Welcome to Vacaville, and a warm welcome to everyone here in the room who made the effort to actually come over to the other side of the world, actually, if you came over from Europe. But of course, also a warm welcome to anyone, all the ladies and gentlemen being with us today in the virtual webcast. We, as always, prepared a rich agenda for yourself, including me speaking about a great story at One Lonza, and then handing over to Philippe, who will actually take you through the financial engine underlying and driving us forward. And then Gordon, as the Head of the business platform Biologics, will take it down and provide further examples on how it looks like specifically when it comes to biologics and drug product manufacturing.
Equally important, you will have, at least those of you being with us here in Vacaville, you will have the opportunity to meet other people, important people who actually make our equity story, our vision, a reality. It's going to be John Howell, the Head of Operations, Integrated Biologics, Fernando, the Site Head since May this year of this great site, and Atul, who's actually leading our biologics R&D activities. Before I actually dive into what One Lonza is about, let's take a quick look at the disclaimer, the safe harbor statement. Please read it carefully, take note, and feel bound to it. And with that, my four topics for me to take you through today are: The Lonza Engine delivers, reporting back. The CDMO model is structurally attractive.
It's a great place to be, especially if you are Lonza, which is the innovation to launch integrator, and I will explain to you what we mean with that term. To lastly, take it to the financials and why we actually call ourselves, see ourselves, and probably from an investor's perspective, believe we are a structural growth compounder, offering actually a great opportunity to create value. Before we dive into the details of the presentation, maybe kind of as a reference, and taking us back to the Investor Update in December 2024. When we introduced the new One Lonza strategy to you, six strategic imperatives which actually drive our decision-making and drive us forward at One Lonza. First of all, we decided to focus on the pure-play CDMO business to only compete where we are strongest, where we can create superior value for our customers and for our shareholders.
Second strategic imperative is about us being a multimodality CDMO, which is a great thing, and I will share with you today why it's not only great for us and our scientists and our customers, but also for you as investors. So we win across high-value, innovative modalities. Then it's about differentiation. What makes us special? We differentiate through the Lonza Engine, a metaphor that I introduced to you in December 2024. In order for us to be able to capture the many market opportunities coming our way, we actually need to build a resilient and competitive global infrastructure to, in the end, manufacture the products, the viable therapies that in the end help millions of patients worldwide. We do that by allocating capital with discipline at high returns. And lastly, we compound value through resilient, repeatable, profitable, above-market growth.
You will see me, hear me touching upon all those topics, and then Philippe and Gordon taking it further down. That is the One Lonza strategy. The Lonza Engine delivers. That is me reporting back on the promises that we made to you exactly 22 months ago, at the end of 2024. Let us go through what we did together as a global One Lonza team. We are gaining together significant momentum. The five elements of the Lonza Engine for repetition to remind you, high-performance teams. We reduced the attrition rate at Lonza, which was not high anyway, by another 3 percentage points. From our top 200 leaders, more than 80% actually have an engagement index of above 80%. It goes further. Considering that actually we went through significant change in those two years, it is remarkable how well the team followed through and made it all happen.
This is something which really excites me about Lonza, and actually created in me the confidence that we, as the One Lonza team, will actually be able to be successful short term, mid-term, and also in the long run. Leading scientific, technological, digital ecosystem. It is unique what kind of resources, what kind of intelligence, what kind of scientific knowledge we actually have within Lonza. Just a few proof points here. We at Lonza, using our Lonza GS system, together with our clients, brought more than 100 commercial drugs to market since 2012, more than any other company, including large pharma companies in the world. The ADC toolbox that we are currently building in our Advanced Synthesis business is market-leading as well and comprises everything that it takes to develop and manufacture those latest modality.
It is about payload, it is about linkers, it is about the mAb, it is about drug product, and the bioconjugation of all of it. What still impresses me, and I think is unparalleled in the industry, is the depth of the customer partnerships that we at Lonza are able to enter into. The level of trust that people invest in us is remarkable, and it is also kind of evidence in terms of what customers tell us. We tend to, making sure that we do not get off track and kind of testing that what we think about ourselves is actually true, but also finding out where we can still improve. We do that through an annual customer survey, measuring our net promoter scores and considering where we have been in 2024, which was already industry-leading.
We have been able to actually double the net promoter score from 2024 to 2025, actually, and currently the latest edition of the survey is going on, and at least so far, seems to deliver equally good or maybe even better outcomes. So 2x up for big pharma clients of Lonza, and 50% up for another very important customer pool of Lonza, small and mid-size biotechs, 50% higher. End-to-end execution excellence, so we kind of are expanding our offering. We are expanding our footprint in the value chain by not only be leading in the drug substances space, but also adding aseptic fill finish drug product capabilities, and it is paying off. Customers appreciate our ability to offer even broader services with actually phase II, phase III Integrated Biologics program up by 35% and 70% of our new molecules signed into Lonza now being integrated offerings.
