Late last year, Lonza Group announced that it would acquire pharmaceutical capsule manufacturer Capsugel for US$5.5 billion in order to provide integrated services ranging from new drug development to contract manufacturing and final product manufacturing.
This can be simply regarded as Lonza’s business diversification process. Experts, however, point out that the acquisition is likely to have significant implications in the field of contract manufacturing of biopharmaceuticals. According to them, Lonza is the global number one in terms of contract manufacturing capacity but it is unlikely to be able to make any additional investment in contract manufacturing facilities for a while following the acquisition and Lonza’s lack of cash can be an opportunity for Samsung Biologics, which constitute the top three in the industry with Lonza and Boehringer Ingelheim.
“Lonza is expected to procure more than half of the fund for the acquisition in financial markets and then its investment for contract manufacturing facility expansion is unlikely,” said an industry source, adding, “It has been said for years that Lonza will expand its contract manufacturing facilities but no official announcement has come out yet and, as a result, Samsung Biologics, which is expanding its facilities, will be able to benefit from the situation.” As of the end of 2015, the combined sales of Lonza and Capsugel are estimated at approximately 4.8 billion Swiss francs.
According to global consulting and research firm Frost & Sullivan, the global pharmaceutical market had a size of US$1.1050 trillion at the end of 2015 with the biopharmaceutical market segment accounting for 18.5% of it. This segment is expected to record an average annual growth rate of 9%, more than double that of the entire market, for 10 years to come and, as such, the outlook is rosy for contract manufacturers supplying biopharmaceuticals
Under the circumstances, Lonza’s investment in capsule manufacturing implies that it stepped aside in the contract manufacturing race. Once the facilities Samsung Biologics is currently working on are completed in 2018, its production capacity reaches 362,000 liters. As of the end of 2016, it was 261,000 liters for Lonza, 300,000 liters for Boehringer Ingelheim and 182,000 liters for Samsung Biologics.
“Lonza veered to capsule manufacturing with a large-scale investment required for it to remain ahead of Samsung Biologics and, in the meantime, Boehringer Ingelheim is focusing on animal drugs with its biosimilar business not going very well,” an expert remarked, continuing, “Samsung Biologics’ lead in the contract manufacturing industry can come earlier and with a greater-than-expected impact to the point of monopoly as the case may be.”