COVID-19 projects. We have a role and a chance to support the greater good, and it is our priority. Most of you know our role in this vaccine project. We are producing -- we are going to produce the active ingredient for the vaccine candidate. We are installing 1 manufacturing line in the U.S., we're installing 3 manufacturing lines in Switzerland. Each manufacturing line with an annual capacity of around 100 million of doses. The line in the U.S. is funded by Moderna. In Visp, we found 1 line of around CHF 70 million CapEx and Moderna is funding the 2 other lines. Very important, we expect the first drug substance batch to be produced by end of this month in Portsmouth, the sooner, the better for the society. And we expect the first batch of drug substance to be produced in Visp in early November this year. I suspect there will be questions later on Modena. I'll stop here with the vaccine and answer as respect to questions later on. Now this is the most important slide for us as well. mRNA have the potential to become a new class of medicine. It carries a large product opportunity and high probability of technical success. And I make a pause here on technical successes. There are today 5 vaccine candidate in clinical Phase III in the U.S. Two are mRNA-based, and they are continuing their journey. Two are adenovirus-based, and they are on hold. This is the vaccine candidate of Johnson & Johnson and of AstraZeneca. This is, by the way, not a good news. This is bad news because we need more vaccines. But just to say that so far, the mRNA new technology made this journey. We are safe so far and the adenovirus-based vaccines are on hold in North America. So we believe in this technology, and you see the pipeline here. The development pipeline of Moderna comprises a few modalities around prophylactic vaccines, cancer vaccines, immuno-oncology, regenerative therapeutics and systemic intracellular therapeutics. This is a wonderful portfolio, a wonderful development portfolio and we have -- we will have access to this development in the future, thanks to this collaboration with Moderna. And this is as important as the vaccine. Cell and Gene and Bioscience division. Let's start with Bioscience. Our Bioscience business is a high-value business around 4 offerings. First, the Discovery business. This is a project business, mainly used in the discovery phase of therapy development. The main products are cell culture, cell media and transaction tools, so we are right after discovery with this portfolio with the innovators. Second, the media business. This is used for the production of monoclonal antibodies, bioconjugate, vaccines and cell and gene therapies. Third, our endotoxin detection assays, ensure safety in injectable drugs against endotoxins, which create fever. So we have the tools to measure the level of endotoxin in the new drugs. If it's too high, the drug will not be registered because it would be creating unnecessary fever. Fourth, we have an unexpected software platforms used to automate quality control processes for biologics and cell and gene therapies. There is an additional small business called Agarose business, uses the raw materials for chromatography platforms. So a broad business, solid business, value business. And we are serving our customers with 7 dedicated sites, 4 in the U.S. and 3 in Europe, and you can read the details here. We play an attractive -- sorry, it is -- we play in an attractive and growing market for research products, estimated at around CHF 1 billion rounded for our addressable markets. Our customer base is broad, and consists of academic research institutes, government institutions, startups and large pharma. We serve basically all the research community with this portfolio of products and services right after discovery. We feel very confident, again, that we can do better than the market. And our ambition is to deliver also on an average annual basis, low double-digit growth rates. Let's come to Cell and Gene Therapy. We are participating in 3 modalities: the autologous cell therapy or patient-specific therapy. There has been a surge of autologous products recently and they've shown therapeutic efficacy in blood cancer. The main issues are the high cost, complex logistics,and the lack of potential for scale up efficiencies. But this technology has proven the concept. It works. The allogeneic or donor cell therapy is the core competency of Lonza. It comprises the majority of the outsource, late phase projects in our development assets. Currently, there are also no industrialized processes. Lonza acquired the viral vector manufacturing business from Vivante in Houston in 2010 for around 20 -- only CHF 20 million. We have today a great expertise with the adenovirus and in lentiviral vectors. Over the years, we invested close to CHF 200 million in the last 10 years in cell and gene capabilities. We have more than 20 years of expertise. We have an organization of more than 1,000 employees dedicated to this business globally. We have a dedicated the regulatory team, supporting customers for pre-IND all the way to commercialization. We have the experience, the tools and technologies to support both clinical and commercial manufacturing. We have one of the broadest and the best know-how in the world on cell and gene. This is our network of assets in Houston. We have the largest dedicated cell and gene facility in the world, not only in Lonza but in the industry. It is a fast-growing market with more than 800 products in the preclinical phase, 800 in preclinical. This growth potential has attracted many players, where it is 500 companies globally focused on cell and gene. Despite such good news, cell and gene therapy will not achieve sustainable commercialization, unless we industrialize the processes. We should also remember that this market is still in its nascent stages. And for context, it took us 20 years to develop the current standard platforms in Mammalian and Microbial fermentation. There have been plenty of deals in the gene therapy space, including Novartis purchase of AveXis for $8.7 billion in 2018. Thermo Fisher acquired Brammer, focused on viral vector, for $1.7 billion. Hitachi has a new facility in the U.S. Fujifilm spent more than $140 million in to a new center recently. And Catalent bought the MaSTherCell business for USD 315 million very recently. We expect the market to grow high double digits. This will inevitably require substantial capacity expansion. And our growth strategy has two pillars: first, high focus on early phase pre-IND pipeline; and second, gain late-stage clinical and commercial contracts. Profitability improvement is at the top of our priority list. We are working to achieve it with the following initiatives: optimization of our planning and scheduling process, robust daily operating mechanisms, tax transfer standardization, automation of manual processes and investing in talents, a domain where the talents are very rare. It's an highly visible business where everybody is trying to get the best of the people on a worldwide basis. So it's now really difficult to find the talents and to keep them. We are convinced we will be able to grow together with the industry at around 20%, 25% on an annual basis. Next business unit. Personalized Medicine. I apologize, but we opened the box, the black box, and opening the black book as a consequence. We go into some details, and we go business unit by business unit. And maybe you said, "Bloody hell, when is he going to stop?" I'll stop only at the end of the last business units. So we have to go through it because you wanted it as well. Personalized Medicine. I just described the current challenges in autologous cell therapy, which can be summarized with 3 words: quantity, quality and cost. Let me explain briefly the relevance of each in turn. Quantity, today, it's impossible to scale. Quality, there is a variation in starting patient material. Every time you take a patient material, you have a different starting point. And the cost, unsustainable COGS and therapy costs as well. So at Lonza, we have decided to tackle this challenge, and we are developing. We're in the process of developing a Cocoon solution, but we are still in the project. What is the Cocoon solution? Lonza Cocoon's platform is a closed system for automating cell therapy manufacturing. Every step with the exception of the patient blood collection, and the administration with the therapy to the same patient is automated in the Cocoon. Lonza's Cocoon solution has the potential to solve the cost, quality and the scalability issues, and it has also the capacity to accelerate the path from clinical development to therapy administration. We have today 3 embryonic, I stress that, embryonic business model. The first model, we sell cocoons to the industry and academics, and they are developed their own therapies with a very limited support from Lonza. So we are generating revenue just by selling assets. The second model, we don't sell cocoon, instead we develop for the customers the best closed system for their targeted therapies. This is a typical CDMO type of business where we own the asset but we offer the service, the know-how to the market. And the third model, in collaboration with biopharma companies, we develop together therapies for clinical to commercial. And now the revenues is a combination of royalties, of milestones and of course, of the work we will perform later on when it becomes commercial. Currently, most agreements are with customers in the U.S., in Israel, Canada, Netherlands and Spain, and we have deals in each of these 3 models today. With this recent announcement, we have basically qualified the cocoon platform towards clinical and commercial readiness. Nevertheless, no hallelujah, no euphoria. We still need to validate the concept with far more patients, and it is in our organization a kind of start-up, and we are not dreaming. We are not expecting revenues in the coming years. This is still in embryonic projects, a promising project, where there are still a long list of hurdles in front of us before it's becoming a highly sustainable business. With this, I am opening the coffee break already because I think you need a rest now from all these descriptions. We take half an hour coffee break and then we come back to that room for more black box opening. Thank you.

