Letter from the CEO

Dear Stakeholders

125 years on from the foundation of our company, Lonza is more dynamic, agile and forward-focused than ever. Since 1897, Lonza has constantly evolved to meet the needs of the day with energy, light, fertilizer and now medical treatments and technologies. In 2022, we continued to adapt to our changing environment, while consolidating our position as a strategic partner to the healthcare industry.

Today, the biopharma industry is able to treat many of the world’s most serious illnesses. The great challenge of modern medicine does not lie only in the discovery of new treatments. We must also find ways to manufacture and commercialize these treatments while maintaining safety, quality and value. During 2022, we have continued to fulfil our role as a trusted Contract Development and Manufacturing Organization (CDMO), while delivering on our targets, extending our offerings to meet customer needs and laying strong foundations for our future success.

Financial Performance

In 2022, Lonza reported sales of CHF 6.2 billion, sales growth of 15.0% AER (15.1% CER), and CHF 2.0 billion CORE EBITDA, resulting in a margin of 32.1%. These robust financial results are driven by strong underlying business performance and a COVID-related sales peak in 2022, which supported both sales and margin.

During the year, we maintained an active dialogue with our investor community. Following Philippe Deecke’s appointment as Chief Financial Officer at the end of 2021, he and I have both spent time building relationships with our stakeholders and investors. Alongside our Half-Year and Full-Year updates, we hosted a series of investor briefings, including an investor roadshow in H2. For the first time since the pandemic began in 2020, Phillipe and I have also had the opportunity to meet with investors in person at events in key locations including London, Zurich, New York and Boston.

Growth Investments and Consolidated Focus

Our investment strategy continues to focus on capturing growth opportunities with attractive margins, while minimizing risk. In 2021, CAPEX reached 24% of sales, and in 2022 we continued to expand this ambitious target to CHF 1.9 billion or 30% of sales. In July, we committed to expanding our Drug Product Services offering with a CHF 500 million investment in a new drug product facility in Stein (CH). Once operational, the facility will complete the value chain for our Biologics customers.

We also announced a series of additional planned investments over the year, including an expanded highly-potent active pharmaceutical ingredients (HPAPI) suite for antibody-drug conjugate (ADC) manufacturing in Visp (CH). We also announced an early phase capacity expansion in Bend (US) . These projects will enable us to build a global end-to-end offering for our customers in key modalities.

Operating in the Post-Pandemic Era

Although many Western countries emerged from strict COVID-19 lockdowns in H1 2022, we remained vigilant across our global business, monitoring outbreaks and observing local restrictions. Infection levels were under control in many markets at the end of 2022, but we remain aware of long-term impacts to communities, economies and healthcare systems.

2022 brought industry challenges, such as extended lead times for raw materials. Specifically, H2 was characterized by global uncertainties arising from increased energy costs and potential shortages. We continue to observe this shifting external context by actively reviewing our business and operating context, both at global and local site levels. We are actively working to mitigate known risks while remaining agile to emerging and unexpected business conditions.

Talent Retention and Development

There are high levels of competition to attract and retain industry-leading talent in the healthcare industry. In this context, we are continuing to focus on employee engagement, ensuring that we listen to feedback and adapt to meet our colleagues’ needs.

Enabling employee growth is a critical driver for retention, and in 2022 a particular focus was placed on establishing leadership development programs, mentoring opportunities and career roadmaps. Our Voice of Employee Survey shows a strong increase in employees feeling that they can learn and grow at Lonza. Our redesigned performance and rewards structure – the Lonza Bonus – was launched in 2022. This aligns our divisions and functions into one performance structure, and is designed to recognize top talent with a consistent metric that takes both company performance and personal development into account. While recognizing colleague performance, we also responded to global inflation volatility with an extraordinary mid-year salary increase for the 16 countries in which 2022 inflation levels substantially exceeded forecasts.

We also remain committed to carrying forward our flexible working practices from the pandemic, with a clear focus on work-life integration. In 2022, we launched a Global Hybrid Working Policy, allowing office-based colleagues to balance three days in the office with up to two days working from home each week. We also introduced a tech-enabled program that allows colleagues to work internationally for up to four weeks per year while observing local employment laws. These developments are designed to improve productivity, support wellbeing, and encourage collaboration and creativity.

Our Global Leadership Team

There have been planned changes to our Executive Committee, as Claude Dartiguelongue (former President of Capsules & Health Ingredients) and Stefan Stoffel (former Head of Group Operations) retired in 2022. I would like to take this opportunity to share my sincere thanks for their many contributions to Lonza and wish them both a long and happy retirement. As these valued colleagues retire, we have appointed new industry leaders to join the Executive Committee. In July, we were joined by Christian Seufert as President of the Capsules & Health Ingredients division, and in August, Maria Soler Nunez took up the position of Group Head of Operations. Finally, in November, Daniel Palmacci joined as President of the Cell & Gene division, succeeding Jean-Christophe Hyvert who will now refocus on his role as President of the Biologics division.

This expanded leadership structure will support the business in optimizing growth potential, with a dedicated President for each of our four divisions. It is my pleasure to extend a warm welcome to Christian, Maria and Daniel. All three are proven industry leaders with outstanding credentials, who will contribute in steering our business towards new levels of sustainable growth and development.

Progress on Sustainability

In 2022, our global operations continued to drive progress towards our seven key sustainability targets, based on selected relevant United Nations’ Sustainable Development Goals (SDGs). We maintained momentum throughout the year in our ESG ambitions. Year-on-year, we achieved a 6% reduction in energy intensity, a 13% reduction in GHG emissions intensity, and a 13% reduction in water intensity. The substantial growth of our business in 2022 was achieved largely without footprint increases, and efficiency gains have enabled us to either meet or exceed our 2022 ambitions. As part of our ESG focus, we remain committed to contributing to the communities in which we operate. To mark our 125th anniversary, in October 2022 we announced plans to give 125,000 volunteering hours to community causes across our global network. Commencing in 2023 – and every year thereafter – each colleague in our global community can take an annual volunteering day to dedicate to a local cause. Looking to the future, the amount of time we give back will increase in proportion to our growing colleague community.

Finally, we were proud to be recognized by Ethisphere® as one of the 2022 World’s Most Ethical Companies. To receive this recognition for the second year running is a testament to the integrity of our people for remaining true to our values in the decisions they take at work each day.

Group Outlook 2023

In 2022, the global business community experienced challenges arising from macroeconomic uncertainty. In this context, our position as a dedicated partner to the healthcare industry has helped to protect our core business from short-term economic fluctuations. In addition, our focus on long-term customer contracts has helped to ensure continuing stability.

Looking forward, we remain on track to deliver our 2024 Mid-Term Guidance, supported by a 2023 Outlook of high single-digit CER sales growth. This reflects our strong underlying business performance, balanced by a reduction in COVID-related sales following the peak in 2022. A CORE EBITDA margin of 30 to 31% is supported by strong productivity and pricing, and offset by residual inflation and the ramp-up of new assets.

Thanks to our People and Stakeholders

As we celebrate 125 years of progress at Lonza, I would like to take this opportunity to thank our partners and suppliers for their engagement and loyalty, and our customers for trusting us to bring their treatments and products to market. I would also like to thank our investors for continuing to support our business.

Finally, my thanks to our colleagues across the global network for their commitment and dedication to making a meaningful difference in an increasingly complex world. I am particularly pleased to extend a welcome to our 3,500 new colleagues who joined Lonza in 2022, and I look forward to seeing what our growing community will achieve for our business and customers in 2023.

Pierre-Alain Ruffieux

Chief Executive Officer