Lonza to Acquire Roche's Vacaville Biologics Manufacturing Site in $1.2 Billion Deal

Apr 08, 2024 17:07 CST Updated 17:07

Roche

Oncology Drug Research, Development, and Manufacturing

Lonza

Pharmaceutical R&D Developer

Author｜Freelance Translator Isabelle

March 20,Manufacturing giant Lonza announces an agreement with fellow Swiss company Roche to acquire one of the world's largest biologics production facilities, Roche's plant in Vacaville, California, for $1.2 billion., in order to gain an absolute advantage in the production of the next generation of drugs.

This factory was acquired by Genentech in 1994, and after Genentech became a subsidiary of Roche in 2009, the factory was also incorporated into Roche. The factory uses genetically modified living cells to produce monoclonal antibodies for the production of next-generation drugs. Lonza stated,The total bioreactor capacity at the Valais plant is currently approximately 330,000 liters, ranking among the top in global biopharmaceutical production bases.

A Roche spokesperson noted that while large-scale production of biologics remains important for the company to deliver marketed products, Roche no longer needs the capacity of the Vacaville facility. The plant currently manufactures tocilizumab (Actemra), rituximab (MabThera/Rituxan), ocrelizumab (Ocrevus), pertuzumab (Perjeta), and Phesgo (pertuzumab, trastuzumab, and hyaluronidase-zzxf) injection.Proficient in large-scale production of biologicsHowever, this plant is one of the oldest facilities of Roche, with much of the equipment aging, and some innovative processes cannot be applied here. As Roche's product line becomes increasingly diversified, ranging from monoclonal antibodies, bispecific antibodies to cell therapies and personalized cancer vaccines, all are involved.What Roche needs is more flexible production capacity., to meet the production needs of small-batch personalized vaccines.

Therefore, on May 31 last year, Roche announced the decision to divest the Genentech plant in Vacaville, which Roche considered as part of its broader strategy to align capacity with the demand of future product pipelines. According to media reports,If no buyer is found, the Vacaville plant may close in 2029.

Ultimately, Lonza decided to step in. Susanne Hundsbaek-Pedersen, Global Head of Technical Operations at Roche Pharmaceuticals, stated: "After conducting due diligence with several potential strategic partners, we are confident that Lonza is the best fit to take over the Vacaville site and continue producing innovative medicines for patients in need."

Lonza stated: "With the approval of innovative new therapies,ExpectedEntireCDMO IndustryThe demand for biologics capacity will continue to rise.. In this context,The acquisition of the Vacaville plant canMakeOur ClientsImmediatelyIn the United StatesThisLargest Drug Market in the World Gains Significant New Production Capacity。"With the Vacaville facility, we now have significant manufacturing capacity on the West Coast, complementing Lonza’s existing biologics site in Portsmouth on the East Coast, as well as its international network in Europe and Asia."

Subject to the satisfaction of customary closing conditions,The transaction is expected to be completed in the second half of 2024.. After the acquisition is completed,Vacaville Facility to Be Integrated into Lonza Biologics Division, the department has already set up factories in Switzerland, Singapore, Spain, the United States, and the United Kingdom.

Lonza has also begun planning for the future of this plant,PlanIn the futureSeveral yearsInReinvest 500 million Swiss francs (US$561 million) to expand the factory, to "meet the market demand for next-generation biologic therapies."

For this new plant, Lonza has high hopes and has raised its forecast for sales growth in the 2024-2028 mid-term guidance. The company expects,The compound annual growth rate of sales in the next four years will be 12% to 15%, higher than the previously expected 11% to 13%.。

In Lonza's updated 2024-2028 mid-term guidance, originally published in October of last year, the sales growth forecast of 11-13% has now been revised.