Ladies and Gentlemen, please hold the line. The conference will start shortly. [Operator Instructions] [Break]

[Foreign Language] Of course, we want to teach you about the business, about the quality of the business, about the issues and the chances. And -- but it may sound maybe like a scholar, is not the intention, we really want to be as transparent as we can with you because I also believed that in the past, we were to some extent, unfair with you, and the box was a bit too gray, not to say black. So we are through with a wonderful business unit, 13 within 1 hour. I would like to spend some time on a few short but very important topics, and I start with end-to-end offerings. It's a bit of repetition of what I said before, but I would like to emphasize this point here. You may still have the impression that Lonza is a CDMO player, we are rather after the IND hurdle. So we are rather a drug substance, drug product actor. Indeed, and I want to stress that, we have a very strong presence in the early development stage right after discovery, allowing us to build a strong pipeline of projects to support our organic revenue growth in the future. This should not be estimated, and this is not only valid for licensing, this is valid for, basically, most of the key business unit. We are in the market at the right place, at the right moment, right after discovery. And I would like to give you an example of how it works, and it's an example of an integration of the activities of basically 3 manufacturing sites, which correspond also to 3 different business units. And this example shows how well capabilities and assets are integrated across 3 different sites, Cambridge, Slough and Basel, to satisfy the customer needs. The collaboration we did, our network successfully support our customers from early gene sequence analysis to drug products formulation and I summarize it now. The journey start in Cambridge where the genes analysis from our customers take place. The recommendation based on this gene analysis move to Slough, where this host cell would be produced and the multiplication will take place. And in between the Drug Product Services will be active with its know-how to facilitate the development of the final drug. Without these 3 business units, without these 3 assets, without these 3 know-how, we would be unable to follow the molecule from gene to drug product. And this sounds very simple here. And now without going to the details, I want to give you a detailed view of how it works. Next slide, please. This is basically the integration where the different steps, the different activities and the integration of these 3 business units and 3 sites to satisfy the need of our customers. Again, the complexity is huge, and the journey is long. This is what we want to demonstrate here without going to details. I would be unable to explain most of these individual steps, but they are necessary, otherwise, you are not achieving your goal and objectives. Again, highly complex journey. We have broad capabilities and we have the expertise and the assets to satisfy the need of our customers. We are not only after the IND, we are strong before the IND phase. You have seen before that we are quite ambitious. We -- in all -- with all business units, we intend to outperform the market. We want double-digit growth rates. Now how can we also support its strong pipeline building is the next topic. Over the course of this year, we also acquired new businesses, new customers and new projects across the modalities that will all support our anticipated double-digit growth rates in the future. Contracted business is up double-digit in Biologic and Small Molecules, high-growth rates of new customers acquisition, combined with the long list of new projects, give us confidence in the future. We are, of course, and I have to say it, at one point in time, we are assuming no major disruptions in the biopharma industry as well as no irrational economic and political development at the horizon. If this is not happening, we feel very confident with what we said so far that we will be able to deliver this wonderful growth rates with the margins. So therefore, we'll introduce soon. Investment projects between 2020 and 2023, this is an overview, a selection of CapEx projects, which are going now, which are on. In Visp, we have the Ibex initiatives. On top of that, we're expanding our capacity for small molecules, we are expanding the capacity for bioconjugation, we're expanding for Microbial and, of course, we start manufacturing the drug substance for the mRNA vaccine candidates. Only in this, basically, we invest in all modalities we have invested to satisfy the future growth rates. Basel / Stein, Drug Product Services being at 20%, market growing at 7% to 8%, we need more capacities we are investing. Cell and Gene, this is a very growth area, and we will be certainly obliged every single year to add CapEx, to add suites, to satisfy the demand. So we are expanding in Netherlands. In Portsmouth, we are adding mid-scale capacities, 6K. And of course, we have also one manufacturing line for the drug substance for the mRNA vaccine. Singapore, we're also expanding our lab services. In Houston, our largest site for Cell and Gene, we need additional suites. We will be certainly investing year-by-year in few new suites to satisfy the demand. In Hayward, this is more slow. We are running the clinical phase. We are adding capacity as well. We are building a new site in China. We are adding capacities in Greenwood. This is for Capsules. We are increasing small scale capacity -- small molecule capacity in China, and also in many sites, we're adding capacities for Capsules. I said it before, we have a capacity for 230 billion Capsules a year. We are sold out, and we will add next year around 13 billion additional capacities for the Capsules business. This cost a lot of money. So therefore, now it's your turn to explain how we are going to add on this high CapEx, please.