Lastly, very important as well considering that we are actually growing 10%, 11%, 12%, 13% on average over time every year, we actually need to have a high capability to take on new people, to take on new technologies, to integrate assets like Vacaville, for example, to be able to continuously kind of feed the beast. This is actually what we are proving, not only here in Vacaville, and you will get now an intuition of what it means and how far the integration also mentally of this strong team here in Vacaville has progressed over the last one and a half years. We also are proving that in how we take on new assets invested in Visp, for example, but also how we actually acquire and make accessible technologies for Lonza and through Lonza to our clients, seamlessly integrating them into our go-to-market approach.
So very strong data points supporting our claim, our self-perception that we as One Lonza are truly gaining momentum. Kind of reminding us as well, we promised to you that we actually would transform ourselves into a pure-play CDMO, and also that we are creating an operating model which is better suitable, more suitable for how to run, in the end, a manufacturing business because the divisions actually haven't been a great idea, I have to tell you. We changed that, and the outcome is actually very positive, also exemplified by the feedback that we get from our people. Back to what we did, we created from three divisions, three business platforms. Integrated Biologics, we will actually learn more about that today.
Advanced Synthesis, another great and strongly growing business at Lonza, and Specialized Modalities, the kind of a business where we actually reach out at the edge of science into future modalities. We decided to exit our Capsules & Health Ingredients business, which is in itself a great business, but not a business where we as Lonza, where we through our Lonza Engine, can actually truly differentiate. We are not the best owner, which is why we actually sold it or are selling it, closing to be expected, before year-end, sold it to Lone Star Funds, at least 60%, and we will have the benefit of retaining 40% shares of that business to later on benefit from the upside that we expect is achievable a few years down the road.
We also made further divestments to create more clarity, get rid of distraction, so sold three more assets and are now really set up to continue to be the winner in the CDMO space where we actually should focus all our efforts on. Just quickly for the sake of completeness somewhat, let me check here. Let's go to actually not only changing our operating model, but of course also making sure that we have the best possible people on board, and that was about strengthening our strategy team. That was about strengthening our go-to-market approach and making it as easy to do business with Lonza as possible. That was also about, and I come to that later, increasing the intensity how we operate our assets. Quality, a key success factor in our business is elevated now to the Executive Committee level with Maria taking that over.
Intelligence analytics, a very important topic for the future as well. I'll speak to that later in the presentation as well, and a new Head of Global Communications. A number of significant changes, bringing on board strong people who will actually help to drive the future success of Lonza, in this case, through the matrix, supporting our three business platforms to actually deliver. Also as a kind of reminder, because that was of course also one of the promises that we made to you with financial performance, and I've chosen the headline, we keep the promises we make since 2024. Lonza, we are meeting, beating, and raising our financial outlooks, and at the same time making sure that not only the business performance today is great, but also that we have the ability to continue to grow.
Continuously taking online our growth projects, which will then drive future growth. Quick reminder, top-line evolution, we met the guidance in 2024. We beat the upgraded top-line guidance in 2025, and we expect to meet, as confirmed today as part of our Q3 update, we expect to meet the top-line guidance 2026. The same for CORE EBITDA, we meet the guidance 2024. We beat the upgraded guidance of 2025, and we raised our margin guidance as of half-year 2026, and expect it to land between 33% and 34%. Last part, where we actually also delivered on our promises. We acquired Vacaville, this great site, with a closing date of 1st of October, and everything that we promised to you over time turned out to become reality. First of all, you will meet some people here of this great team in Vacaville with a retention rate of roughly 95%.
We continue to invest into the flexibility of the asset to make it a truly flexible, high-performing CDMO asset. As a reminder, this is not about the quality of the asset, and you will see it today. It's great quality as you would expect it to be from a site coming from Roche and Genentech, but we actually will invest so that it becomes even more efficient going forward. Based on the contracts that we have been able to sign as of January 2026, we have already been able to fully compensate the outgoing business of Roche so that we, until 2028, have certainty to remain somewhere around CHF 0.5 billion in revenues to then, starting in 2028, start to grow and expect to reach peak sales that potentially being up to CHF 2 billion in the first half of the 2030s.
Equally important, besides integrating the site successfully, also executing the first successful tech transfer and having a successful U.S. FDA inspection has been key for us, and the team here in Vacaville delivered upon that. I guess the takeaway here is we keep the promises we make. Let's briefly talk about the CDMO business model and why this is a great place to be, the pharmaceutical market, and why it is a great business model to operate in. First of all, looking at the business potential as of today, which is of course the underlying commercial pharmaceutical market, which provides for a rare opportunity in terms of high growth consistent over time. Since 2000, it probably can go further back. This market continued to grow through everything, pandemic, wars, inflation, whatever.
