Lonza has agreed to acquire Genentech’s large-scale biologics manufacturing site in Vacaville, CA, from Genentech’s parent Roche for $1.2 billion, the companies said, in a deal designed to significantly increase the buyer’s capacity for manufacturing biologics at commercial scale.

With a total bioreactor capacity of about 330,000 liters, in reactor sizes of 12,000 and 25,000, the Vacaville plant is among the largest biologics manufacturing sites in the world by volume. That capacity will grow in coming years, Lonza said, as it plans to invest approximately CHF 500 million ($556.6 million) to upgrade the Vacaville plant, a capital project intended to enhance its ability to satisfy demand for next-generation mammalian biologics therapies.

During the upgrade, Lonza will manufacture existing products for Roche at a committed volume of 30% of capacity in 2025. Those volumes will ramp down over the medium term, Lonza said.

Roche inherited the Vacaville site in 2009 when it completed its $46.8 billion acquisition of Genentech, which built the facility and put it into operation in 2000.

Since then, Lonza said in a presentation to analysts, nine commercial product families have been manufactured at Vacaville, including the COVID-19 antibody “cocktail” or combination treatment of casirivimab and imdevimab that Roche developed with Regeneron Pharmaceuticals during the COVID-19 pandemic. The cocktail had been marketed as REGEN-COV™ in the U.S. and Ronapreve™ outside the U.S.—but is no longer FDA-authorized following the growth of cases stemming from the Omicron variant of COVID-19.

“We decided to divest our Vacaville site as part of our long-term network strategy and
optimisation plan, to deliver a more diversified portfolio including new drug modalities,”
Susanne Hundsbaek-Pedersen, Global Head of Pharma Technical Operations, stated. “Having gone through a competitive diligence process with multiple potential strategic partners for the facility, we believe that Lonza is the ideal owner for the Vacaville site to continue producing innovative medicines for patients in need. We are particularly pleased that the employees at the site will be offered employment by Lonza.”

Market share vs. pharmas

The presentation by Lonza’s top executives offered another rationale for the deal: Lonza expects CDMOs to command more than half the expected market share of installed mammalian drug substance manufacturing capacity by 2028—52% vs. 48% for pharmaceutical companies, compared with 39% for CDMOs and 61% for pharmas last year.

CDMO share of installed mammalian capacity has grown from 25% in 2013, and 29% in 2018, while pharma capacity has shrunk from 75% in 2013 and 71% five years later, according to data cited by Lonza—derived from an internal company analysis as well as data from IQVIA, EvaluatePharma, Citeline, and publicly announced capacity expansions last year.

Lonza said it would offer employment to the plant’s approximately 750 Genentech employees.

“Looking ahead, we are excited about the continued growth and innovation that Lonza will bring to Vacaville,” Vacaville Mayor John Carli stated in a Facebook post. “While we bid farewell to Genentech, we are grateful for their significant contributions over the past 25 years. The medicines produced at the Vacaville facility have undoubtedly impacted countless lives worldwide, and we are proud to have been a part of that journey.”

Lonza said the acquisition would help it better meet demand for mammalian contract manufacturing from customers with existing commercial products, as well as those with molecules in process of being developed into commercial products.

The Vacaville plant will also create for Lonza a significant U.S. West Coast commercial manufacturing presence, complementing the company’s existing biologics site on the East Coast in Portsmouth, NH, as well as its network of international facilities across Europe and Asia.

“The Vacaville site is a highly valuable strategic acquisition that will make capacity immediately available for our customers and unlock future growth for our Biologics division,” Jean-Christophe Hyvert, president, biologics, Lonza, said in a statement. “It will support us in providing a commercialization path to existing customers and incremental large-scale commercial capacity to our partners.”

Products now manufactured at the site by Roche will be supplied by Lonza, with committed volumes over the medium term, phasing out over time as the site transitions to serve alternative customers.

As a result of the Vacaville deal, Lonza has updated its Mid-Term Guidance 2024–2028 by raising its projected sales growth range from an 11–13% compound annual growth rate (CAGR) to between 12% and 15% CAGR, both at constant exchange rates (CER). Lonza finished 2023 with CHF 655 million ($729 million) in profit on CHF 6.717 billion ($7.479 billion) in sales, up 7.9% (10.9% at CER) from CHF 6.223 billion ($6.929 billion).

Profits fell 46% from CHF 1.218 billion ($1.356 billion) in 2022, in large part due to about CHF 500 million ($556.6 million) in sales and termination cost impacts stemming from Moderna reducing production of mRNA drug substance for its COVID-19 vaccine at Visp, Switzerland, announced in September.

The deal is expected to close in the second half of this year, subject to customary closing conditions. Upon closing, Lonza will integrate the Vacaville site into its Biologics division, joining a network of existing mammalian manufacturing sites in Portsmouth and Visp, as well as Slough, U.K., Singapore, and Porriño, Spain.

“Next chapter”

“We have deep and long-standing industrial expertise in delivering commercial scale manufacturing services for our customers’ therapies. In combining this with the strong legacy of the Vacaville facility, its highly skilled colleague community and its proven track record on quality, we are excited to take our leading large-scale mammalian offering to its next chapter of growth,” Hyvert added.

The acquisition comes at a time of tumult for contract manufacturing and development organizations (CDMOs).

Last month, Catalent found a buyer when Novo Holdings, the asset manager of the foundation that controls Novo Nordisk, agreed to acquire the company for $16.5 billion. Novo Holdings stands to recoup two-thirds of that expense by selling three of Catalent’s fill-finish sites to Novo Nordisk for $11 billion upfront so it can meet booming demand for its blockbuster obesity drugs Wegovy® and diabetes drug  Ozempic®.

And in Congress, the U.S. House of Representatives’ Select Committee on the Strategic Competition between the United States and the Chinese Communist Party Chairman Mike Gallagher (R-WI) and Ranking Member Raja Krishnamoorthi (D-IL) have joined to introduce the BIOSECURE Act (H.R. 7085).

The measure would forbid the awarding of federal contracts—including procurement of drugs for Medicare and Medicaid—from being awarded to “foreign adversary biotech companies of U.S. national security concern.” Among Chinese companies cited by name in the bill are two CDMOs, WuXi Apptec and WuXi Biologics.

WuXi AppTec has denied posing a threat to U.S. security, while WuXi Biologics has issued a statement taking issue with the bill’s description of the background of CEO Chris Chen.

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