Executive Summary:
We are adding Lonza (LONN SW / LZAGY), Repligen (RGEN), and Alpha Teknova (TKNO) to our model portfolio, reflecting our constructive stance on a pending recovery in the life sciences supply chain. To hedge sector-specific and broader healthcare macro risks, we are initiating short positions in PPH (Pharmaceutical ETF) and CVS Health (CVS).
Position Sizing in Model Portfolio:
Lonza (LONN SW): 2.0%
Repligen (RGEN): 1.0%
Alpha Teknova (TKNO): 0.5%
PPH (Short): -1.0%
CVS Health (Short): -0.5%
Thesis:
The life sciences tools and CDMO sector has endured a prolonged post-COVID downcycle. The pandemic pulled forward demand, leading to elevated inventories and overcapacity. That was followed by a sharp slowdown driven by three primary forces:
Post-COVID Demand Normalization: Excess inventory built during the COVID boom led to prolonged destocking across the supply chain.
Biotech Funding Slump: A steep drop in biotech IPOs and venture funding reduced R&D budgets, suppressing demand for research tools and early-stage services.
Policy and Macroeconomic Uncertainty: Rising interest rates, China macro weakness, and the shifting U.S. regulatory and pricing landscape created a risk-off environment.
This confluence of headwinds drove significant underperformance in life sciences equities relative to the broader market. The secular tailwinds, outsourcing, biologics innovation, and new modalities like gene therapy, remain structurally intact. What we’ve experienced is a cyclical reset, not a collapse of fundamentals.
Signs of Bottoming and Inflection:
Recent earnings commentary and order trends indicate that destocking is ending, and biopharma activity is resuming:
Lonza cited “robust commercial demand” and “high utilization in early-stage biotech,” with biologics, cell & gene, and bioscience divisions all seeing renewed growth.
Repligen returned to double-digit organic growth in Q1 2025, with orders up 20% year-on-year and management guiding for sequential revenue acceleration.
Danaher (Cytiva) and Sartorius both reported improved book-to-bill ratios, increasing orders, and a bottoming in bioprocessing activity.
We believe the sector has reached a cyclical trough and is now in the early stages of recovery.
Portfolio Additions – Investment Rationale:
1. Lonza (LONN SW) – Late-stage Biologics CDMO Leader
Lonza is a top-tier CDMO with unmatched capabilities in biologics and cell & gene manufacturing. While early-stage project signings slowed during the funding crunch, management now sees "good momentum" and expects stronger H2 growth. Lonza’s high-utilization network, multi-year contracts, and scale provide a durable base, while new facilities position it to capture future growth. The planned divestiture of its CHI division will streamline its business to focus purely on CDMO opportunities. We see Lonza as a core, defensive-quality name that will benefit both from secular biologics demand and cyclical normalization.
2. Repligen (RGEN) – Bioprocess Innovation Platform
Repligen’s bioprocessing tools are critical to biologic drug manufacturing across upstream and downstream processes. It serves CDMOs and pharma directly and is deeply embedded in customer workflows. Repligen saw a recovery in orders in H2 2023 and Q1 2024. New modalities like cell & gene therapy are its fastest-growing segments. It has also improved operations, reduced costs, and brought in a new CEO (formerly head of Cytiva’s bioprocess division). The company has now returned to double-digit organic growth and expects revenue acceleration through 2025.
3. Alpha Teknova (TKNO) – Idiosyncratic Growth from Niche Reagents
TKNO supplies custom reagents and solutions for early-stage biotech and clinical programs, with particular exposure to gene therapy and mRNA developers. Unlike peers, TKNO grew revenue and customers in 2024, Clinical Solutions revenue rose 110%. Management improved EBITDA and extended its credit facility. Its ability to serve bespoke, small-batch needs makes it uniquely positioned. We see it as a high-beta, small-cap play on the rebound of early-stage biotech R&D and advanced therapies. TKNO has demonstrated execution and resiliency even at the sector's nadir.
Shorts – Sector and Macro Hedging:
To manage risk and reflect relative positioning, we are shorting:
1. PPH (Pharmaceutical ETF) – This ETF overweights large-cap pharma companies that benefited from COVID testing/vaccines and have less exposure to pipeline-driven growth. Many of these firms face patent cliffs, pricing headwinds, and slow R&D pipelines. As CDMOs and tools providers rebound, we expect PPH components to underperform.
2. CVS Health (CVS) – CVS is facing structural margin compression from its PBM and retail pharmacy segments, compounded by recent Medicare Advantage weakness. We see risk to earnings and valuation as competitive pressure mounts. This position offsets our exposure to healthcare more broadly, particularly given the divergent setup versus high-innovation subsectors.
Conclusion:
The downturn was cyclical and has created a mispricing opportunity. With signs of recovery emerging across demand, orders, and sentiment, we are proactively rotating into high-quality names with specific secular exposure and strong execution. Lonza, Repligen, and Teknova give us a diversified mix of scale, innovation, and niche growth. Coupled with shorts in PPH and CVS, this basket reflects our conviction that the next leg in life sciences will be led not by big pharma, but by the enablers of next-gen therapies.
Disclaimer:
Ridire Research is an independent research publication operated by Ridire Research LLC and affiliated with a private fund, an Exempt Reporting Adviser under the U.S. Investment Advisers Act of 1940. Ridire Research is not registered as an investment adviser and does not provide personalized investment, legal, accounting, or tax advice.Informational & Educational Purpose Only
All materials—including text, charts, model portfolios, and explicit labels such as “Buy,” “Sell,” “Hold,” “Long,” or “Short”—are published solely for general informational and educational purposes. They reflect the author’s views at the time of writing, derived from publicly available data, proprietary frameworks, and market analysis, and are not tailored to any reader’s specific objectives, financial situation, or risk tolerance. Subscription to this Substack does not create an adviser–client relationship with the affiliated private fund or its principals.
No Offer or Solicitation
Nothing herein constitutes (i) an offer to sell or the solicitation of an offer to buy any security or other instrument, (ii) a recommendation to participate in any investment strategy, or (iii) a solicitation for investment advisory services. Any references to trades, allocations, or vehicles should be viewed as hypothetical model illustrations only. Offers, if ever made, will be made solely by confidential offering documents and only to qualified investors in jurisdictions where permitted.
Potential Conflicts of Interest
The affiliated private fund, its affiliates, employees, and related accounts may hold, increase, decrease, initiate, or exit positions, long or short, in securities or digital assets discussed, without notice or obligation to update disclosures. Such positions may be inconsistent with views expressed in this publication. The affiliated private fund, related entities, and personnel may initiate, modify, or exit positions in any mentioned security before or after publication without further notice. We maintain internal policies, including trading blackout windows and conflict reviews, to mitigate potential conflicts of interest.
Accuracy & Forward-Looking Statements
Although we strive for accuracy and analytical rigor, information may become outdated and may contain errors or omissions. Forward-looking statements, projections, or target prices are inherently uncertain and may differ materially from actual results. No warranty, express or implied, is given as to completeness, accuracy, or reliability.
Risk Acknowledgment
Investing involves substantial risk, including the potential for complete loss of capital. Past performance, whether actual, indicated by back-tests, or modeled, is not indicative of future results. Securities, derivatives, and digital assets mentioned may be illiquid, highly volatile, or subject to regulatory change.
Reader Responsibility
Readers should conduct their own due diligence, consider their personal circumstances, and consult a licensed financial professional before acting on any information contained herein. By reading this publication you agree that Ridire Research LLC, the affiliated private fund, and their affiliates accept no liability for any direct or consequential loss arising from reliance on the information presented. This research is not directed at persons in jurisdictions where such distribution would be contrary to local law.