Of course, kind of makes sense because health is the last thing people would start to save on. We are building on a market which is sustainably, in a resilient fashion, growing 6%-7% per year. What is also interesting, and there have been discussions about that topic probably 10 years ago, when a new modality enters the market, people get overexcited, and they believe, okay, biologics will actually substitute and wipe out small molecules. Then there is CAR-T. CAR-T will actually substitute everything, wipe out biologics. In all reality, what is happening is that the new modalities add additional opportunity, but actually it is building on what is there already before. In terms of being Lonza and us being the place to actually bring the most innovative technologies to the market together with our partners, this is a great place to be.
At Lonza, we are not happy to just grow at market rate, but we intentionally, through the investments and the technologies that we have chosen for ourselves, we actually created an upside of an additional 1%-2% growth by picking high growth modalities. We are right now doing the math, 6%-7% + 1%-2%. Then making sure that we are not stuck in the presence, but that we are a long-term opportunity. That we are preparing ourselves already today to not only grow and deliver over the next five years, but also five, seven, 10, 15 years further out. The window into the future, telling us how the future will look like and what we need to prepare for, is actually the pharmaceutical pipeline. First of all, it is growing at 8% CAGR, so if anything, it might amplify the underlying market growth.
What are we able at Lonza to cover within this pharmaceutical pipeline? 90% of the molecules, based on the technologies that we at Lonza already master today. They are driving growth today, and they will continue to drive growth in the future, considering how the innovative pharma pipeline looks like. But we are also taking bets on the future, because being strong and delivering, having this growth engine of biologics manufacturing today is great, and it will actually continue to drive growth for the next 10 years. But we need to make sure that we never miss the bus, which means we need to be present in the future technologies as well, and we are. Allogeneic cell therapies, viral vectors, autologous cell therapies, mRNA, all small, however, high growth segments in the market, and Lonza is able to cover them all.
Well set up, not only for short to midterm growth, but also ready to actually win in those new modalities in five, 10, 15 years out. Now, how to extract value from this very attractive underlying market. Let us briefly reflect upon the CDMO business model itself and make sure that we all understand that this is not the flavor of a day, but that this business model provides for substantial economic lasting value to the global pharmaceutical Drug product and drug substances supply. Why is that so? First of all, the benefit that the CDMO business model offers to our clients, be it small or large pharmaceutical companies, is, first of all, risk reduction. Because a company which has a phase II asset and is, of course, operating with limited funds as well, wants to spend every dollar on the true value driver, which is innovation.
They don't want to spend their money on brick and mortar, but rather go to someone who actually has the expertise and the capacity to actually take their products from innovation to launch. So it's risk reduction. Then specialized expertise that we are able to produce because we can apply it across the pharmaceutical universe. An individual company probably shouldn't invest into specialized expertise, which it might only use once for one product. Rapid secure scale because we have the capacity available, something very beneficial for our clients and in the end, again, freeing up their funds for them to invest into the true value drivers. How do we do that? Why does it work?
Because, first of all, we create economy of scale by pooling demand across the pharmaceutical universe, and by doing so, increase utilization, which in the end leads to superior returns on the invested capital for a specific asset or for a specific network. So returns, as soon as you start to be able to differentiate, offer something that others don't have, you can ask for higher returns. You pool risk. Markowitz theory. You all do that constantly. Kind of optimizing a portfolio through risk diversification of individual risky positions. For us, it's those risky individual positions being a phase I, phase II, phase III project, right? But by creating a large portfolio, the overall risk goes down, utilization goes up, economics go up.
This is actually why the CDMO business model is so attractive in providing sustainable value to the industry, which leads to continued outsourcing and growth increment of 1%-2%. Having a great business model is probably a good thing. Operating a great business model in a market which is actually supply-constrained is even better. How does future capacity utilization look like? We at Lonza are actually following the market since more than 20 years, and have a proprietary market model which actually kind of carefully looks at each individual announcement in terms of new capacity being invested by CDMO or by a pharmaceutical industry. The team of five, six people have super transparency in terms of what is available, what is being built. That's the supply side.
We need to make sure that we have an as precise as possible perspective also on the demand side. What is the kilogram figure? That's important. It's kilogram, the volume figure for certain drug substances being in demand going forward. Here we really go down to every molecule. Also in development, look at daily drug dosages in clinical trials and look at patient prevalence, and then calculate kg figures for each technology. We actually continue to see two things. First of all, the amount of capacity being provided by pharmaceutical companies and by CDMOs actually further shifting towards CDMO. Currently, 2025, we probably have a slight advantage of CDMOs, probably above 50%, but we expect it to actually further increase until 2035 based on everything we see, for one. Then the question is how is utilization?
