Lonza Group AG (LONN) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Half Year Results 2026 Investor and Analyst Conference Call and Live Webcast. I am Sandra, the Chorus Call operator. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Wolfgang Wienand, CEO. Please go ahead, sir.

Yes. Thank you, Sandra, for the introduction, and thanks to all of you for joining our call today. Before we start the presentation, let me share with you our disclaimer regarding forward-looking statements made by us. This is also available in the online version of our presentation for you to download and read in your own time, I guess. Before we move to the details of our half year results, let's briefly look at the agenda that we prepared for you today. I will start with an overview of our H1 performance and some of the highlights from across our business. I will then hand over to Philippe, our CFO, who will take you through the financial results in detail. After that, I will return to provide an update on the performance of the individual business platforms and conclude with our outlook for the rest of the year. Following the presentation, we will take a short 2-minute break and return with a live video stream for our Q&A session. Let me start with the top line overview of our H1 performance. We delivered a strong performance across all three of our business platforms. All of this essentially spot on or even better than our expectations at the beginning of the year. This strong performance reflects the sustainable, robust demand for our offering. The depth of our customer relationships and the disciplined operational execution by our global One Lonza team. Together with some favorable phasing, these strengths taken together enabled us to deliver sales of CHF 3.4 billion and a CER sales growth of 16% compared to H1 2025. The core EBITDA reached CHF 1.2 billion, which represents a high margin of 34.8%, an increase of 4.4 percentage points versus H1 2025. Alongside the strong sales growth and further margin expansion in H1 2026, we improved our free cash flow by CHF 300 million compared to H1 and 2025. Based on this performance and our current H2 forecast, we are upgrading our full year core EBITDA margin outlook to 33% to 34% and reconfirm our expectation of 11% to 12% CER sales growth. As in previous years, our guidance remains rooted in a disciplined assessment of our business. Our track record of consistently delivering on and its times exceeding the promises we make to you gives us confidence in the upgraded outlook we are providing today. My takeaway as the CEO of Lonza, we have a tight control and very good visibility of our business at hand and how it will evolve over time. And we have a global team which efficiently translates over and over again, market opportunities and our customers' trust in Lonza into an attractive and very profitable business. Earlier in H1, we also marked an important strategic milestone for our company with the agreement to divest the [ Capsules ] and Health Ingredients business to Lonza. With this large divestment alongside the other recent divestments, we further executed the One Lonza strategy and have now completed our transformation into a pure play [indiscernible] at high pace. All this within less than 15 months after announcing our new strategy in late 2024. While H1 numbers as such are obviously an important proof point, in our case, a strong one, let me put them into perspective to how we see the full year performance evolving and how it relates to what you can expect from us in the years to come. Based on our upgraded 2026 outlook, we are convinced to eventually look at another strong year and another important step on our overall trajectory of strong profitable growth and significant value creation at Lonza year-over-year. All of this fully in line with our ambitious organic growth model of low teens annual CER top line growth on average over time at continuously expanding profitability and cash generation. My takeaway we continue to deliver on our promises and intend to continue to do so in the future. Now let's dive into our group's business and the overall operational performance in H1. The first half of 2026, we saw broad-based momentum across our businesses with all three business platforms delivering double-digit constant exchange rate sales growth at high profitability. This also meant a return to positive sales growth for specialized modalities as expected and communicated to you earlier, which reported 22.6% sales growth compared to H1 2025. In Integrated Biologics we have seen healthy momentum in our mammalian and drug product technology platforms. While delivering fully in line with our expectations, the business platform is lining up, among others, the large-scale commercial assets in [indiscernible] and [ Wakad ] as important drivers of future growth in the years to come. In advanced synthesis, exceptional growth has been driven by a combination of small molecules and bioconjugates and in specialized modalities, we have seen exceptional growth in microbial from a low prior year base alongside sustained healthy growth in BioScience and a strengthened operational performance in Cell & Gene. With our new operating model that we have introduced in April last year, we have further increased focus on