Lonza’s available US capacity, global footprint are major competitive advantages

Despite major capital expenditure investments announced by Big Pharma in 2025, the potential for overcapacity in the United States is unlikely, according to William Blair analysts, who contend that Swiss-headquartered Lonza is the only contract development and manufacturing organization (CDMO) with available large-scale U.S. mammalian capacity.

In a note to investors this week, William Blair analysts called out the “trend of manufacturing localization, in which biopharma sponsors are increasingly seeking to manufacture products in their ultimate end market (e.g., U.S. for U.S. and Europe for Europe).” While Lonza itself doesn’t expect significant changes to its current commercial contracts, the analysts anticipate the CDMO’s customers will align future clinical and commercial manufacturing with these new incentives.

“These factors have the potential to be major tailwinds for Lonza,” according to the analysts, who noted that Lonza is also one of only a few contract manufacturers “with the global scale necessary to support customers across locations, modalities, and stage of development.”

In the U.S., the analysts see Lonza’s $1.2 billion acquisition in 2024 of Roche’s large-scale mammalian drug substance facility in Vacaville, California as a major win for the CDMO with 12,000L and 25,000L stainless steel bioreactors contributing to a total bioreactor capacity of around 332,000L. According to Lonza, integration of Vacaville is progressing with a commitment of $500 million in upgrades to the quality system and IT infrastructure.

The IT systems at the site are being “aligned” to communicate with Lonza’s global mammalian network, Diane Vallejos Lever, senior vice president and global head of sales for Lonza Integrated Biologics, told Pharma Manufacturing in late October at the CPHI Frankfurt conference.    

“We are in the middle of that now,” she said. “It’s also public knowledge that we had prior commitments to the previous owner [Roche], so we’re in that as well and we continue to look for new customers over the next few years.”

Under the terms of the Vacaville acquisition, products previously manufactured at the site are being supplied by Lonza to Roche with minimum volume commitments over the medium term, which will ultimately phase out over time as the facility transitions to its own customers.      

William Blair analysts noted this week that incremental margin dilution with a “slight step back” is expected for Vacaville in 2026, even though products being onboarded at the site have more favorable pricing compared to the legacy Roche products.

“The step-down primarily reflects a transition period as employees adapt from manufacturing Roche products to new programs, which may temporarily impact efficiency, as well as Lonza’s need to incur certain costs associated with upgrading its facility, such as permits,” according to the analysts.

While Vacaville is expected to be slightly more dilutive next year, the analysts said concerns about its impact are overstated with expansion in Lonza’s base business expected to more than offset the margins step-down and drive material margin improvement again in 2026.

U.S. capacity remains in high demand due to the threat of pharma-specific tariffs and Lonza is confident in its ability to sign more contracts for Vacaville in the near term. In its third-quarter 2025 qualitative update in October, the company pointed to the signing of a “significant” long-term commercial supply agreement — with further signings expected in coming months — and said it plans to make additional investments over the next two to three years to upgrade Vacaville’s automation system and multi-purpose capabilities.

Lonza is also investing CHF 500 million to build a new 20,000-square-meter, GMP‑compliant fill and finish facility in Stein, Switzerland, with automation, isolator and single‑use systems, and a sustainable design. The expansion, expected to start operations in the first half of 2027, will boost commercial manufacturing capacity, streamline supply chains, and support flexible, scalable biologics production, according to the company.

Once the Stein facility starts operations in 2027, Lonza will be able to offer a “more comprehensive set of commercial services, which will further enhance its pricing power as customers remain focused on total implicit and explicit manufacturing costs and factor in supply chain savings, probability of delays, and other manufacturing issues into their decision-making processes,” William Blair analysts concluded.