The example here being Mammalian, we actually see continued undersupply, high and too high utilization of the globally available capacity. The different scenarios that you see here are for different assumptions in terms of what big pharma companies will actually invest in the U.S. On that topic, is the CDMO business model dead because big pharma companies decided to invest in the U.S.? The answer is no, and we have great evidence to actually answer with no. For one being, if you look at Bloomberg consensus and compare to historic trends, you see that actually the investment behavior, the CapEx intensity of the big pharma companies is not changing. It is growing by 3% over time, and also the CapEx to sales ratio is expected to remain the same.
What is changing, though, is that those companies probably shift capacity and investments from other parts of the world to the U.S. So in the U.S., we will see things coming online, but not actually changing the overall equation in terms of global demand. Just as another data point, which I leave to you to think about what it means, but the $600 billion announcements of investments of big pharma companies in the U.S., most of it, the lion's share will not go into manufacturing. If we just add up those sites, those manufacture investments which have broken ground in the meantime, we see roughly 5%, the majority of this 5% going into GLP-1.
No change, and also in the future going forward, a very favorable environment for companies like Lonza in terms of not only having a great business model, but also operating in a space where there is a structural undersupply of capacity. So adding it all up, 6%-7% underlying market, 1%-2% active market selection, 1%-2% continuing outsourcing, leading to an addressable market for Lonza 8%-10%. Then the differentiation, what is special about Lonza comes into play, the Lonza Engine, adding an additional upside of 2%-3%, leading to our organic growth model top line expectations of 10%-13% on average over time. So Lonza is the innovation-to-launch integrator. So really now not talking about the business model as such, but making sure that you understand what is special about Lonza and what will make us win in the future.
One important thought to understand what we are doing in the market compared to others, Lonza is not solving a procurement problem in the first place. We are not solving a procurement question in the first place. In reality, we are solving a value question for our clients. A customer, an over-the-pharma company, has two important first-order value questions to answer. The one being, is my molecule effective? We cannot help in this regard. That is for the customer to find out in clinical trials. The second question is, can I manufacture that product? Can I manufacture that product efficiently? This is when you come to Lonza, and this is what makes us special. So we are the innovation-to-launch integrator. We are not in a capacity race. I do not see us in a capacity race.
We will build the capacity that we need to support the growth trajectory that we see ahead of us, but we are not racing against anyone or another company to build capacity faster. As long as we can add the capacity that we need to support our innovation to launch go-to-market approach, we will create value for our clients, their patients, and for our shareholders. What does it mean? What does it take to be an innovation-to-launch integrator? Three layers, starting with infrastructure. Vacaville, I mean, the physical part of Vacaville is infrastructure. Then an operating system which actually connects and codifies our scientific and technological insights and our data intelligence to make them usable, applicable based on our infrastructure. Here, I think an important thought is our approach of being a multimodality vendor maximizes access to customer innovations and in the end, value capture.
I come to that later again. Let's quickly go through where we are today and what you can expect from us going forward in terms of further evolving our infrastructure. We have already today built a unique, highly resilient global network, which enables global supply chains and regional supply chains to serve a more fragmented world across key modalities. Just looking what it specifically means across the different technologies, you'll see actually there's almost no gap. We are present in all key regions, and we can deliver across all key modalities. The few gaps you see actually in terms of what we want to do and intend to do in the future, and where you might see potential future investments, especially for bioconjugation in the U.S., which is a very attractive market, obviously, in itself. On top of being attractive, it is undersupplied.
You will see also continuing investments in Europe and in the U.S. for biologics, and drug product will also play an important role going forward to us to really double down on our ability to integrate drug substances services with drug product services. Already today, we are operating the most resilient network in the CDMO space. In terms of supporting our short to mid-term growth, we cannot stand still. We need to continuously add new capacities, new technologies. What we are currently managing is a portfolio of 25 growth projects, altogether worth CHF 8 billion, 90% of that going into commercial and mixed assets, so the high return activities in our overall portfolio. We are committed to all our modalities, and those 25 projects actually serve all eight of them.
What you can expect going forward from this portfolio of growth projects, as soon as they have reached peak sales, is a ROIC return on invested capital at peak of 30%-40%, which will then actually push forward the average ROIC of Lonza as a whole. The recent project that we announced over the few months, spray drying in the U.S., commercial highly potent API, linker for ADCs, and a second ADC aseptic fill finish drug product line in Stein. This is a short to mid-term future. Lonza being a true long-term opportunity, we already today need to think about, how is our network supposed to look like in 2035 and even in 2040?
