Hardly any other sector in Switzerland was so hyped on the stock exchange in 2021 as that of contract manufacturers in the pharmaceutical industry. Now it turns out that companies like Lonza or Polypeptides probably don’t have that much leeway when it comes to setting prices.
Moderna vaccines are produced at Lonza in Visp.
Just six months ago they were among the stars on the Swiss stock exchange, the contract manufacturers of active pharmaceutical ingredients. The values of lonza, Bachem, Dottikon ES, Siegfried and polypeptides climbed to dizzying heights, fueled by the exuberant mood on the markets and additionally by the pandemic.
About six months later, shareholders of these companies have to draw a bitter balance sheet. The worst hit were the stocks of the two peptide specialists Bachem and Polypeptide, whose prices fell by 61 and 54 percent respectively compared to the end of 2021. The market value of the more diversified manufacturers Lonza and Siegfried has each fallen by around a quarter, and that of Dottikon by almost 30 percent.
Tuesday showed that the correction of these former “high-flyers” is not yet over. One profit warning of the management of Polypeptide caused the share price of this company to plummet by 30 percent compared to the previous day.
Polypeptide is struggling with sharply increased costs for raw materials, energy and consumables as well as significantly increased personnel expenses. According to the company, these have not yet been passed on to customers.
The question arises as to how robust the business of contract manufacturers in the pharmaceutical industry is in general. It is possible that these suppliers do not have as much leeway in setting prices. Another big unknown are the investment offensives that all providers have initiated in anticipation of a sharp rise in demand. Polypeptides has increased headcount by 13 percent in just one year (ended June 30, 2022). Some investors may prefer to wait and see if the industry is overly optimistic about building additional capacity.