quality, operational execution, productivity and cost discipline across our global network and across all three business platforms. The organization-wide effort to drive both top line and margins and improved cash generation is becoming increasingly embedded across One Lonza, and I am encouraged to see the first tangible results of these efforts already reflected in our H1 performance. This is another proof point for me that we are on track with our measures to deliver both elements of our longer-term organic growth model, which is not only attractive top line growth, but equally margin expansion, which will then more and more translate into attractive cash generation. Customer demand remained robust across technologies during H1. This was reflected as an example, and the extension of our strategic long-term collaboration with a leading U.S. biopharma company for a broad range of innovative clinical and commercial biologics. The agreement underlines continued high demand for our global biologics development and manufacturing services as well as our capability to deliver highly tailored and flexible solutions to meet specific customer needs. The ability to combine multiple sites, including all of our commercial scale U.S. sites and development services from across our global network within a single partnership highlights the strength of our unique One Lonza business model, which strongly differentiates us within the CDMO industry. In Specialized modalities, we have seen the approval of the six commercial Cell & Gene therapy in the Lonza network, further consolidating our position as the world's leading commercial manufacturer in this space. We continue to support sustained demand by investing in our growth, and this is reflected in our announcement of today of two new ADC-related projects. One, to expand our payload linker manufacturing capacities in [ FIS ] and another to further strengthen our commercial scale, ADC, fill-finish offering in Stein, both in Switzerland, more about these in a moment. These investments also support the continued expansion of our integrated offering across technologies, which sees growing interest as customers are looking for a single strategic partner that can support their programs from early-stage clinical development through to large-scale commercial supply and from drug substance to drug product. This end-to-end capability is further evolving as another key differentiator for Lonza and positions us strongly to support antibodies, bispecifics and ADCs and other bioconjugates throughout their life cycle. With our increasingly diversified offering, our deep, long-term customer partnerships and our broad and well-diversified geographical footprint, our business model is uniquely positioned to remain resilient and deliver profitable growth as the external environment evolves. Let me now provide an update on some of our key growth projects in some more detail. Across our network, we continue to make good progress in executing the investments that will support the next phase of growth for Lonza, and we are adding new ones to support future growth mid to long term. In Vacaville, the upgrade measures towards CDMO readiness continued to progress well. As communicated previously, already the five contracts signed by the time of our full year 2025 reporting in January this year are expected to offset the gradual reduction of Roche volumes through 2028, perceived attractiveness of the capacities and customer demand remain high, reinforcing our confidence in Vacaville starting to drive growth after 2028. And fully exploiting the site's capabilities and capacities in the early 2030s to maximize value creation for Lonza. Let me also briefly touch on our large-scale [ aseptic ] fill/finish facility in Stein. As customer needs continue to evolve, we have decided to further enhance the strategic scope of the facility by adding capabilities for high-value small molecule drug products alongside its original focus on biologics only. This will broaden the addressable market for us and will further strengthen the long-term attractiveness of the site. The additional capital requirements will be small, while the enhanced scope is expected to extend the time line to start operations in 2028. Turning to our newly announced investments on the right side of the slide, both in support of our integrated [ ADC ] offering. This area continues to attract strong customer interest given its high therapeutic and commercial potential. And fifth, we are building a set of multipurpose, highly potent payload linker suites, which are scheduled to commence ramp-up in 2029. We continue to see strong customer demand in this area, supporting our confidence in the long-term opportunity for this investment. In Stein, we are building a second commercial aseptic ADC filling line, which is due to commence ramp-up from 2030 onwards and already benefits from a major pharmaceutical company as an anchor customer and strategic partner. Both projects will reach peak sales by the mid-2030s at the latest. Alongside investing into growth in line with our new One Lonza strategy. In the first half of 2026, we also took the final step on our transformation journey to a pure play CDMO. We signed an agreement to divest the CHI business to Lone Star for an enterprise value of