So good afternoon. Good morning from my side. With the new Lonza, of course, comes new external reporting, very importantly as well, a new guidance. I'll first cover reporting. But before we go there, let's talk about the principles. So we heard the feedback from all of you, investors and analysts, and Albert mentioned it already. We want more transparency. The first, very important principle, we increased granularity in our pharma reporting going forward. And we changed other reporting metrics. So first of all, we reduced the number of adjusted performance metrics. We eliminate CORE EBIT, CORE RONOA to really focus on the important ones. We increased thresholds for CORE adjustments. Of course, the new reporting will follow the divisional structure. And with these additional details, we will provide more qualitative informations that you can better interpret the results. So these are the principles, and then we go into what you can expect and Albert described in detail the different business models for our new divisions. And we believe that from a financial point of view, we can well characterize each of the divisions with sales in reported currency, in constant currency, with EBITDA and, of course, EBITDA margin in CapEx. Now net working capital movements, other cash flow movements they have -- they show quite some noise at a division level. So we believe we get a better picture at the group level. So we will report operating cash and cash at the group level. And similarly, for ROIC, which is a very important metric for us. Here, we see our divisions as a portfolio, and each of them at different stages of investment. So again, when you look at the overall feature, we believe ROIC at the group level, provides the right perspective. And last but not least, of course, financing, it has to be -- the picture has to be at the group level. Now in terms of the core adjusted performance metrics. As I mentioned before, if we go back to history, I believe, in 2011 also, we introduced these noncore adjustments. And these were related to typical topics like restructuring, amortization of acquisition-related intangibles and so forth. And what we have decided is to reduce the number of adjustments that we do, limited to the critical ones. So basically, it would be divestitures, acquisitions and divestiture-related costs, litigations, environmental provisions and major restructurings and major changes to pension plans. And the other important change is a threshold, the materiality level for each of these individual adjustments. In the past, it ranged, depending on the specific topic from 0.5 million to 10 million now we are raising the bar to 20 million per specific, let's say, topic. Now when you look at the history, what does this mean? We had, if we look at the recent history, a gap of around 150 basis points between reported and CORE. And of course, we want to reduce this gap as much as possible. With the new metrics, this gets reduced to -- by 70/30 basis points. And I think very importantly, also the level of sustained performance that we have as a company. Interestingly, when you see the new APMs with the new thresholds, if we would apply this theoretically to the H1 2020 results, the CORE and the reported numbers pretty much converge. And again, we will apply all of this. We said we do it post LSI carve-out. So this will be implemented in the reporting of next year. Now this gives you a first glimpse at the new Lonza, and these are indicative figures. And they are calculated in a simple way. We take the LSI, subtract it from the Lonza Group, and we get the new Lonza. There's no surprise, right? It's accretive from a growth point of view and from a margin point of view. And then when we look at the different lines here, we see that CapEx, of course, is higher. It's 16% for the new Lonza compared to 13% for the Lonza Group as we reported in 2019. And of course, this is related to the higher investment needs of our pharma business, and I get to that a little bit later. ROIC is a touch lower? I mean, I would say, almost in line. And here, the important point is the expectation for acceleration of our ROIC definitely remains. So higher growth margin accretion. And very importantly, if we go to the next slide, the company remains very strong from a cash flow generation point of view. And here, we can think about, first of all, what are our priorities for capital allocation, they remain the same. First, investments in organic growth projects, then potential bolt-on acquisitions and then dividends. Again, this is under the, let's say, current cash flow generation from the new Lonza. And the other very important point, when we look at our cash flow capabilities, and we look at our projections, we're completely convinced and we're completely comfortable, we remain a solid investment-grade rating. So this remains a key priority for us. Now INDs, this section of the presentation with what should you expect? And coming 2021, we will report 2020 still with the current structure, so LPBN as a segment. And we will start operating with the new division structure in 2021. So the first time we will report under the new structure will be half-year 2021. Now of course, in order for all of you to get more details on divisional numbers, we will try to provide a pro forma 2020 with all the additional level of granularity I described before. And we will try to have this available before we report the half-year results. So this would be mainly on timing. I know -- I'm sure everyone will be thinking, why don't we get them earlier, but believe me, it's not so simple. And I confirmed this with my team before sharing it today to get all this information, let's say, precisely calculate and report it, is quite an undertaking. So this is about the new reporting and then in terms of expectations when you will get the new reporting. Now I move to the topic of guidance. Now before we get into the guidance, let me provide a complementary perspective to what Albert presented. And this is the financial models within the new Lonza. I can say we basically have 3 models. We have the Commercial CDMO, the Clinical CDMO and the Product Business. Let me go through the different lines, and we have discussed this with all of you in different occasions. The first important line is revenue visibility. And in the Commercial CDMO business, we have visibility ranging from 5 to 10 years, depending on the modality. In Clinical, it can go up to 2 years, right? Depending on the program. But of course, in Clinical, the moment you have -- you don't miss -- you miss a milestone. Of course, typically that specific clinical program terminates. And then on Product, even though we do have a lot of stickiness in our business like Capsule business and Bioscience, we covered that earlier -- or Albert covered that earlier. The level of visibility is definitely less than a year. I'll briefly touch on a topic because as we report under the new structure, it's important to keep it in mind, what is -- what are some important considerations, this is not all the considerations, very important considerations on revenue recognition. On the Commercial, manufacturing is a batch release. In Clinical, depends, if it's manufacturing, if it's a batch release. If it's services, is delivery of services and then on Product, it's delivery of the product. Then why is this important? And why do I mention it? Because what we often see in the contract -- commercial contract manufacturing businesses, we have a large campaign, right? And then if the release gets delayed by a few days, and it's just falling in a half year on a full-year period, it has impact in the reporting of the numbers. But of course, this goes together with the qualitative statements. Now let me get into the more financial levers by each of our financial models. So first is very important, when we think about the new Lonza, the operating leverage compared to many on the industries is already very high. So here, we're talking a company overall, which has a high level of operating leverage. Now these are different degrees within already, what I say, a very favorable situation. In the Commercial manufacturing, it's a bit higher, meaning you have a bigger proportion of fixed costs as a percentage of your total fixed cost structure. And Clinical and business is a little bit less. Now when it comes to CapEx, there is a full gradient of possibilities. Commercial is more CapEx intensive, Clinical is in the middle, and Product Business is on the lower end, right? And with CapEx comes OpEx, right? You need to man, ramp up facilities, you know that, and that impacts our P&L. And the final part of the slide just shows, again, and we go back a little bit to the report. In terms of variability of results, you could say, well, there should be low variability of results, but given the visibility, but as I said, given considerations of revenue recognition, given considerations of timings, of CapEx and OpEx investments, you do not necessarily always have an absolutely, let's say, regular pattern of performance. I mean when you take it over a year, it works like that, it's more related to periodic performance of the different divisions. Now we get into the interesting part, and this relates to the guidance. But before I get to the guidance, I would like to summarize a baseline, and we're using as a baseline, a glimpse of H1 2020 results. Now these are approximative figures, again, when we publish the final numbers, you'll see they are quite close. But again, we're approximating the numbers. So here, you see the sale split. I don't go through each of the numbers. All of you in the room are very numerically savvy. I'm sure you add up. You say it doesn't up to 100. And the missing slide, 5% is related to licensing that will go together with Biologics. But we would like to guide for Biologics, excluding licensing, and that's why we present the baseline in such a way. Now we go into the interesting slide. This is the guidance. So we take the foundation of, let's say, the full-year 2020, right? We gave you a reference point. And here, we see the different guidance for the divisions. So we start with Capsugel -- sorry, Capsules and Health Ingredients. And here, we say the growth is low to mid-single digits in terms of sales in a sustained level of margin. You remember from the prior slide, 35%, so a very high level of margin already. Then we say it's sustained. In Small Molecules it's high single-digit to low double-digit sales growth. And then we start from a baseline of 25% margin. And here, we say it's an improvement that we expect to see. Biologics, low double digit, and again, from a baseline of 35%, and it's an improvement. And I get to the last bucket here, this is a combination Cell and Gene and Bioscience. You saw the numbers from Albert. The growth we expect in Cell & Gene Therapy is 20% to 25%. So quite a strong level of growth. Bioscience, 10% to 12%. So the combination of these two, we describe here as double digit. And then in terms of the margin performance, in Bioscience, we start from a reasonable level of margin and we say improve, right? And then in Cell & Gene Therapy, we start from an investment phase. And here, we say definitely a step improve, right? And the combination of the 2 is this arrow with a relatively steep slope, and we would qualify this verbally as we need step improvement in profitability, of course, driven by the high-growth rate in Cell & Gene Therapy from a sales point of view and the need to go from an investment phase to a higher -- much higher level of profitability. This brings me to the last slide in my presentation and is the guidance, right? And of course, the famous 2022 midterm guidance comes to mind, right? This was for the Group. Now we're talking going forward in new Lonza. And then the immediate reference point is when we think of the old midterm guidance, we talked about the LPBN segment growing sales, high single digit, and we talked about margin, 30% plus, right? So we can relate to that. In a way we're talking now the guidance for the new Lonza, basically, is the old LPBN segment plus LHO. And here, the guidance -- and we're talking 2020 to 2023, in terms of sales growth, we see an average growth rate double-digit over this period of time. And then a trajectory that gets us to a core EBITDA margin of around 33% to 35% by year 2023 and double-digit ROIC by the year 2023 as well. And I think the other important point is here too is a trade-off between margin acceleration in the short-term and long-term sustained sales growth. And so we're reaching or trying to reach the right balance and if you would just make a quick comparison between what we communicated before and what we are communicating right now, we are providing stronger growth guidance, right? And when it comes to the margin, you could say this is a year delay compared to what we communicated before. And here, one important point is we're saying the level of CapEx investment in the coming years, meaning '21 and '22, will remain more or less at the level of 2019. And again, this is to capture growth opportunities, and these growth opportunities we have said before typically are opportunities with very high rates of return, above 20%, clearly above 20%. Low levels of risk because in many cases, the sales projections had already been secured with commercial contracts. And so we believe this is the right balance to maximize the overall value for the company. So let me close here. I can summarize it in a couple of words or sentences. We are now providing the desired increased granularity, not only in the reporting, but in the guidance. And this is a reflection of increased confidence not only in the overall strong performance we see for the company, but in the individual strong performance for the different divisions. So I close with that, and I hand it over to Albert for the last section of our presentation.

