Lonza Bets On Biologics. What's It Mean For You?

By Louis Garguilo, Chief Editor, Outsourced Pharma

It’s a large and universally recognizable CDMO, so this matters.

Going forward, Swiss-based powerhouse Lonza will increase its focus on biologics, and “advanced synthesis” such as complex modalities including antibody-drug conjugates (ADCs), cell and gene therapies (CGT), and mRNA-based therapeutics.

Lonza will exit its Capsules & Health Ingredients (CHI) business – considered by many as a cornerstone of the company’s until-now broader market strategy.

Few CDMOs performing a reorganization or market adjustment would be as newsworthy, although Catalent’s move in 2024 does come to mind.

Certainly, this new One Lonza organizational structure aligns with undeniable trends in the biopharmaceutical landscape. (And Lonza wants to make clear they are not existing the small-molecule CDMO business, as their press release explains.)

Will Lonza’s move lead other CDMOs down similar paths?

Conversely, we can assume some small-molecule-focused CDMOs see this as the reduction of a strong competitor. Their market just improved.

The Market Has Changed

Lonza’s strategy reflects a growing predominance of biologics and (complex) novel modalities.

Monoclonal antibodies (mAbs), cell and gene therapies (CGT), and ribonucleic acid (RNA) platforms now preoccupy biopharma innovation, funding, and partnership activity.

Many of today’s development pipelines include assets that fall into these categories, and they garner the highest market aspirations, and most sizable investments.

Because these therapies require sophisticated development and manufacturing environments, it is sensible that Lonza has decided to concentrate its efforts here to become best-in-class, and according to the company, "focus on its investment on its core CDMO business."

Candidly speaking, sponsors have habitually informed us the “we can do (most) everything” CDMOs have never been able to do everything well enough.

In that sense, Lonza’s decision looks less like a gamble, and more like a logical evolution to operate at peak performance at a premium end of the outsourcing market.

Lonza had been signaling its strategic intent, notably with its $1.2 billion acquisition of Roche/Genentech’s Vacaville biologics plant—a facility with 330,000 liters of bioreactor capacity.

Still, a deep breath before declaring this as the future of more and more CDMOs, or accepting ruminations about the impact on the entire drug development industry.

First off, innovative and more complex small-molecule development is not disappearing. (Neither is it suffering some kind of slow death.)

The best proof of this may be the chase to put the next GLP-1s in solid-dose formulations. Radiopharmaceuticals are lighting up as well.

Small molecule drugs still account for a significant majority of approved drugs and global prescription volume (including generics), and reign supreme in most global markets.

These drugs remain less expensive to develop, have more predictable regulatory pathways, and—thanks to increasingly complex synthetic techniques—are entering new therapeutic territory once thought the exlusive domain of biologics.

Specialize or Diversify?

After decades of M&A and consolidation, where CDMOs bolt on varied services and capacity to offer customers, is the time of the “one-stop shop” over?

Perhaps. All modalities, as hinted at above, are becoming more complicated, requiring elevated specialization and expertise.

Sponsors today must increase due diligence efforts to estimate whether a CDMO that, for example, suddenly says it can now do gene-therapy-related work, or is suddenly expert in GPL-1 development, is for real.

But having stated that, is Lonza’s new organization now a different brand of one-stop-shop, at least in the realm of all-things biologics. 

Semantics aside, what we really have here is a structure for supreme vertical integration.

One Lonza is a bold (and logical) move by an important CDMO pursuing its unique best interests. Is it also a flashing, industrywide signal?

We do know that Lonza is not alone. We see emergent biologics-focused CDMOs—Cellares, ElevateBio, AGC Biologics and others — building reputations and pipelines by going all-in on complex therapies.

Even diversified players like Thermo Fisher and Catalent place sizable bets on biologics and advanced therapy platforms.

And yet … many of the most successful CDMOs have found strength in offering both small and large molecule support across development and commercial stages.

This hybrid model is appealing to pharma sponsors looking to consolidate vendor relationships across programs, streamline tech transfers, and internally remain virtual and lean.

Back to small molecules specifically, there are also CDMOs actively expanding services to meet new and growing requirements in areas such as highly potent APIs (HPAPIs), controlled substances, and next-generation oral formulations.

Hellos And Goodbyes

Prioritizing biologics is perfectly sensible; completely existing the capsules and health ingredients business is bold.

Lonza certainly talked this reorganization over with investors and key stakeholders , who now get a clearer understanding of mission and market opportunities; with existing (and some potential) customers; and Lonza utilized its years of experience, market/industry intelligence and research to back up the decision.

And the CDMO must have also carefully weighed the risks.

What happens when we encounter the next shift at innovative drug sponsors?

For example, do we see hints of  a CGT cycle? Will Lonza have the operational flexibility and customer diversity to weather the next market shifts?

But long before that, perhaps, the real question now is will Lonza effectively execute on its plan. Will the anticipated benefits of full implementation be realized? Will profit margins increase?

Will other CDMOs take a similar tact to form unanticipated competition for Lonza?

No matter how those questions are answered, to wrap up here I’d suggest a main takeaway for biopharma sponsors is actually an old fundamental:

Lonza’s move reinforces the need to clearly understand your CDMO’s strategic center of gravity, its mission and priorities. Do they align with yours?

And perhaps a consequence of Lonza’s pivot may be that other CDMOs do better clarify their priorities to sponsors.  

Lonza’s strategy may render no definitive verdict on the evolving CDMO landscape. It is a reflection of its own strategies and goals, and competencies.

A name-brand CDMO just pushed all its chips to the middle of the table. Bets are off as to what the rest of the development and manufacturing outsourcing world does or does not do in response.