In stark contrast, in January this year, Lonza announced the closure of its mammalian clinical production facility in Hayward, California, resulting in the layoff of 218 employees. The spokesperson explained: "The reason for this decision isCDMOMarket demand is concentrated inCombinationOr integrationClinical andCommercial products, while the Hayward site offers limited growth opportunities outside the clinical scope." Not long before that, in early October last year, Lonza announced the construction of a new commercial fill line at its Stein, Switzerland site, adding approximately 115 employees.

Global CDMO Shake-upAdjustment

A Few Are Happy, A Few Are Worried?

In fact, Lonza's enhancement of its manufacturing capabilities is merely a ripple in the wave of global CDMO restructuring.

In February this year,Novo Holdings to Spend $16.5 Billion on Catalent AcquisitionAs part of the agreement, three manufacturing sites of Catalent will be sold to Novo Nordisk for $11 billion, which will result in some major contract manufacturing organizations disappearing from the open market.

ForThisM&A，Eli Lilly and Company executivesExpress ConcernAccording to the Wall Street Journal, Eli Lilly's Chief Financial Officer Anat Ashkenazi stated that Catalent is an indispensable part of the pharmaceutical industry for the manufacturing of commercial and pipeline products, especially in the diabetes and obesity sectors, where Eli Lilly also has products manufactured at Catalent’s facilities. Given that Eli Lilly competes with Novo Nordisk in the diabetes and obesity treatment fields, Eli Lilly's Chief Executive Officer David Ricks has also questioned how this merger might affect the company’s relationship with Catalent.

On the other hand, other companies are also trying to seize this opportunity to expand their own CDMO products. Recently, Juan López-Belmonte, CEO of Laboratorios Farmacéuticos Rovi, stated that the deal between Novo and Catalent is a "huge opportunity" for the Spanish company to win injectable CDMO business in the coming years.

From last year to this year, within the global CDMO industry, factory closures and openings have been happening simultaneously, with layoffs and expansions occurring side by side, presenting a scene of stark contrasts—both hot and cold, like fire and ice.

March 19,Novo Nordisk announces an investment of approximately 4 billion RMB in Tianjin, China for the expansion project of aseptic formulations, and held the groundbreaking ceremony for the expansion project. According to reports, this expansion project for sterile drug production will adopt globally leading isolator technology, providing a higher level of sterile assurance for drug manufacturing.

March 19,WuXi Biologics Announces Groundbreaking of Integrated CRDMO Center at Tuas Biomedical Park in Singapore, officially entering the construction phase. The center covers an area of 13.5 hectares and will provide integrated research, development, and production services for biopharmaceuticals in the future.

March 15,Novartis announces $256 million expansion of biopharmaceutical manufacturing facility in SingaporeThe project will introduce digitalization and automation on-site to enhance manufacturing productivity and help improve the skills of the company's employees.

February 15,CDMO Company New Vision Pharmaceuticals Announces Closure of Aseptic Blow-Fill-Seal Production Facility in Florida, USA88 employees unemployed.

January 26,Lonza Announces ClosureGuangzhouFactory, laying off about 300 people.

On January 25, Singapore welcomed a $2.23 billion investment from AbbVie.Expansion of AbbVie's Small Molecule and Biologics Manufacturing Plant in Singapore, adding 24,000 liters of biologics API capacity to the company's global production network and supporting AbbVie’s existing products as well as emerging immunology and oncology compounds.

October 2023,CDMO Formulsolutions Lays Off 66 Employees。

September 2023,SK pharmteco Acquires Controlling Stake in Center for Breakthrough Medicines (CBM) for an Undisclosed AmountOxford Biomedica, the leading CDMO in cell and gene therapy, announced that it will acquire ABL Europe from France's Institut Mérieux for €15 million (US$16.31 million). This transaction will further solidify Oxford Biomedica's position as the world’s leading CDMO in cell and gene therapy.

In August 2023, Emergent BioSolutions announced,Will reduce investment in its CDMO service business and no longer emphasize it.BusinessGrowth, while the company will lay off more than 400 employees.

February 2023,Thermo Fisher cuts 230 jobs at three sites in San DiegoMainly engaged in the manufacturing industry, engineers and scientists were also laid off; In April,Closing a plant located in Princeton, New Jersey, laying off 113 people, this factory is mainly responsible for biologics development and cell therapy services; In May, due to the reduced demand for Covid-19 products,Second Round of Layoffs Conducted at Three Plants in San Diego, laying off a total of 218 people; In August,Announcement of plans to lay off 205 employees at the Aragua, Florida plant; November,Announcement of the closure of the plant located in Auburn, Alabama, and laid off 97 people.

CDMO Enterprises in China

HowVolume IISeeking ProgressPlan to break the deadlock?

On the evening of March 26, Wuxi Biologics, the largest CDMO company in China, released its 2023 annual report. The data shows:Company Revenue17.034 billionYuan, year-on-year growth11.6%；Net profit attributable to the company's ownersApproximately 3.4 billion yuan, a year-on-year decrease23.1%. This is the first time that WuXi Biologics has experienced a decline in annual net profit since its listing.

Recently, several U.S. lawmakers have been advancing a draft bill targeting a number of Chinese biotechnology companies, including CRO and CDMO giants WuXi AppTec and WuXi Biologics. The bill willProhibition on "Foreign Adversary Biotechnology Companies Related to U.S. National Security" from Receiving Federal Contracts or Collaborating with Companies Seeking Such Contracts。

If the bill passes, companies that develop drugs covered by federal Medicare and Medicaid programs will have to choose other outsourcing partners.

WuXi AppTec and WuXi Biologics have become the main outsourcing manufacturers and R&D partners for many small and large biopharmaceutical companies, including Eli Lilly's Zepbound and Mounjaro. Last year,WuXi AppTec Generates 65% of Its Revenue from American Clients。

Two weeks ago, analysts at Intron Health wrote in a report,The Dilemma of WuXi AppTec and NovoAcquisition of CatalentThe potential gap created could account for approximately 20% of the global CDMO market share.. The team stated that most of the open shares will be redistributed to other Western CDMO companies.

At WuXi Biologics' earnings conference on March 27, CEO Chris Chen responded to these recent hot topics: "Companies that have not cooperated with us may have some concerns due to uncertainties in the broader environment. However,The companies that have cooperated with us all have a deep understanding of our service capabilities and quality.。”

WuXi Biologics stated,CurrentlyThe company's business is operating normally.Will actively expand overseas markets, and the "Follow-the-Molecule" project is proceeding smoothly.Several potential blockbuster projects areSmoothlyAdvance, willFrom 2025Contribute significantly to revenue。The company will continue to expand its commercial production capacity in Germany, the United States, and Singapore.

Cayman Islands-based Catalent released its 2023 annual report on March 29,Show Operating Revenue7.825 billionYuan,Compared to 2022The10.255 billionDecreased significantly,ReasonLost a large number of orders due to the pandemic,ButAfter removing large ordersYear-on-yearGrowth24.37%。

Asymchem's core business lies in small-molecule drugs, with key technologies being "continuous reaction technology" and "biosynthesis technology." The company is also expanding into large-molecule biopharmaceuticals, but has yet to achieve scale.

The annual report also showsFree Cash FlowRMB 2.308 billion`, year-on-year growth`103.1%. This was previously a widely criticized aspect of Asymchem: its forward-looking layout and not aggressive enough expansion; now, however, it has become an advantage, with all this cash on hand perfectly poised to weather the pharmaceutical industry's winter.

Regarding the 2024 plan, Chairman of Asymchem, Hao Hong, mentioned in the New Year's address: “2024Year isAsymchem accelerates its international layout comprehensively this year, and we will establish R&D and production bases overseas.”