So all topics are important. They are all very important, but the next one is extremely important for me. Victories of the culture. Culture, cultural fit, values are non negotiable. The people who shape an organization determine the kind of culture it has and the culture of the organization will determine the kind of people fit in. A successful organization has both great people and great culture. And this is extremely important because great people will attract great people who will continue to lift the bar, the level of excellence in the organization. A musician performing in an orchestra thinks, feels, breathes with their fellow musicians. They do this without sacrificing the individual talent to the collective sound. The company culture we want at Lonza is like this orchestra. We must develop our capacity to accept and express the diversity of different thoughts and views. At the same time, we must harmonize these varying thoughts and views to build the path to collective success. We are not yet there, but we have now the ambition. In order to have a great culture, one cannot compromise the uncompromisable. The following attributes are not negotiable. We don't want kingdoms and sallows, but a collective contribution to the whole, without one blame and divisiveness, but responsibility and accountability. We don't want confusion, we want focus and clarity. Integrity is critical. It is about trust, truth, honesty and acting in a way that is right for the business and not for the individual. Finally, we must stand for openness, passion and discipline. There cannot be a great culture without great leaders. And to me, great leaders are people who do a few things exceptionally well. First, they set a clear direction or a magnetic north for the business to follow, and they ensure that everyone knows and understand what the business wants to achieve; second, they are able to extract the best from their people around them by motivating and trusting them and by delegating; third, good leaders set the right example for others to follow. Finally, great leaders are also calm under fire, resilient, creative, down to earth, courageous and bind their organization together. Conclusion, we are participating in a very resilient and biotech industry, Pharma & Biotech industry. As a key technological partner we bring in all the know-how and assets for the development and manufacturing of a new drug, and our role is undisputed. We are competing on reputation, quality and reliability cost as well, but these 3 attributes: reputation, quality and reliability are the most important. And our customers have every necessity to choose a CDMO partner with an outstanding track record and an end-to-end offering. What really matters is in an organization is the quality of the interaction. Having smart and highly educated people is important. But if they don't collaborate, if they are not aligned, they will not bring the expected performance, and the group will not win. The group culture is one of the most powerful forces in any organization, a culture where people don't manage their old status, but common goals. Finally, I would like to share 3 priorities for the business as we move forward: First, dedicated efforts to complete the transformation to the new structure. Currently, we are on track to commence operations in the new design from January 2021; second, Pierre-Alain and I share a personal obligation to deliver smooth and seamless handover of leadership. We will both be working as a unit together to ensure a comprehensive onboarding process in the coming weeks. My third and final point is also the most important. Today, we draw a line in the sand. We no longer talk about the business of 2 segments, operating in 2 industries. Lonza is now a single business with a clear identity, operating in a single industry. We are the global development and manufacturing partner of choice in the Pharma & Biotech industry. And our business purpose is very simple. We design and deliver technologies to enable a healthy world. Many thanks for your time and for your attention. We can start the Q&A session.

[Operator Instructions]

Okay. One can see management is down to earth. [Foreign Language] 2 questions, if I may. The first one...

One question after the other please.

Of course. The first one, I mean, you have shown quite impressive growth ambitions in most of the business lines, with one exception, I would say, the Capsules business. This business you acquired 4 years ago. And if I remember back in the days, the business has grown, yes, about a 5% to 6%, and now you guide for 3% to 4%. Can you change it little -- or say a little bit what has changed here in the underlying assumptions that this business is now probably going to be the slowest growing business within Lonza?

Well, first of all, we are still -- we still have the ambition to grow faster than the market, best first answer. Secondly, we want to maintain high margins in a market environment where our competitors are trying to gain market share on prices. So the combination was growing faster than the market with maintaining high margins is excellent. And thirdly, I said it, it was not maybe evident. Today, we are sold out. So we can grow faster because we are missing capacities. We will be investing next year around CHF 80 million to CHF 85 million to add 30 billion of Capsules capacity. So it's why we've been a bit conservative because we are restrained in our ambition to grow faster, we are missing the capacity. But I repeat, the combination for me growing faster than the market, maintaining high margins in a highly compete environment is good results.

Okay. And the second one the Drug Products Business and Biologics. I mean, one of the key priorities you mentioned is you want to go into commercial aspects of that business. Can you elaborate a little bit on how you intend to do that? You acquired the site from Novartis. You entered the business 4 years ago. But just for Clinical, how...

Very simple. If you take our value chain and as I've been insisting, making sure you understand we start right after discovery, we have everything till the end except commercial, fill and finish. And there are 2 possibilities to fill in this hole is a greenfield plant. We do it ourselves, or we find the best flower and we buy the best flower. We are considering both what ideally we would like to own today this fill and finish commercial capabilities. And now if you want to buy where can you buy? There are a few individual or a few pure players. Otherwise, you have to buy the fill and finish capacities and capabilities from a large pharma company. And today, let's be fair, I want to make the big picture because of COVID, fill and finish capacities are sold out worldwide because of the extra future demand, which have been reserved by the vaccine candidate developers, where we are. Said differently, it's not easy to find the best flower. Can't be more precise, but we will love to have it in our -- on our table -- in our garden. Yes.

[ Helena Jolie ] , UBP. You mentioned on Microbials that you have the full line exclusively at Visp. And I was wondering where the -- were this area to grow further? That would be an opportunity to have another line somewhere else? And what is the rationale other than saying we got it all there, and to keep it all at Visp? And is there not also risk of having it only in one location?

Yes. First of all, we started with Microbial in Visp. We developed the business out of Visp. So far, we have been able to manage the worldwide global business out of Visp, where we have the resources, where we have the scale, where we have the know-how. And for the time being, we don't see the need. We don't see the need to open a new Microbial fermentation site outside of Visp. We want to focus and to centralize where we have the capacities and the know-how.

