CDMOs dominate the headlines – and Lonza delivers a clear message of strength

Lonza is in a position of strength and intends to sharpen its focus further. Some observers see a warning shot for competitors in the Swiss group’s latest results, as the company combines a very strong financial performance with an explicit commitment to concentrate even more tightly on its core CDMO activities. In Switzerland, however, there is also a degree of unease that future strategic investments are planned almost exclusively abroad. Perhaps for this reason, Lonza’s share price slipped by a few Swiss francs despite the solid figures.

Strong performance in 2025 underpins strategic refocus

For the 2025 financial year, Lonza can point to an impressive set of results. The Basel-based contract development and manufacturing organisation (CDMO) generated revenues of CHF 6.5 billion, representing currency-adjusted growth of 21.7%. With a CORE EBITDA margin of 31.6%, the company not only exceeded the prior-year level but also its recently upgraded guidance. More importantly for both investors and customers, Lonza is using this operational strength to drive its strategic realignment.

Investments clearly focused on biologics and complex modalities

A key pillar of the strategy is disciplined capital allocation. In 2025, Lonza invested CHF 1.3 billion in property, plant and equipment – close to 20% of sales. The bulk of this spending went into high-growth technology platforms such as Mammalian, Drug Product, Bioconjugates and selected capacities in cell and gene therapy. This targets precisely those segments where pharmaceutical and biotech companies increasingly rely on external partners to manage high fixed costs and regulatory complexity.

Particular strategic importance is attached to the now “fully integrated” large-scale facility in Vacaville, California. According to the company, the site significantly strengthens Lonza’s position as the largest biologics CDMO in the United States. Vacaville contributed around CHF 0.6 billion in revenues in 2025, and the signing of a fifth major commercial contract underlines strong demand. For Lonza, the facility is a key asset in serving customers seeking to regionalise their supply chains – a trend that has intensified amid geopolitical tensions and has effectively pushed many companies to invest heavily in US-based manufacturing.

“One Lonza”: organisation as a growth enabler

With the launch of the new One Lonza operating model in April 2025, the company also reset its organisational structure. The consolidation into three major business platforms – Integrated Biologics, Advanced Synthesis and Specialized Modalities – is designed to reduce complexity and offer customers seamless end-to-end solutions. This is complemented by centralised operations and quality functions, as well as group-wide strategic account management for key customers.

According to Lonza, the new structure is already paying off: customer satisfaction continues to improve, and the number of integrated drug substance and drug product projects is increasing. At the same time, the company is strengthening capabilities in strategy, innovation and M&A to complement organic growth with selective acquisitions.

Market outlook remains positive as outsourcing trend continues

Despite macroeconomic uncertainty and geopolitical shifts, Lonza remains highly confident about market prospects. While large pharmaceutical companies are increasingly directing investments towards the US, they continue to refrain from building comprehensive in-house manufacturing capacity. For biotech companies, outsourcing remains the norm. The economic rationale for transferring development and manufacturing risks to specialised CDMOs remains firmly intact.

Against this backdrop, Lonza expects further revenue growth of 11–12% (CER) in 2026 and an expansion of the CORE EBITDA margin to above 32%. Growth is again expected to be particularly strong in the first half of the year. Currency effects – especially from a weaker US dollar – are seen as a headwind, but are not expected to materially affect profitability thanks to natural hedges.

Exit from capsules and ingredients sharpens Lonza’s profile

In parallel, Lonza is continuing its exit from the Capsules & Health Ingredients (CHI) business. While the division performed solidly in operational terms in 2025, it is no longer considered part of the company’s long-term vision as a focused CDMO. A separation would, according to Lonza, further strengthen capital allocation towards high-margin, technologically demanding business areas.

More critically, commentators at Neue Zürcher Zeitung note that Lonza plans to invest and grow almost exclusively abroad, potentially sidelining its Swiss home base. In the NZZ’s reading, this points to a broader challenge for Switzerland as a location. However, the trend towards heavy investment in the US – and increasingly also in China – by pharma majors such as Novartis, Roche and AstraZeneca can also be interpreted as a signal to CDMOs to follow their customers. Those that fail to do so risk falling behind.