Because we need to lay the foundation today so that we are a company, an asset, which will not only grow the next five years on, but also 10 and 15 years down the road. Having said that, actually, we are looking at a world which most likely will be more fragmented. The response of the manufacturing industry, pharmaceutical industry being more regional supply for regional demand. We actually continue to optimize for two dimensions, one being resilience over different geopolitical scenarios and cost competitiveness. It is clear that you cannot have both at maximum at the same time. We are in a great place already, and we will continue to further improve on both dimensions, but especially on the dimension of cost competitiveness. How do we do that?
How do you know today what you need to prepare for so that you are ready to win also in 2035 and 2040? That reminded me of a project I went through 15 years ago, actually, which was called scenario planning, where you in a forward storytelling fashion, create different geopolitical scenarios, nine in our case. You decide for the three most likely, and then you actually create a model for ROIC, in our case, a discriminative ROIC model in which you can test different network setups against being successful under the different geopolitical scenarios.
The outcome of that analysis you will actually see, hear about, read about over the next months and years because we are preparing ourselves through optionality in terms of investment platforms around the world to be successful also in the long run, and not only operate the most resilient network today, but also in the future. The second layer, the operating system, this is a very complex slide, and it is a complex slide by design because what we do at Lonza is complex. On the left-hand side, you essentially see we are operating in eight key modalities and we, together with our clients, bring their breakthrough innovations to launch and provide viable therapies for patients. In between, we offer services across everything, life cycle stage, preclinical to commercial.
The scale in our facilities from lab to large scale, all supported by a leading quality management system and all this happening all around the world, in the U.S., in Europe, and in the rest of the world. This is unique. You don't find it anywhere else. If you want to know why this actually makes sense, I would like to give you just one figure. The rest you can actually forget if you want to. It is 99%. Once a molecule has entered this box at Lonza, the retention rate through the different stages of development, phase I to phase II, phase II to III to launch, is 99%, normalized, of course, for clinical failure. I guess the message is, as soon as we actually have a molecule within Lonza, in our operating system, it never leaves again.
If you have something special like that, if you created it over 40 years in our case, you want to maximize the opportunity. So take in as many molecules as possible, which means being a multimodality CDMO is maximum value capture by maximizing the number of opportunities. We do that, again, at any scale, any phase across modalities across the globe. So this is about maximizing the opportunity and the value capture. Some proof points. We have a batch success rate across all modalities of 99%. Contracts signed prior to phase III is 90%, so that means people come to us for this very reason, us being the innovation-to-launch integrator. We are at any given point in time working on more than 1,000 molecules, which is the industry-leading pipeline.
One out of five FDA-approved drugs every year kind of are connected to manufacture at Lonza or using Lonza IP. 14 out of our 20 top customers work across at least two business platforms, so integration again, and 95 of the 100 large pharma companies are actually customers of us of overall 800 customers. So last part, last layer is the science and technology piece. I will actually make that short. First of all, and I just take that example, our GS expression system is the most used biologics expression system in the whole industry. We continue to improve it further in terms of cell line stability, in terms of yield. Gordon will take you through that in more detail later. We also continue to not only develop technologies ourselves, but also add technologies from the outside, acquire them or making them exclusively accessible to us.
Recently partnered with Asimov, acquired technology from Nona Biosciences, and just last Friday actually from Qurient, another dual payload technology, which will all help us to create an even stronger integrated innovation to launch engine. So a specific example with regard to another technology which will become very important for the pharmaceutical industry as such, but also for us at Lonza. But maybe before we go into specific technological questions, let us remind ourselves what data treasures we actually hold in our hands. We are the one company in the world, including large pharmaceutical companies, with the highest number of executed batches. We brought, at Lonza, brought more than 140 drugs to market in terms of manufacturing. We are working on 3,300 clinical molecules over that period of time and 1,500 tech transfers.
You kind of can imagine that we are sitting on the richest database in terms of manufacturing data of pharmaceutical drugs. We started to actually clean them up to make them accessible and usable for AI technologies and create a kind of a Lonza intelligence layer to then optimize for three things. First of all, we actually want to accelerate development and tech transfers, and Gordon will give you one specific example later where it is actually already happening today. Second dimension is AI-guided manufacturing, so increasing output and getting more out of the same asset. Lastly, AI-supported quality to actually increase our batch success rate even beyond the 99%, to make sure that we create as little waste as possible.
This is the journey we embarked on, and the starting point for us is unique, and we will make use of it going forward on those three dimensions. One specific example, a first proof point actually is around a real project with a large pharma customer where actually together with the customer, based on number of historic data, has been able, through AI, to actually increase the output by 15% by actually identifying relevant signals in historical batches between process parameters and output by through a human in the loop, an MSAT expert, make decisions which led to significantly improved output for this very product, and in this case of 15%.