Just in the press release, you mentioned that Biologics and Small Molecules, this year are up high double-digit -- I mean high double-digit is certainly not 50%, but can you quantify that a bit?

You want to comment?

So can you just clarify the question? You say in the press release, but you relate to this year?

To 2020. You mentioned.

Well, what we been...

I'm sorry, I give you difficult one.

No, no. Look, two comments. I think in the press release, you mean today in the morning? We don't talk about...

You mentioned the contracted business is up high double-digits versus 2019.

Yes. But I think what we're talking about in the press release is the pipeline, right? Mainly, I think...

I'm surprised with the statement of the question. But...

Yes, because, look, I think in the press release, the nature of the press release today is to summarize what we have presented today, clearly. And so it's about providing a baseline, right? It's about providing guidance. And then there is a slide that Albert presented building the pipeline for the future, right? And here, it's important to understand how our business works. We build the pipeline and a pipeline, not necessarily translate immediately into revenue. So for example, like a customer comes to us and says, look, I would like to contract this commercial product. And then we start planning for it, and the revenue would materialize, call it, in 2 years or in 1 year or whatever. And so what the statement -- I'm sorry, I'm interpreting what you're saying based on what I know of the press release. What we're saying is we have increased significantly our pipeline in all our commercial modalities. And this is very positive, right, because this pipeline is an inventory, if you want to think about it like that, of future revenue that we would have in the future. Also the H1 numbers, I could comment, but I would prefer not to comment today on financial results that we did back in July.

Sure. And on the CapEx guidance, just to be very sure, you talked about '21, '22 is to remain at '19 levels. You talked about the future Lonza.

Correct.

The 695, not the 800.

No, correct. So the way I think about -- the way to think about it, to make it easier is, in terms of percentage of sales. And so what we've seen, we said in 2020 will be similar to 2019, right? And so we make the change here '19 for the new Lonza is around 16% Capex, right? And therefore, we say '20 to '22, the level of CapEx will be 16% plus. That's how I would describe it.

So a bit higher than the CHF 700 million because top line is growing?

Correct.

And the last question, your ambition for Cell and Gene to grow 20% to 25% is quite eye catching. It's one of the faster-growing segments where you are not that significantly above the market compared to Mammalian, Microbial, Small Molecules. Is that because the competitors are also tougher there, or?

If you take our Cell & Gene Therapy business portfolio, all in all, the Autologous, the Allogenic, the Viral Vector, we are on a worldwide basis, we are the largest player. And I mentioned, don't underestimate, I mentioned in my presentation, we have 1,000 persons dedicated to Cell & Gene Therapy. It gives us an idea of the size and the import of that business, and we are growing faster than the market at high double-digit growth rates. And this is what we have been able to achieve in the past. There are no reason why we can't continue on this path. So we feel confident with that.

No, no. I mean, it's great but...

Don't underestimate the know-how and the salaries business today.

I appreciate it, but is the competition there tougher versus in the other fields or?

There are new competitors, which came in through acquisitions, ThermoFisher and Catalent. And the competition is tough, but I wouldn't say it's tougher than the others. It's just as it is. I mean, if Brammer spent CHF 1.7 billion in the acquisition of ThermoFisher. And Brammer, of course, they have won businesses. They need to access the business. So yes, it's tough, but not more and less than the others. There is a question, yes.

Patrick Rafaisz, UBS. Three questions, if I can, please. The first is a follow-up on CapEx. Are you still sticking to your message that $1 of investment yields, $1 of revenue, 5 to 7 years down the road. So the new CapEx you've been talking about now are actually incremental to what we have previously.

Rule of thumb, yes.

Okay. And then the second question, you talked about biosimilars potentially taking up a lot of volumes in terms of capacity. Are you tempted to maybe change your approach here?

No. If we are the producer of choice for a pharma company like Roche for 1 medicine, we will never, in parallel be the producer of a biosimilar, no way. This is excluded out of our ethics and business portfolio. No way. We will not do it.

But if you're not the producer?

We are not the producer, we will consider it, of course, assuming we have the capacity. Yes.

Okay. Understood. And then the third question is on your Mammalian offering, and you start right after discovery phase, as you explained, right? And there is especially one competitor who emphasizes very much the importance of the discovery phase to build the future pipeline. Is that something you might be looking at filling at one point in the value chain discovery services?

As long as I maybe and will be the Chairman, we will not become a discovery company. This is left to the big pharma. This is left to the start-ups, and this is left to research institutes. We are not in this cruel world as we are not in the the commercialization of final drugs with this brand, no way. We stick where we are CDMO player and no discovery, research, basic research activities. We have already enough on our plate. Other questions from the room? No? Yes. One, Daniel is close to you.

Okay. Do you have any plans for the use of proceeds when and if you sell LSI? Let's say, by Q1 next year.

No, we have not yet finalized the discussion at the Board level, what we intend, what we want to do the proceeds, so I can't answer today. It's on the agenda of the Board, but no answers for today otherwise, it would be too speculation and never good. So I can't answer.

And second question, if I may. Are there any manufacturing bottlenecks in terms of the production steps for your efforts in this -- in the vaccination projects you have at the moment?

What -- can you repeat the question, sorry?

Is there any -- are there any bottlenecks in the manufacturing suppliers or partners you need to work with as far as the vaccination of project?

For the time being, we are almost aligned with our original plan and the original plans were to have the first batch of block substance in October this year, which should take place by end of this month, which means we have been able to have access to the equipment and other raw materials. And in this, we said we want to be able to produce. The original plan was in January, and now we intend to produce the first batch in December, which means we have access to all the necessary equipment and also raw materials. I'm not saying it was easy, but I'm saying we have it in place now.

Or -- yes, for the first batch, but looking at volume production, I mean you feel optimistic on that?

Well, we feel optimistic that we have the production lines. They have been installed. They're with the ramp-up. And during the ramp-up, you have always surprised us, positive and negative. So it's too early to say when we will be able to produce full speed at full capacity in these 2 sites. But as of today, we are aligned with the plan for the first important batch. Other questions? If this is not the case, we take the question from the phone line. Okay?

The first question from the phone comes from Richard Vosser from JPMorgan.

I've got 3, I'll ask them one at a time. So just in terms of the Alzheimer's opportunity that you alluded to and mentioned, could you give us some idea of how you have baked in that opportunity into your numbers? Is there a direct opportunity for Lonza? Or should we think about that more as a market opportunity that keeps supply very -- or supply-demand balance very, very tight, therefore, helping pricing?

Well, the demand, as we said today, the demand across the modalities is high. The outsourcing demand is growing from the big pharma as well as from small start up. We don't have this capabilities, and we don't see a weakness, a weakening in these trends. The only -- for me, one of the key questions will be or maybe that will the future COVID-19 vaccine eat up some capacities. So adding access to capacities today needed for different pharmaceuticals, would that be maybe allocated to the COVID-19 vaccine, maybe that I don't know. What we can say on that, of course, there is a kind of risk to have access to key raw materials. Because there are some allocations taking place again because this extra demand linked to the vaccine and also the pre reservation of capacities and of raw materials to be able to manufacture these vaccines, assuming that became -- that become registered.