CHF 2.3 billion. The transaction is expected to close before year-end 2026. Within less than 2 years, we have systematically transformed our portfolio around the technologies and capabilities where we see the greatest opportunities for superior long-term value creation. As you can see on this slide, this transformation included four divestments of non-CDMO and noncore CDMO activities sharpening our focus on our three business platforms, integrated Biologics, advanced into this and specialized modalities. At the same time, we continued to embed our new One Lonza operating model across the company to ensure our organizational scalability and readiness for the significant growth in the years to come. Today, Lonza has a clear strategic direction and the portfolio fully aligned with our ambition as the global leader in the CDMO industry and the most trusted partner for the biopharmaceutical industry. While implementing our One Lonza strategy, we follow a highly disciplined approach to how we deploy our funds. Every growth investment, organic or inorganic, is assessed against our defined capital allocation framework. We have presented this before. However, let me briefly recap it here, considering its importance for our strategic decision-making process. As you will see, our first priority is to invest in maintenance, infrastructure and systems, ensuring that our base business remains robust, efficient and well positioned to reliably deliver value over time. Second, we are committed to a progressive dividend policy. This brings us to the discretionary cash that we have available for growth investments, both organic and inorganic. We remain highly disciplined when allocating capital to organic CapEx or bolt-on M&A guided by strict financial thresholds and our commitment to sustainable value creation. For such investments, we need a clear view on how our distinct CDMO business model can deliver value for our customers and that we can differentiate against competition through the Lonza engine is our unique sets of strength. In the absence of appropriate strategically and financially attractive growth opportunities, surplus capital would be returned to our shareholders. Until 2030, based on our organic growth model, we intend to invest more than CHF 7 billion in organic CapEx, with the majority of it dedicated to future growth. As said, these investments follow clear financial return criteria, namely an IRR of at least 15% and the ROIC at peak of at least 30%. For acquisitions, we will remain disciplined and committed to attractive financial returns to ensure shareholder value creation from a strong strategic fit and the potential to generate synergies. Now let's take a brief look at some analytics underpinning our confidence in Lonza's growth potential going forward. Across our technologies, we continue to see sustained demand for outsourcing. For example, demand for marine capacity continues to outpace supply. With recent geopolitical developments pharma and biotech customer demand for U.S. capacity has remained particularly high. and this is reflected in the sustained level of contracting for biometrics capacity at all our U.S. sites, namely [ Portsmouth ] and [indiscernible]. Looking ahead, we anticipate an increased regionalization of supply and demand, a trend that aligns well with Lonza's broad and well-diversified global network and our ability to support customers across key pharmaceutical markets. The sustained trend towards outsourcing across the biopharma industry, is reflected in the modest end based on our historic and forward-looking analysis unchanged CapEx to sales ratios of the largest pharmaceutical companies, which balanced out at around the 5% between 2015 and 2030. While the ratio has remained largely flat and look set to continue at the same level, there is greater interest in U.S. investments in the current geopolitical context likely at the expense of investments in other regions. As a result, we continue to see healthy momentum in strategic outsourcing across both large pharma and biotech customers and attractive opportunities across technologies and geographies. In this context, Lonza's continued focus on growth investments has remained attractive to both large pharma and small and medium biotech. This has helped us to maintain a largely balanced customer portfolio among the 2. In my regular exchanges with a number of key pharma customers, I have not seen any evidence of a fundamental shift in how they view their strategic partnerships with Lonza or outsourcing more generally. This reinforces our confidence in the resilience of the demand environment and our ability to deliver on our ambitious growth trajectory. Within our customer portfolio, I should also mention that we have a high weighting of long-standing strategic partnerships that, in multiple cases, spend decades. At the same time, we continue to maintain a strong presence in early-stage development, which supports future demand for our technologies and capacity. Overall, the fundamental drivers of outsourcing remain firmly in place. And we see Lonza very well positioned to continue to significantly benefit from these sustainable long-term industry trends. With this, I hand over to Philippe for him to take you through the details of our strong financials in H1 2026.