Remarkable and more to come. With that, I actually come to the last part of my presentation, which is me taking all the great things that I explained to you about the market, the CDMO market, the business model, what makes us special at Lonza, the Lonza Engine, and us being the innovation-to-launch integrator, how that actually all ends up in terms of the financial algorithm, the financial engine that we are running at Lonza. But before we go there, I want to share a few data points in terms of what the company did in the past and delivered in the past, how resilient this performance over a decade actually was, and how we, as the global One Lonza team since 2024, accelerated our performance beyond everything that we did before. But let's start with the period of 2019 to 2024.
A low teens sales CAGR over time. CORE EBITDA growing at the same CAGR, also low teens, which of course then leads to a flat CORE EBITDA margin. However, we added over that period of time CHF 2.5 billion revenues, and we did that during COVID. If anything, COVID was an opportunity for Lonza, and we all remember that Lonza was part of the solution. We actually have been the manufacturer of the COVID-19 vaccine of Moderna. Ukraine war, spiking energy prices, not a problem for the Lonza business model. We continue to significantly grow at high profitability. Biotech downturn, while not great for the industry, it's only 10% of our business, and this 10% doesn't really completely depend on biotech funding. Also here, not really a problem. Us continuing to grow at very high profitability.
Same is true for U.S. tariffs, while of course, bringing friction to global supply chains, our business model completely protected us against impact in this case. Same holds true for the war in Iran and high energy prices. We actually, as a business, went through all that in a very resilient fashion and continued to significantly grow at high profitability. What happened since 2024? We actually increased, considering the acquisition of Vacaville, of course, our sales CAGR to 16%-17%. CORE EBITDA margin, while being flat over the five years before, up 3- 4 percentage points. ROIC up 2- 3 percentage points, and free cash flow conversion is expected to be twice the conversion rate as compared to 2024. How did that happen?
And essentially, myself, the global One Lonza team worked on five key levers, but all of that based on a deeper transformation, which in the end is a cultural transformation. Let me maybe even start there. When I joined Lonza in July 2024, I actually was impressed by the quality of people I met. Highly capable teams. I was impressed by the readiness of the people to share, and I was impressed by the readiness of the people to also listen to my thoughts. I spent a lot of time walking, talking to people across the whole company, across all hierarchy levels. I tested my hypothesis, and I listened to theirs, and I synthesized that together with the executive leadership team into what then became the One Lonza strategy, the One Lonza vision, our purpose, our values.
What I also felt, and you can imagine that this is actually not a surprise, considering the past years in terms of leadership uncertainty at Lonza, there was a certain lack of clarity within the whole organization, and the whole organization was operating in an operating model which actually wasn't suitable for CDMO divisions, and the company kind of run like a holding, right? I mean, lack of harmonization, really not fully exploiting available synergies, while in reality, with the exception of the CHI business, the CDMO business is just one business model, right? That was the starting point. What also was kind of a surprise for me at the time, that there was some confusion around the identity, what Lonza really is. I kind of found a number of people who actually weren't clear about, are they a pharmaceutical company or are they a manufacturing company, right?
That is a very important distinction. I want to make that clear with one example, which is a numerical one. If you look at successful large pharma companies, they are operating with a gross profit margin of 90%, so 10% COGS. If you look at Lonza, gross profit margin is, I mean, let's say around 40%, so 60% COGS. So how intense and how rigorous you are about manufacturing makes the whole difference, right? There was confusion around that, which made actually the sentence, "We are not a pharmaceutical company, we are a manufacturing company," for me, the most used sentence over my first year. What did it mean practically? It means or meant me, the team, bringing much more intensity in terms of how we operate, how we run our business. Much more intensity how we actually operate our assets.
Just two examples, and that is part of the operational excellence improvement that we have been able to implement already leading, among others, to the accelerated financial performance. There haven't been really useful, meaningful productivity KPIs. I brought some very simple ones, which I continuously use myself and take a look at, and the whole organization knows I'll take a look at it. This actually helps to make clear and make transparent, are we improving at the pace at which we want to improve to, in the end, also mid to long-term, deliver the margin expansion that we want to achieve? What, of course, also helped is bringing on new growth projects. CapEx excellence was another very important point because in the end, Lonza is about cash, right? We need to generate cash.
It's a very CapEx-intense business, so how good, how fast, how precise we are in delivering CapEx projects is a key success factor going forward. Again, confusion about being a pharma company or manufacturing company makes a difference in terms of how we look at CapEx efficiency. Here, we made significant progress as well by introducing some very useful tools as well. Technical reference costs and us shooting for top-tier performance in this regard. Being very precise in terms of what is really needed, what is truly needed to deliver a certain business case, and making that very clear upfront. That already led in individual examples of important growth projects to CapEx reductions of 30%-40%. Operating leverage is something which, of course, comes along with discipline in terms of SG&A costs, and we see that at work as well. Commercial excellence is another important topic.