Excellent. Second question is just a follow-up from the last question on the COVID-19 mRNA vaccine ramp up. Just thinking about that ramp up. I understand you will have the production lines in place. Those production lines will have a certain capacity per month to be run. How should we think about that ramp through 2021?

So every single manufacturing should have, in the ideal case, annual capacity of 100 million doses. Now hopefully, the ramp-up goes smoothly. And as of February, March next year, latest, we can run these 4 manufacturing lines at full capacity without problems. But I repeat it, the ramp-up is in difficult exercise, and you have no indication how, when or how badly it may take place. We've the experience, we're experts. Nevertheless, they were unknown. But we hope that by February, we can run these manufacturing lines correctly and smoothly. This is not a statement. This is the hope.

And then final question, please. Just on the -- you mentioned sort of maybe impacts from bumps in the road. Just thinking about impacts on clinical trials from COVID-19. We may have addressed this on the second quarter call. But just are you seeing any -- as we run through the COVID-19 pandemic, are you seeing any delays, slowdowns that we should think about that you've baked into your -- to the future or something we should think about?

You mean for Lonza?

For Lonza. Yes.

No, the answer is no.

Next question comes from James Quigley from Morgan Stanley.

It's James Quigley from Morgan Stanley. So first question is -- I've got 2. The first question is on the margin. So Rodolfo, you mentioned we're going into -- we're going to still be in a sort of a CapEx-intensive period for 2021 and 2022. And previously, with the margin progression, we're thinking flat margins in 2020, some improvement in '21 and then a big improvement in 2022 and you sort of suggested that improvement has been pushed out. So how should we think about that margin trajectory and progression now? So should we be thinking sort of similar? So almost flat next year, some margin progression in 2022 and then a big step-up in 2023. And then sort of related to that, what are the -- sort of the key factors that need to be in place to hit the 33% versus the 35%?

So first, James. First point, we, of course, cannot start giving guidance now by year because this is the topic of January 2021. So I think the objective today is to provide the trajectory. I mentioned also in one of the sections or I can mention it now, it's not a linear trajectory when we talk about margins. And here, I think the important point to keep in mind, it's this discretionary decision, which is, what is the level of investment in OpEx and CapEx on a given year. And depending the final numbers that we define for a given year, it has an immediate impact on the margin. So I know it's not a very granular answer. But otherwise, we start providing guidance by year, which is absolutely not the intention here.

Excellent. Okay, cool. And my second question is to -- Albert, you sort of touched upon the sort of risk of overcapacity. And obviously, at the moment, everybody's full up and everybody is building significantly. But let's suppose how much is the -- in the future? How much is sort of delaying overcapacity sort of dependent on COVID-19 and antibodies and also on Alzheimer's? Is it the case that with the current pipeline, do you see it sort of ex COVID, ex Alzheimer's the supply-demand dynamics should still be very favorable for Lonza? Or are you somewhat dependent on Alzheimer's and COVID before that sort of backflips?

Did you get the question or do you want...

Yes, yes. So I think the answer, Albert explained it during his presentation. I think in general, he showed the expected ramp-up in capacity. I think when he describes the -- let's say, the different market projections for the different business unit, if you do the math, you come to the conclusion that we still see a pretty, let's say, balanced situation between supply and demand in the coming years. Now as Albert mentioned, this is not rocket science, right? There will be years where we have less capacity than needed. We are leaving that in Lonza, at least. Where we see very interesting demand. And in some situations, we cannot fulfill it. I mean the Capsugel is an example, but we have others like that. And we have to accept that in some cases, there may be some overcapacity and the better players will gain market share, right, in these situations and maximize the use of capacity. I think in general, I mean, the plans we have, you made the reference to Alzheimer's is based on normal expected demand, based on the clinical pipeline that we see today. So it's not assuming scenarios where all of a sudden, you have exceptional approvals and leading to exceptional growth rates. Again, it was -- for us, it was difficult to get all the nuances from your question, but I think I covered the main points.

I just want to add one thing. I mean, we said before that the market will be adding around 2 million-plus little capacity in the next coming years and the fear that over capacities. If we take Alzheimer, just a small reality of Alzheimer. If Alzheimer comes, there will be a need between U.S.A., Japan and UECD (sic) [ OECD ] countries of around 30 metric tons of drug substance for this medicine, the first year, only for the first year and for part of the world. Now Biogen built a plant with a capacity of 150,000 liters. This capacity can produce only 8 metric tons of drug substance. So there is a gap, an immediate gap of 22 metric tons. And if you want to produce 22 metric tons of drug substance of Alzheimer medicine, you need at least additional 400,000 liters, which means that part of these 2 million liters added capacity will be already used for Alzheimer. At the beginning and only for the U.S.A., for Japan and for the 5 UECD -- OECD countries. So this is a scenario, if it comes, the capacity will be utilized very rapidly. But who knows? Who knows when asthma will be raged. I don't know. We don't know. It's impossible to predict that.

The next question comes from Jo Walton from Crdit Suisse.

I also have 3 questions. I'll ask them in turn. So the first question is about your operational expenses for expansion. In 2020, we had about CHF 160 million. As we think about adding your capacity, should we think about each year, having another bolus of this sort of expansional investment that comes with it?

Well, the operational expenses linked to CapEx grow with the development of the CapEx investments. So the first year, you have low operating expenses. Second, they're growing up and in years 3 and 4, when you are close to manufacturing, you have high operating CapEx because you're hiring and training the people. This half to look at that. And this year, in our plants, only in our plants, we will have a CapEx of roughly CHF 640 million, CHF 650 million and linked to this CapEx this year and the previous year, we have a OpEx of CHF 160 million. So again, you follow the OpEx linked to the -- this is a direct link with the the investment plan or the CapEx, growing with the years.

My second question is relating to the Moderna deal. You said that we wouldn't see much in the financials and that you were partly doing this for the greater good. Now I wonder if you can just help us as we look to model this, when should we look to see revenues and profits begin to come through? Would you expect it anything to show through next year? We're -- assuming that the vaccine comes good, you are going to be able to deliver batches clearly to Moderna. So if you could just explain that a little bit more, perhaps you could also tell us if you've had any or if you have any capacity to make any of the monoclonal antibody cocktails, which seem to be quite important for the greater good as well as vaccines.

So we have the intention and I look at Rodolfo. We have the intention to put into our business plan 2021 regarding COVID-19 and Moderna, sales of around CHF 110 million. This is what we think we will -- we can generate next year, and this will be put into the business plan. We are not willing to comment on the margin. But I repeat it, let's be clear. It's -- I've been very clear. We are not trying to optimize the margin. We see that exercise as being part of our obligation to help the society and we have no intention to optimize to the last penny, the margin. So it will be slightly dilutive. But for next year, I put CHF 110 million in our business plan.

And if I could ask a final question then on your Cell and Gene Therapy business, you tell us at the moment that this is essentially breakeven, and it's going to have a strong trajectory could you help us -- how many years you think it will take before this became an average margin business? Is this a 3-year opportunity, a 5-year opportunity or a 10-year opportunity?