Recently,Porton Pharma is located in Waigaoqiao, Pudong, Shanghai, focusing on antibody andAntibody ConjugationDrug (ADC） GMPChinaTrial production line completed and put into operation`, marking that Porton officially has the one-stop CDMO service capability to provide antibody and ADC services from Preclinical Candidate Compound (PCC) to Investigational New Drug (IND) application and GMP production for global biopharmaceutical companies and research institutions.`

In January this year, BoTeng invested 1.085 billion yuan in Chongqing to build an ADC commercialization platform, which will be completed later.Will reach an annual production of large-molecule antibody bulk solution28,800kg, ADC ConjugationStock Solution46,080kg, MacromoleculeAntibody preparation finished product2.7 Million Bottles，ADC Conjugate FormulationFinished Product2.2 millionBottle production capacity.

However, in the annual earnings forecast released by Porton Pharma, the total revenue for 2023 is expected to be between 3.517 billion and 3.869 billion yuan, representing a year-on-year decrease of 45% to 50%. The main reason is that the company delivered a large number of significant orders received earlier in the same period last year — In November 2021 and February 2022, Porton Pharma successively received two CDMO orders from Pfizer, with procurement order amounts of 217 million US dollars and 681 million US dollars, respectively.

In conclusion

During the epidemic,CDMOEnterprises have enjoyed numerous dividends. As the pandemic recedes, reduced demand, overcapacity, intensified competition, and uncertain international relations have all turned into chilling winds. Whether domestically or internationally,CDMOCompanies are all seeking change and breakthroughs. Opportunities and challenges coexist, hope and difficulties are present at the same time. In the great wave of change, will the strong remain strong, or will newcomers rise to the top? Let us wait and see.

Main References

Fierce Pharma: Lonza strikes $1.2B deal to buy mammoth Roche plant amid CDMO industry upheaval

Roche Media Statement: Roche To Divest Legacy Genentech Facility in Vacaville, California, asPart of Long-term Strategy to Evolve Manufacturing Capabilities

Roche Media Statement: Roche enters into a definitive agreement with Lonza, which willacquire the Genentech manufacturing facility in Vacaville, California,USA

Lonza News Release: Lonza Signs Agreement to Acquire Large-Scale Biologics Site in Vacaville (US) from Roche

Lonza News Release: Lonza Delivers Solid 2023 Performance with 10.9% CER Sales Growth and 29.8% CORE EBITDA Margin

PharmaVoice: 3 questions hanging over the Novo-Catalent deal

Seeking Alpha: Lonza: The Day Has Come, And We Lower Our Expectation

PharmaceuticalsEconomic Report Official Account:Lonza12$100 Million Acquisition of Roche's U.S. Plant, New Supply Chain Layouts by WuXi, Novo Nordisk, etc.—Is Global Pharmaceutical Production Capacity Accelerating Restructuring?

Snowballchuminhua

PharmaCircleWeibo:《1600"Million US dollars!"CGT CDMOAnother Acquisition in the Field

Securities Daily Voice Official Account：《GlobalBiotech Financing Warms UpWuXi BiologicsCan it get out of "DarkestMoment"

Yi HengCourtyardOfficial Account：《By《BiosafetyBill》AgainOn the Risks of Kangle Ying》

Asymchem Official Account：《Unswerving Original Aspiration, forging ahead without pause!AsymchemChairman Dr. Hong Hao2024 New YearSpeech"

AsymchemOfficial Account:《【Heavyweight】Technology Empowers, Moving Towards the Sun: Asymchem Laboratories Group 2023 Annual Performance Report》

FTAsNo. 1SimbayPark Official Account：《Milestone! Bo-Teng Co., Ltd. Antibody andADC GMP Pilot Production Line Completed and Put into Operation

Active Pharmaceutical IngredientsIntelligence Bureau Official Account: {Investment of 1.085 billion! Created by Chongqing PortonADC (AntibodyConjugated Drug) CommercializationPlatform》

WuXiBiological WeChat Official Account:WuXi Biologics2023Annual Performance Steadily Increases》

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