How we actually show up, how we go to market, what the commercial model is, how we actually price value. This is something that will even get more intense and will receive more focus going forward as soon as our new Chief Commercial Officer has joined the company. Kind of bringing it together again. We are also underway and on the transformation journey in terms of even strengthening our high-performance culture and strengthening our competitive toughness in terms of how we win in the market. We see first evidence that it actually is coming through, and that people accept the challenge, that they turn them into opportunity, and in the end, into a performance. What we did together over the last two years in this regard speaks to itself.
This was also the reason why we actually are looking with a much higher confidence at our ability to further accelerate how we improve our margin going forward, which we then translated into the upgrade of our organic growth model as shared with you today. So the organic growth model in which we actually turn disciplined investments into resilient and repeatable, profitable above-market growth at increasing returns. Sales growth, low teens, organic CER on average over time, which we then turn into CORE EBITDA margin expansion with EBITDA margin growth, sorry, EBITDA growth ahead of sales growth, and the upgraded financial ambition in this case being to reach high 30%s in the midterm. All that then needs to translate into an improving cash generation KPI, in our case, being free cash flow conversion on average over time, which we are seeing to come through already now as well.
That then feeds the next investments, which will be at the mid to high teens percentages of sales to then yield as an overall economic outcome ROICs of 2x-3x WACC in the midterm. If you look at it, what we are doing is actually creating a structural growth compound. A cash funds growth. Growth creates more cash. Repeat. That's probably a very attractive financial engine that we hold in our hands. This being our organic perspective on the world. During our investor update, December 2024, I also shared with you that going forward, we would actually take an impartial view on how to grow, be it through organic growth projects or be it through value-accretive bolt-on M&A.
Based on us having built the internal muscle, the strategy team, and the ability to be very efficient in terms of executing due diligence, executing deals, and integrating new people, new assets, new technologies, we are looking at a broad set of opportunities, be it in the CDMO industry itself, where we might acquire other businesses, including new modalities, but also underutilized pharma assets, Vacaville being that kind of archetype. We continue to look at technological opportunities from technology developers. What we need, though, in order to really double down on M&A opportunities is a clear line of sight towards value creation, and we test each and every opportunity against two criteria. First of all, does the business model provide value for our customers, and does it work? Does it provide value to Lonza?
Second criteria, does a specific opportunity benefit from what makes us special, from our Lonza Engine? Because only then we have reasons to believe to create superior value. The three areas of opportunity for us is, of course, taking on capacity from the outside world, taking on business from the outside world, or taking on and integrating technologies. If I look at the three business platforms, you see our kind of relative priorities in terms of where we would like to acquire and where we are looking at opportunities. Vacaville is a successful example in terms of capacity for biologics. Technology, we acquire technologies. Advanced Synthesis is also an area where we would be ready to take on capacity businesses, now continuing to acquire technology. Specialized Modalities is probably somewhat different because we have enough capacity, right? But acquiring business there or technologies would make sense.
We are always mindful of not only looking at what we have today, but also kind of adding to our innovation to launch integrator, further attractive modalities. So thinking beyond today and being ready to acquire the next modalities, which might then drive growth in 10 years down the road. There is opportunity for us to accelerate our very attractive, strong, and upgraded organic growth model through M&A. With that, actually want to come back to the five key messages that I've been sharing with you today. Which is, first of all, we have delivered on all our commitments made at the Investor Update in December 2024. We operate in a structurally attractive market that supports not only short to midterm opportunity, but also long-term opportunity, and we are proactively, strategically preparing ourselves also for this long-term opportunity.
There's not a time-bound organic growth model which will end in 2030 or so. It will continue for many, many more years. We are the one innovation to launch integrator that offers highly differentiated and uniquely comprehensive CDMO services. So remember, once a molecule is within Lonza, it doesn't leave anymore. Increasing the opportunity through being present across many opportunities makes sure that we maximize the value creation of this special thing that we have created over the last years. We are, in financial terms, a structural growth compounder that delivers long-term value through disciplined reinvestments of increasing cash at high returns. Lastly, as you have seen today, we upgraded our organic growth model and the resulting midterm financial ambitions. With that, I hand over to Philippe, who will take you through the details of the mechanics of our financial Lonza Engine. Thank you so much.
Well, thank you, Wolfgang. What an exciting story indeed. A warm welcome from myself as well to all of you joining us here in Vacaville. Good morning to people joining us from the U.S. and, of course, good evening to people in Europe. In the interest of time, let me jump right into the content. This page, actually, Wolfgang just took us through, and actually discussed and showed us why we are in an attractive industry and why Lonza is very well-positioned within this industry. Wolfgang also explained to us why combined and together this creates a very attractive financial model, something we call the Lonza structural growth compounder. But how does it work? What are the mechanics?
