* Upgrades sales targets for 2018
* Says Capsugel doing better than expected
* Water business still under strategic review (Adds comment from CEO, details about virus and water businesses)
ZURICH, July 25 (Reuters) - Swiss drug ingredients maker Lonza upgraded its 2018 sales growth target on Wednesday, saying its Capsugel acquisition exceeded expectations and on "buoyant demand" from pharmaceutical and biotech clients for products including viruses for gene therapy.
The Basel-based company said first-half core earnings before interest and taxes were 626 million Swiss francs ($629.97 million), identical to the 626 million franc average forecast in a Reuters poll.
Sales rose 33 percent to 3.1 billion francs, about on par with the poll.
Lonza upgraded its expectations for full-year sales to mid- to high-single digit growth on a comparable basis, from the previous forecast of mid single-digit growth.
Lonza's 2016 purchase of Capsugel for $5.5 billion added pill capsules to the Swiss company's existing pharmaceuticals ingredients business, helping expand its range of services for drug companies and nutrition makers beyond the ingredients and production services that it has traditionally supplied.
"Capsugel... integration is progressing better than planned, operational and commercial synergies are starting to materialize and healthcare continuum offerings are becoming even stronger," Chief Executive Richard Ridinger said in a statement.
In addition to its sales target, Lonza also expects its core earnings before interest, taxes, depreciation and amortisation as a percentage of sales for 2018 to match the core EBITDA margin of 26 percent that it recorded in the first half.
Earlier this year, Ridinger opened the world's largest virus manufacturing facility for gene therapy in Texas, where he said "transfer of existing and new customers into the facility is making good progress."
The company said its water chemicals business that sells HTH brand swimming pool products remains under strategic review for possible disposal, though it said the business turned upwards in May and June as pool owners began opening their facilities.
Strong results in the water business are expected going forward after restructuring and the introduction of new products, Lonza said. ($1 = 0.9937 Swiss francs) (Reporting by John Miller, editing by John Revill)