Thank you very much, Wolfgang. Good afternoon, and good morning to those of you joining from North America. Before we dive into the details of our half year 2026 financial performance, let me remind you that all figures relate to Lonza's continuing CDMO business, unless explicitly stated otherwise. This means they exclude the Capsules & Health Ingredients business, which is reported as discontinued operations. The half year 2025 financials have been restated accordingly and were published on June 23, 2026, to allow you to put today's results in perspective. Also, unless otherwise stated, sales growth figures are reported in constant exchange rates. Starting with an overview of our financial performance in H1 2026, and where Lonza delivered a strong performance with sales of CHF 3.4 billion and H1 weighted CER sales growth of 16%. Importantly, this growth was entirely organic, whereas the growth -- the strong growth reported in H1 2025 included the contribution from the [indiscernible] acquisition. In actual exchange rates, sales grew by 11.2% and reflecting an FX headwind of almost 5 percentage points versus H1 2025, mainly from the weaker U.S. dollar. This FX impact is expected to moderate significantly in H2 2026 as the U.S. dollar weakened primarily during the first half of '25, when it strengthened again more recently. For the year, we therefore expect an FX impact on growth of minus 2 to minus 3 percentage points. Core EBITDA increased to CHF 1.2 billion, representing a growth of 27.4% and versus H1 2025. This translated into a core EBITDA margin of 34.8%, up 4.4 percentage points versus last year. Our margin expansion was supported by the by operational execution, maturing growth projects and operating leverage, a favorable product mix and phasing further contributed to the margin uptick. This is also reflected in the continued improvement in our return on invested capital, ROIC, which increased by almost 3 percentage points to 13.2% in H1 2026 and versus H1 2025 on an annualized basis. This demonstrates that our stronger earnings performance is also increasingly translating into higher returns. The strong H1 performance provides the foundation for our upgraded 2026 core EBITDA margin outlook of 33% to 34% from our previous outlook of a core EBITDA margin above 32%. As Wolfgang already mentioned, this was a particularly strong first half, supported by a lower prior year base and favorable business phasing. Momentum remains positive and absolute sales growth will continue in H2. We expect a lower percentage growth in the second half of 2026 based on the prior year high comparable, especially in advanced synthesis. As a result, H1 and H2 for the group should be viewed together with a stronger first half performance and a more normalized second half growth combining to deliver growth in line with our full year 2026 outlook. Looking at sales growth by business platform. All three business platforms delivered double-digit CER growth in H1 '26. Integrated Biologics grew by 10%, and Advanced Synthesis by 28% and Specialized Modalities by 23%. This demonstrates the broad-based nature of the first half performance and shows that all our businesses are contributing to Lonza's growth. Integrated Biologics delivered healthy momentum, driven by maturing growth projects and robust growth in the base business. Vacaville, as communicated earlier, showed an H1 weighted sales phasing due to a planned shutdown in the second half to implement the CDMO readiness changes. And for the full year, we expect the bakeries site and sales to be roughly in line with full year 2025 at around CHF 0.6 billion. As expected, Advanced Synthesis delivered another half year of exceptional growth supported by strong performance in small molecules and especially in bioconjugates versus a lower 2025 base. H2 sales for the platform are expected to be higher than H1 in absolute terms, with growth versus the prior year normalizing against a much stronger prior year base and favorable phasing. Adjusting for these factors, underlying growth in H1 was in the low teens, demonstrating the continued strength of the business. Following a somewhat weaker year 2025, impacted by planned asset adaptation microbial and operational challenges in Cell & Gene, our specialized modalities business platform returned to strong CER sales growth, mainly driven by microbial and bioscience. Cell & Gene returned to normal operations towards the end of H1, which is expected to support growth in the second half. Overall, sales for the group grew by almost CHF 0.5 billion in constant currencies in H1 2025. This reflects our continued effort to bring new capacities online and increase throughput within our existing base assets. Turning to core EBITDA and margin development. The strong top line growth translated into significant margin leverage. The group core EBITDA margin expanded by 4.4 percentage points to 34.8% in H1 2026. This uplift was mainly driven by three factors. First, growth projects across platforms continue to mature, meaning are more utilized and operate more efficiently and so contributed positively to margins. Second, sales growth outpaced functional expense growth, creating operating leverage. And third, our organizational focus on operational execution productivity measures and cost discipline began to show tangible results. A favorable product mix and H1 weighted sales facing further supported margin accretion. The strongest margin improvement came in Advanced synthesis, where core EBITDA margin increased by 6.8 percentage points to around 48%. Also, H2 margins are unlikely to reach the exceptionally high level seen in H1 and we continue to see a strong margin trajectory for the business overall. Specialized modalities also delivered a material margin improvement with the core EBITDA margin increasing 10.7 percentage points to 28% and from strong margin improvement in our Microbial business. This was driven by the return to growth of the platform, favorable portfolio mix and disciplined cost management. With that margin uplift for microbial and the continued attractive margins in bioscience, Specialized Modalities is now getting closer to the overall group level margins. In Integrated Biologics, the core EBITDA margin remained stable at a solid 36%. Margin accretion in the gross business from project ramp-up was offset by less favorable profit mix in the base business. Moving to free cash flow. We made further progress in H1 2026. Free cash flow improved to CHF 426 million compared with CHF 116 million in H1 2025. This represents a clear step-up in cash generation and reflects the stronger earnings level as well as somewhat lower CapEx spend. It also illustrates that our organizational focus on cash generation is beginning to show first results. CapEx amount to CHF 530 million in H1, equivalent to 15.7% of sales compared with 21.2% of sales in H1 last year. In H1 2026, trade working capital as a potential of sales increased to 37.9%, reflecting the stronger sales growth in H1 and which resulted in a higher level of accounts receivable at the end of the first half. We expect this to be a temporary factor, and we continue to see additional opportunities to improve trade working capital. Now let's take a look at our CapEx spend and project portfolio in more detail. In H1 2026, around 60% of CapEx was invested into growth projects across our business platforms. While we expect some normal CapEx phasing from 2026 to 2027, investment intensity is expected to remain within our CDMO organic growth model range. Our key investment area in H1 remain the million, drug products, bioconjugates and cell and gene. We continue to make progress on our major growth projects, including the upgrade measures at [ Vacaville ], which will lead to the aforementioned shutdown in H2. Also, we advanced larger CapEx projects in drug product and bioconjugates. This investment portfolio is central to our CDMO organic growth model. The assets currently in ramp up are increasingly contributing to growth and profitability in the short to medium term as utilization continues to build. At the same time, the projects under construction provide the additional capabilities and capacities needed to support Lonza's long-term growth ambitions and meet future customer demand. Across both categories, we remain focused on disciplined return criteria and investment areas where the Lonza engine creates a clear competitive advantage. Our CapEx investment plans and how our disciplined capital allocation translates into sustainable long-term growth, cash generation and value creation is a topic we will have the opportunity to discuss in more depth at our upcoming Capital Markets Day in Vacaville in October. I very much look forward to see you all there. With that, thank you for your attention. Now let me hand back to Wolfgang for the business platform updates and the 2026 outlook.

Yes. Thank you, Philippe. And indeed, now let's look more closely at the H1 performance of each of our three business platforms, starting with Integrated Biologics. In this platform, our largest business platform, we delivered sales of CHF 1.87 billion, and you see our sales growth of 10% as compared to H1 2025. The core EBITDA margin -- core EBITDA of CHF 67 million. We delivered a flat margin of 36% versus H1 2025. Sales and margin were both driven by healthy momentum from growth projects ramping up across our Malian and drug product technology platforms. Sales growth was further supported by the base business, although the margin was offset by weaker product mix in H1 and the growth projects ramp up in [ FIS ]. Looking at specific sites, we saw H1 weighted sales at [indiscernible]. However, we anticipate that this will be offset in H2 due to the extended shutdown to progress with the site CapEx measures, with full year 2026 sales expected to be broadly flat versus full year 2025 at around CHF 0.6 billion. Overall, we are very pleased in how the site is now fully integrated in our global network continues to fully deliver on our expectations and to attract high customer interest. [indiscernible] is also part of the, I believe, unique and successful offer that we could make to a leading U.S. biopharma company as one of our strategic partners. Turning to our large-scale mammalian asset in [indiscernible], we have commenced a multiyear ramp-up in line with our planned time line. While during ramp-up, this asset doesn't contribute to growth yet and is dilutive on margin. It will become an important source of future growth of our biologics business. In addition, the already ongoing drug product investments in Stein that I mentioned earlier, belong to integrated biologics and will also support the platform's long-term growth trajectory. Now let's take a moment to look at the performance and key highlights in our Advanced Synthesis platform. Here, we delivered exceptional CER sales growth of 27.7% versus H1 2025, resulting in sales of CHF 834 million. We also reported a core EBITDA margin of 48.1%, an increase of 6.8 percentage points versus H1 2025 for core EBITDA portfolio CHF 401 million. Sales growth in this platform was driven by a combination of factors. We saw a strong performance in our small molecules technology platform and especially in bioconjugates. This was further supported by increased asset utilization alongside the favorable product mix, the lower base in H1 2025 and phasing. The accompanying high core EBITDA margin was supported by a favorable mix, good operational execution and strong operating leverage. While we are pleased with the exceptionally strong performance in this business platform in H1 2026 and anticipate higher absolute sales in we envisage that CER sales growth will moderate in H2 as planned due to a combination of less favorable phasing and portfolio mix alongside a higher base in H2 2025. Similarly, margins will normalize in the second half of the year as expected. To support the attractive long-term growth outlook of Advanced synthesis, our recently announced highly potent payload linker expansion that I talked about earlier, will provide much-needed additional capacity in response to strong customer demand. Finally, let me take a moment to review the performance of our Specialized Modalities business platform. Here, we delivered sales of CHF 553 million and a strong CER sales growth of 22.6% as compared to H1 2025. We also reported a core EBITDA margin uplift to 28%, an improvement of more than 10 percentage points versus H1 2025. Resulting in a core EBITDA of CHF 155 million. We are particularly encouraged by this continued progress with margins in specialized elites now approaching group average. This highlights the balance across Lonza and demonstrates the profitable growth is being delivered across all business platforms. The return to positive sales growth was driven by exceptional growth in our microbial technology platform compared to a low base in H1 2025 with the asset successfully adapted and now contributing to growth. Performance also benefited from favorable phasing in H1 2026. Bioscience sustained double-digit sales growth as well, benefiting from favorable sales phasing, while Cell & Gene showed a strengthened operational performance towards the end of H1 2026, and we, therefore, expect the business to make a meaningful contribution to growth in H2. Double-digit core EBITDA margin accretion was driven by a combination of strong sales growth, and favorable portfolio mix alongside our ongoing focus on good cost discipline across our operations. Now let's turn to our outlook for the full year 2026, the strong performance we delivered in H1 reinforces our confidence in our One Lonza strategy and its centerpiece, the Lonza engine. Together, that drive attractive growth above the underlying market, while our disciplined investments continue to create the foundation for future growth. These investments will remain in the mid- to high teens of CapEx as a percentage of sales and will proceed in line with the capital allocation framework that I shared with you before. Based on our strong H1 performance, we are upgrading our full year 2026 core EBITDA margin outlook to 33% to 34%. And while reconfirming our expectation of 11% to 12% CER sales growth. In summary, for 2026, you can expect from us the delivery of another full year of strong profitable growth, which will then form the basis for us to continue on our overall trajectory of strong profitable growth and value creation year-over-year, in line with our organic growth model. As we come towards the end of our presentation, let me take a moment to summarize the four key takeaways of our half year results. Firstly, we delivered a strong H1 performance with 16% sales growth at constant exchange rates and a high core EBITDA margin of 34.8%, while also materially improving free cash flow. Based on this, we are well set up to deliver a strong full year in line with our upgraded outlook. Secondly, these results show benefits of our sharper focus on quality, operational execution, productivity, cost discipline and cash generation. While this is an ongoing journey that will never stop, the first signs are encouraging and reinforce our confidence that we will continue to unlock value across all levers. Thirdly, looking to the external environment, we see that customer demand for launches capabilities and capacities remains strong. This reflects the deep trust of our customers in us and support the resilience of Lonza's unique business model. Across our global network, we continue to see customers choosing Lonza for our scientific expertise, our strong commitment to quality our manufacturing excellence and our ability to support complex programs across the molecule life cycle and across the world. In H1, lastly, we have successfully completed our transformation into a pure-play CDMO, which will enable us to continue to unlock significant value from our CDMO business. This gives us a clear strategic focus and ensures disciplined capital execution with a partial view on organic investment and bolt-on acquisitions. With all of our investments, we are guided by the same objective, creating sustainable long-term value for our shareholders, our customers and the patients they serve. Before we conclude, let me remind you about our Capital Markets Day, which we will host in Vacaville this October. This is your opportunity to engage with our Chairman and myself with Philippe as our CFO and other members of our leadership team. You will gain deeper insights into our strategy and value creation framework and visit one of the most important sites in our global network, widely recognized as a global Beacon of biologic manufacturing across the biopharmaceutical industry since more than 25 years. We will share how we are executing the One Lonza strategy, discuss our growth ambitions and provide a deeper look at the opportunity ahead in our integrated biologics business platform. We look forward to welcoming many of you to Vacaville, and we encourage you to register your interest soon, if you wish to join us. With that, I would like to thank you for your attention, and we will now take a 2-minute pause while we set up the video recording for the Q&A session. We look forward to joining you again in just a moment.