What are the actions that we put in place to actually increase and give us high confidence in creating the sales growth, deriving the margins, creating the cash, and rising the returns? That is what I would like to take you through today. Let me start with one fundamental concept that we get asked often. How does actually Lonza create growth and grow returns over time? On the left, you see the illustrative example of one of our growth projects. Three phases. The first one, we deploy capital. When we deploy capital, we actually don't generate revenues yet. We don't generate returns. The asset is actually cash flow negative and ROIC negative. Then comes the ramp-up period. This is where the growth happens. This is where Lonza grows, this is where we increase sales over time. After a while, the asset reaches peak utilization, growth slows down.
However, the asset becomes highly cash generative, high margin, and high ROIC. Remember, all the projects we launch are designed to deliver ROIC at or above 30% when reaching peak. A return that is much higher than our average ROIC of the company today. So every additional growth project raises returns. One single growth project doesn't do the trick. What you need is a large portfolio of assets all the time. That is what we have. Wolfgang mentioned 25 large projects. These are the large projects. These are not all the projects we're running in the company. The addition and the overlay of growth projects is what creates the continuous 10%-13% growth over time. The actual growth of a single year depends on the timing and the size of the growth projects and their phase.
Yes, there will be some fluctuation, the actual rate of growth, even more so when you look at the platform level. Why? Because a platform has a much smaller portfolio of projects and a smaller base of assets. As you can see in the middle, the rate and the share of our growth projects is increasing over time. 2x here over the midterm. So the addition of these growth projects will lift the ROIC of the company over time. Very important concept, and again, something that we cannot keep repeating. Now let me stay with growth a little longer. As you can see on the left, this is what Wolfgang took us through before. This is the market view of why we believe 10%-13% is the right growth figure for the company. But how do we capture that growth?
How do we deliver on that demand? This is what the right side is showing you. 8%-10% on average, roughly, will be what the company will generate out of new capacity, new growth projects we are adding to the network. Why 8%- 10%? Because our model tells us that we will be spending 10%-13% of our capital in percent of sales into growth assets. This 10%-13% of growth capital will generate over the midterm after construction, after ramp-up, a growth for the company of 8%-10%. Why only 8%- 10%? Because this is further out. During these five to seven years, the company will have grown significantly. While yes, you have in your mind this one-to-one ratio between CapEx and peak sales, this is in seven years.
The company will have grown, therefore not giving you 10%-13% growth, but roughly 8%-10%. The remaining growth will come from our base assets. Don't forget, we are investing into our base assets to continue to grow every single year. This is very attractive growth because yes, you don't rebuild everything. You basically improve and you increase capacity of existing assets. Together, again, roughly 10%-13%. These two model match, and this is why we feel strongly, and we're highly confident about the growth we can generate. My last slide on sales, and showing you why we are confident in the midterm growth. Everything we need to grow to 2030 exists. All the large growth projects are existing. They are either ramping up or they are in the late stage of construction. What will drive growth by 2030?
Foremost, the assets you see on this chart. Vacaville here, of course. Significant growth driver by 2030. Our 20k asset in Visp, another key growth driver for the company. Portsmouth, small and mid-scale assets, also very important by 2030. Then you see commercial bioconjugation, several assets in Visp ramping up over time, significantly driving growth in the midterm. Then we have another load of smaller growth projects. Remember, highly potent API assets, or drug product assets that we built in Stein, Switzerland. All of these will also contribute. Then we have our base, which is very predictable, which will also deliver to growth by 2030. The story, and Wolfgang mentioned that, the story doesn't stop in 2030. We're investing today to grow for the next decades.
You've heard us this year already announcing three projects, and there will be more to come based on the renewed infrastructure strategy that Wolfgang shared with us today. Where and which projects we will need? This you'll hear soon from us over the next months and years. Therefore, high confidence for the growth for 2030 and preparing already and laying the foundations for the growth post-2030 into the next decade. Let me shift gears to our margin expansion. 2024, we reported just slightly above 30% CORE EBITDA margin. 2026, this year, we're telling you, and we reconfirm today that our margin will be between 33% and 34%. How do we go from here, and what are the actions that we've put in place over the last two years that show us the path to the high 30%s? Mainly, three drivers of margin.
They are actually not very different from the three drivers I told you back in 2024. First, maturing growth projects. The growth projects you saw driving top line are also the one that over time, as they increase utilization, have better cost absorption, will grow their margin. So the maturing of our growth projects is one key driver of margin improvements. Number two, commercial and operational excellence. This is what we do day in, day out. These are the metrics that Wolfgang shared with you on how we drive the organization to have better margins in all our assets, and I will get to this in a second. The third one, probably in many company present, operating leverage. