Merck KGaA will divest its CDMO business to Lonza, in a deal valued between low- to mid-triple-digit million Swiss francs.
The deal includes five sites across the US — more than doubling Lonza's US footprint — and will see around 1100 employees transfer to the Swiss CDMO. The companies expect to close the transaction in the middle of next year.
The sites are located in Carlsbad, California; Madison and Verona, Wisconsin; Indianapolis, Indiana; and St. Louis, Missouri.
The agreement excludes BioReliance, Merck's contract testing services business, which serves its life sciences clients.
For Lonza, the acquisition will bring the number of its US sites to nine and expand its capabilities in bioconjugates, viral vectors and drug-delivery technologies.
CEO Wolfgang Wienand said: “Our customers are looking for partners who combine deep scientific expertise with the capabilities and scale to support increasingly complex medicines from innovation through to commercial supply."
The integration of Merck’s CDMO business into Lonza will give our customers access to a broader range of services and additional production capacity in the US, a key market for Lonza.
Lonza expects the additional facilities to generate around $300m in sales in 2028, with a core EBITDA margin below the group's overall level.
The acquisition is expected to have an insignificant impact on Lonza's overall results.
Merck's CDMO exit follows strategic portfolio shift
Merck paid around $780m for Exelead, one of the five sites included in this deal, in 2022. The German-based company later announced plans to invest more than €500m during the next ten years to scale up lipid nanoparticle (LNP) technology at the facility.
Just four years later, Merck is set to sell the Exelead site alongside four others for considerably less than what it originally paid for Exelead alone. However, analysts have suggested the divestment is a strategic move for the company.
Richard Vosser, an analyst at JP Morgan, said the business lacked the necessary scale and was capital-intensive, adding that the sale would allow Merck to focus on its core life sciences businesses.
The divestment also forms part of a wider portfolio restructuring under CEO Kai Beckmann, who took up the role in May this year.
Merck sharpens focus on innovation-driven businesses
Merck said it intends to focus more strongly on innovation-driven businesses, moving towards a more concentrated Life Science portfolio.
The move comes amid wider consolidation in the CDMO sector, as companies such as Agilent Technologies, Celltrion and Catalent build scale in manufacturing capacity and broaden the range of therapeutics they can develop and manufacture for customers.
“Today’s announcement is another important step toward implementing our medium- to long-term strategic agenda,” Beckmann said.
As announced during our strategy update in May, we continue to focus our portfolio on innovation-driven businesses that build on our core capabilities and strengthen our long-term competitive position within Life Science and across the entire Merck portfolio.
"At the same time, we continue to connect and scale capabilities across Merck to leverage our unique market position as an integrated science and technology company."
The announcement comes after two major acquisitions by Merck.
In June, the company agreed to acquire US-based Bio-Techne, a provider of analytical technologies, for just under €10bn, strengthening its Life Science division.
Then, last month, Merck also announced its $1.3bn acquisition of Silence Therapeutics, a biotech focusing on siRNA therapeutics, to expand its presence in rare diseases.