[Operator Instructions] We take the first question from Charles Weston from RBC Capital Markets.

It relates to CapEx programs. And I just wanted to understand how you manage the CapEx growth projects in order to keep growing smoothly within the medium-term guidance range. And when there is a change like there has been twice now for commercial fill/finish in Stein, where different assets ramp quite differently and change the business mix. How should we think about the impact in terms of where you will fall within your range in any given year and margins? So that was the one question. In summary, when CapEx programs change, what's the impact? And how should we think about that?

Yes. Thank you, Charles. And first of all, great to have you. And before we actually answer a question just for your information, I mean, if need be, Philippe and myself will be happy to actually add another 5 to 10 minutes to our session and we'll be happy to answer your questions. Before -- maybe to your point, first of all, CapEx is in itself a process which is lumpy. And how it actually occurs over time is not easy to plan, which is why we are kind of more looking at the overall corridor in line with our organic growth model, so mid- to high teens percentages of sales. And this is how we would actually like you to look at the CapEx figure as we described it for the first half and how we see it evolve for the full year, kind of shifting somewhat into 2027. Second part of the answer is -- and we have a very clear view, I mean, not only for the next 5 years, but further out because lead times of large projects actually is much longer. And we actually know precisely when we actually need to take which investment decision in order to have the capacity ready to then further out provide the capacity that we need to deliver the revenues. When it comes to [ shine ] and the, let's say, more strategic decision that we have taken there to broaden the scope of the facility towards high-value, small molecules. This, in the end, was a view of creating, I mean, additional potential and an attractive offering for our clients and kind of came with consequences for like a small additional CapEx amount insignificant, but a certain extension of the time line. When it comes to our growth trajectory, I mean, midterm and longer term, actually, we continue to commit to our CDMO organic growth model of low teens sales growth in constant exchange rates on average over time. So in this regard, I believe there is no reason to be concerned because this is how we foresee our company to grow over the next years. I don't know anything to add from you, Philippe. So thank you, Charles. James, great to have you.

The next question comes from James Quigley from Goldman Sachs.

One on the revenue outlook and the guidance. So you didn't upgrade the guidance for revenues with a set of results, but how would you characterize the visibility that you have on revenue growth for the second half of the year? There is a bit of a concern among some investors on the exit rate being lower in half 2 and then moving into 2027. But could you talk to the dynamics that give you confidence in the outlook. To be clear, I'm not looking for any guidance for '27. What are the factors that give you confidence in being able to continue to grow in the midterm range despite the 6% to 8% implied growth for the second half?