Well, first of all, we are not at breakeven. The Cell and Gene Therapy business is still a loss business. And what we are saying since a few weeks and months as officially, we intend to achieve breakeven at first quarter 2021. And I'm not -- we are not going to speculate longer than this. Today it's a loss business. First quarter 2021 should be breakeven, and then we will see how we can further improve the margin of the business. But no further speculation for today.

If I may just push my luck. You mentioned that you weren't giving any guidance on the licensing business. But it's obviously an attractive way to get an annuity out of some of your fantastic intellectual property. Should we assume that your licensing revenue stays broadly flat then for your modeling purposes? Or should we assume that, that will grow?

Yes. I would -- if -- I would recommend you put between flat and GDP-type of growth. Don't underestimate. It takes, assuming we make a deal today, we signed a contract for royalties for a potential product. We will not get anything before 6, 7, 8 years, assuming this project is successful. I said it's a patient game. So put flat in between flat and GDP-type of growth, right? And then you have the answer to your question. A fair answer to your question.

The next question comes from Deng Xian from Berenberg.

I have 2, please. One after the other. The first one is you mentioned biologics, China will be one of the growth drivers, together with biosimilars and Alzheimer's. But on the other hand, China is operating in a very different...

Sorry to interrupt you. Can you start again? It is impossible to understand your question, sorry.

Sorry, can you hear me better now?

Yes. Yes, it seems to be better.

Yes. Okay. Sorry. So my question is -- so first one is in terms of biologics, you mentioned China would be one of the growth drivers together with biosimilars but on the other hand, China is operating under a very different set of regulations with lots of local players, for example, the PD-1 market is very different compared to the U.S. So I wonder -- just wondering if you could provide some insight on China strategy? Or do you see that as actually a differentiator compared to, for example, peers like Wuxi Biologics? Where Wuxi is dominating in China, where Lonza is mainly in developed market and both can grow healthily without too much overlap. Any comments would be great.

Yes, we don't like to talk too much about our competitors. We have respect for them. The key comment I would like to make on Wuxi is the following. We are the expert on large scale manufacturing, stainless steel, 20,000, 15,000. This expertise is not in the hands of Wuxi so far. So we are much better, much stronger than Wuxi with the large scales technologies, and the market today is rather looking after 20,000 type of capacities and know-how than 1,000 or 2,000. And we are benefiting from this trend because we have this know-how, and Wuxi may have it at one point in time, but they are mainly focused on small and mid-scale capacities. This is the main distinction between the 2. And of course, the other one, they are Chinese-based and we are European and U.S.-based, so it makes some difference. They have a better access of the Chinese customer, and we've a better access to European and American customers than Wuxi. This is what I would like to say between the main differences between the 2 without going into unnecessary details here.

Understood. That's very helpful. If I may follow-up, kind of -- well, kind of touch on that. The next question is, you mentioned more capacity expansion is under discussion and decisions to follow [ Fluence. Just wondering if you could provide any color or insight into kind of thought in terms of scale do you see the majority being single-use, a lot of single useful clinical programs? Or as you said, you see a lot of demand from these 20,000 large-scale fermenters? And any sort of difference in comments on dynamics in -- if different dynamics growth trends in those 2 different type of programs, that would be great.

Well, I'm not sure I got the question correctly, what I would like to say, preclinical and clinical, this is mainly small-to-medium-scale activities. And once you are commercial, you want, of course, the stainless steel, you want the stable process and you want to use the 20,000, 15,000, is my answer. Again, preclinical, clinical, rather small, mid-scale, what is commercial you want and you need the efficiency of 20,000, 15,000 installation.

Next question comes from KC Arikatla from Goldman Sachs.

I have 3, please. I'll go one by one. The first one, you mentioned that 70% and 65% of your Mammalian and Microbial sales come from commercial assets. How do you expect this product mix to look like in 2023, please? Given your focus on increasing contribution from clinical assets.

You cannot change this sales distribution overnight. This is a patient work and as expected in 2022, 2023 the sales split will not be significantly different, maybe 1 or 2 basis points here and there, but the future will be stable. And by the way, I said it, this is a very good sales distribution. We have a high stable business, high visibility, we can plan on manual capacity utilization. And then we have this nice 30% preclinical-clinical. So it's a good split, and it will not change so rapidly in the near future. This is impossible.

Got it. And the second one, you mentioned about being at peak capacity utilization currently, given the increased demand. Can you give us a rough sense of how capacity utilization will look like in 2023 or 2024 place?

Which capacity, sorry.

Your capacity utilization, you're close to 100% currently.

Today, we say, when you run a business of biologics and 90% capacitization, it means you are running at full capacity. You have no flexibility to bring in to add new customers and new projects. So we're running at full capacity. We have 2090, we go through 330. Simply, we will be running as well at capacity with this new installed capacities. What does it mean? And we said it this afternoon, there was a slide. We said we are planning. We're evaluating additional capacities, and the decision will be taken very shortly. So if we want to capture the market development, we need new capacities, and we will invest in these new capacities. In 2020, we will be more or less sold out for the next year as well.

And my final question -- the final one, I'll push my luck on the Moderna one. Appreciate your comment on 2021 sales contribution. Are you able to provide any color on how many doses you expect to sell in 2021? Is that the entirety of 400 million, please?

All depends on how fast we would be able to run these 4 manufacturing at full capacity, and I don't want to commit to any numbers today. I don't know. It's clear, the sooner we can run at full capacity, the better. If it is in January and February, I don't know. We can certainly give you more data next year. Some are equal to one, but not today, this would be pure speculation, and it will be wrong. We would give growing information to an important information for the market and for the society.

The next question comes from Peter Welford from Jefferies.

I've got 3 questions. I'll ask them one by one as it is requested. So let me start with Ibex, please. I wanted to go back to the comments you made with regards to the contract. I understand your comments on the Sanofi JV facility. But just with regards to the major -- the building 1, the large building. Can you just go back and give us an outline for the dedicate part, which I think is the bulk of that facility, how we should think about that sort of 3 quarters, I guess, in the building coming on stream over the next -- course of the next, I guess, a year or 2 or 3? Just to help us think about how we should think about the cadence of those various suites coming online. When you think about, I guess, it being contracted for the next 2 years, what sort of proportion of the building does that represent that's now contracted?

So the Ibex building 1 has 2 wings, wing number 1 for the so-called design and develop. And the capacity in this wing number 1 has been contracted for the next 2 years. The wing 2 is the Ibex dedicate, so for mainly mono plant and this capacity has been reserved for the future. But as we have to install the equipment in the wing 2. There will be no sales coming from the wing 2 in 2021. The sales generating the wing 2 will come in 2022 and not before. Well as of next year, we will generate sales and margins from the wing number 1. Is that clear? Wing number 1, design and develop. Full capacity has been contracted. Sales will be generated next year. In the wing number 2, we still have to install the equipment to use this wing number 2 and sales will be generated only as of 2022. But we have 3 large contracts signed for the wing number 2, and we are negotiating another large contract in this wing 2. So basically, the capacities has already been reserved. And in the JV, 50-50 with Sanofi. We start producing in Q4. And our capacity, which is 50% of the total capacity has already been contracted.

And that brings another question. Just with regards to plans for building, I guess, we'll call it, building 3. Is there yet a confirmed commitment made to invest in building -- another building in Ibex?

No comments on building 2 or 3, nothing has been decided.

Okay. And then the second question, sorry, on just Cell and Gene Therapy. I wonder if you can comment a little bit there with regards to the cocoon system in terms of -- is Cocoon something that's part of a lot of your existing customer contracts at all? Or is this -- I guess, I'm just thinking longer term, it seems as though the shift to Cocoon is obviously a key part of the business in the future. But presumably, a lot of the existing products or any current product is going to have to be revalidated entirely on the Cocoon system. So I guess when we think about Cocoon, realistically generating revenues, I mean, presumably, this is still many, many years until a product based on Cocoon is likely to become a clinical or commercial reality.

Well, I can only repeat what I said to avoid confusing you. Cocoon is a start-up within the organization. It's a research project. We have been able to demonstrate that the concept works with his first patient treatment in Israel. I said it on purpose. It's in embryonic business. We need to prove it -- this concept with more patients. We have 3 embryonic business models and I don't know. We don't know today how much of revenues this free business model may generate in the future. I don't want and we can't speculate. But the sales will be marginal this year, will be marginal in 2022 and will still be marginal in 2023. We hope that at one point in time, this flat curve maybe developing very fast, steep growth. But again, I don't know when the concept must still be better demonstrated. But we've a fantastic tool to move from a highly cost-intensive manufacturing process, manual processing, autologous cell therapy to an automated one. This is fantastic. But not expect high sales, and we are not crying victory today anyway, still a long journey.

That was great. And then the final one...

We have one concept.

Understood. Very clear. Just a final question, a quick one, I think, for Rodolfo. Just to understand the other or I guess, the corporate EBIT line, which I think was about CHF 100 million in 2019. I guess, just thinking about new Lonza and thinking about sort of the margin and what that means, should we consider that sort of CHF 100 million or so corporate EBIT as a sort of rough -- consistent to get in the new Lonza? Or are there actually a lot of parts of corporate EBIT that perhaps go with LSI? Or how should we think about that going into the future?

So Peter, we're still in assessment phase for that. I don't -- I cannot give you a specific answer. I mean, in rough terms, yes, when you look at 2019, the level of let's say, overhead spending in corporate was around CHF 90 million. It was a bit inflated because we had almost CHF 20 million of costs associated with the carrot at the time. Then if you do the math, you could say, look, around 30% should normally go away, and we believe that around half of that would be around half of the 30%. So meaning 15% could trend up, let's call them as stranded costs. And given that certain functions cannot be fully scaled down.

The next question comes from Thomas Wrigglesworth from Citigroup.

I've just got 1 or few questions focused on returns. So when talking about double-digit return, could you give us some indication as to on new spends, the return on capital that you anticipate to achieve that full run rate?

Sorry, did you understand...

Yes. I think you must repeat your question, please. Sorry for that.

Sorry. So I'm just wondering what is your target return on capital on new projects? Give us a sense of achieving double-digit return on invested capital as you're in your 2020 to '23 targets?

Well, think I will -- I can only repeat what we said. I mean our target is double-digit return on invested capital, and this is what we want to achieve for the group. We don't want to go into more specific details, new projects, old projects maintenance CapEx. The group win will target a double-digit return on invested capital across the operations. And the CapEx will be between 16% and 18% of total sales in the coming years. This is what I can say...

Understood. I just -- I guess, in a way, you're in a CapEx-intensive phase of the business. I guess the shareholders probably more happy to see how loans are growing than delivering high returns. I'm just wondering how you thought about that in setting these targets.

Look, I mentioned it also in -- I mean, again, you look at different metrics, right? When we talk about the internal rate of return, these projects have as I mentioned, 20% plus and sometimes significantly above that. So it's a very attractive rate of return. When you look at the ROIC metric, of course, it's a little bit of a tricky metric because the question is, what year do you use in terms of the ROIC evaluation. If you use like ongoing years, the ROICs are several orders of magnitude higher than the double-digit growth, right, for a specific project, and that is what, as Albert said, lifts the ROIC up double digits. So I think it's easier to think about rate of return.

We have a follow-up question from Richard Vosser from JPMorgan.

One question, please. You mentioned that the Moderna vaccine sales in '21 in your planning could be CHF 110 million in terms of sales. Just how should we think about that within the context of the midterm targets? Is that within the midterm targets? Or is that upside to those?

No. This is included in the mid-term targets.

The next question is a follow-up question from KC Arikatla from Goldman Sachs.

My question has been answered.

We have 1 question for the room to bring some diversification. Or maybe your voice is strong enough? What do you think? Or we need the microphone for the colleagues on the phone here?

The next question from the phone comes from Jo Walton from Crdit Suisse.

Just a clarification, please. You've talked about deciding whether you're going to add more capacity or not a decision to be made shortly. Would that add to the capital expenditure that you were already talking about? Or have you already factored in additional capacity in that 16% or so?

It is included. There was another question from -- yes. Mr. [indiscernible]. We take maybe the last 2, 3 questions. Is that good or is wrong. Okay? Yes.

Regarding again, Moderna, you mentioned in your presentation that there were a lot of other therapies that were being explored in mRNA. And I was wondering whether you are totally focused on the vaccine at the moment? Or whether there are some discussions already in those new areas, which have started?

No, with Moderna -- on Moderna, on mRNA, we are today only focused on the vaccine candidate and not on the other therapies. It will come, but it is not the priority today. I mean I'll make one important point here. Why this focus on the mRNA vaccine. It's very important. There are as -- this is an hypothesis. This is not a statement. The hypothesis is that by end of the year, 2 vaccine candidate may be registered. This 2 vaccine candidate are 2 mRNA-based. It could be Moderna and Pfizer. Unfortunately, for the society, 2 vaccines based on the adenovirus are on hold. This is the vaccine of AstraZeneca, and this is a vaccine of Johnson & Johnson, which means on a short-term basis, there will be maybe only 2 vaccines, which will be registered by the FDA. And this is not enough, by the way. This is making life of the society very complicated. We were hoping that at least 4 to 5 vaccines will get the FDA approval as fast as possible. These 2 vaccines, Pfizer and Moderna, we will never be able to satisfy the total demand, no way. So world is getting complicated. We are in the poll position with Pfizer. We want to be successful not only because of the money of the margins, but we want to make a contribution to the society. I want to have a normal life as soon as possible. So it's why the focus is entirely on this vaccine. We must be successful. Because 2 strong vaccine candidates at the moment failed and there were consequences. If 2 vaccines are facing problem in the clinical phases with participants, the probability that the population may reject this vaccine is higher. So so far, with Moderna and Pfizer, we are in poll position with no problems so far, and it's very important. So we have no other choice to put all our efforts on this vaccine. Okay. If there are no more questions? No? Thank you very much. Thank you for your patience. And we hope that we opened the black box. It's maybe not as bright as you wish, but maybe it's at least moving into the right direction. Thank you for your patience and listening to us, to all these detailed information. Thank you very much.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.