Yes. Thank you, James. Maybe me taking at least the first part, maybe the full answer. First of all, visibility for the rest of the year is very good. And in a way, if you look at our top line guidance and also the upgraded margin guidance, actually pretty narrow corridors, which you can pay, I guess, our confidence and our tight grip that we have on our business. When it comes to -- I mean, what does it tell us for -- I mean, the future of Lonza. I mean you will have your view or anyone will have his or her view. But in our view, 2026 will be another year of strong profitable growth. And you should rather see it as a starting point for our organic growth model to continue to be applied. So while there has been phasing between H1 and H2, you might rather see that as a reflection of the fact that actually Lonza is not a cookie factory, right? It's a pretty complex high-tech operation with just by nature, a certain lumpiness in its business. So actually, for me, as a CEO, for us at Lonza, this is of no concern. And we remain confident, and we try to convey that in our presentation that we'll be able to continue strong profitable growth over the next years to come. Again, in line with our CDMO organic growth model, which is for us, the North Star in terms of how we think about our future ourselves and how we actually explain and communicate to you about what you can expect going forward.

The next question comes from Thibault Boutherin from Morgan Stanley.

Just in terms of -- when we think about midterm outlook, between the different divisions, I think there was at least a consensus that view that biologics would be the fastest-growing midterm. And we're seeing this very, very strong growth in advanced synthesis. So just if you could, without giving guidance, if you could just give us an idea of your view on which modalities is as the strongest potential on sort of short to midterm. So we have a better idea of what to expect.

Yes. Again, I would start with my answer to that. First of all, I would rather take this as a sign of strength because what is actually happening and what you're seeing at work is risk diversification across technologies and across business platforms. And this enables us to actually commit to our organic growth model to actually deliver low-teen CER sales growth on average over time in the future with margin expansion step, expanding step-by-step. So this idea of kind of diversifying a certain lumpiness within our different businesses is not an outcome, but it's actually an incoming hypothesis and one of the design principles of our company and our overall portfolio. If you ask me what our growth expectations for all those businesses are? They are all high, and Biologics is a growth engine of the company and will continue to be a growth engine. And in my presentation, I shared I thought I said the business platform is right now lining up the next commercial scale, large-scale assets in first and also in Vacaville drive significant growth in biologics over the next years to come. However, those assets today don't really contribute to growth yet because Vacaville an acquisition from Roche. And [indiscernible], the large-scale biologics asset is an asset in ramp up right now. ADS is a highly attractive market segment where we're actually leading as a company, and we enjoy significant growth and are happy to continue to invest and double down on this technology, Specialized Modalities, as we talked about, benefited -- or Lonza benefited very much about from this diversification logic that I just declared before last year. But we also told you at that time that this business platform will also start to contribute not only to growth but over time also to margin. That is what we are starting to see right now. So also Cell & Gene we consider to be an attractive modality in which we would like and will be present going forward. Anything to add it I'd say that is a good sign.

The next question comes from Justin Smith from Bernstein.

A quick one. Given where the ROICs are now, I just wondered if you wanted to make any potential comments about where ROIC might be as a percent -- as a multiple of work?

Yes. Thank you, Justin, for the question. So again, 13% now, which again, benefited, of course, from also putting our Capsules business into discontinued operation. And now you're seeing the increased margin dropping all the way down, of course, to profits and to ROIC ultimately. So in terms of WACC, we are probably now close to 2x whack or so, and we probably see further potential. But we are not guiding on ROIC, but given our margin expectations as you have them in the organic growth model, ROIC will follow suit.

The next question comes from Odysseas Manesiotis from BNP Paribas.

Firstly, would it be fair to assume you're by processing raw materials and finished goods inventory is at level similar to or below usual -- and with small scheduling changes in this be reason for volatility we're seeing in the bad processing side on the supply side. And secondly, Philippe, should we take your comments on CGT production coming fully back to normal in late as at Portsmouth for A3 on a CGT product has been fully resolved? And fair to say at this point that all the [indiscernible] have been resolved as well?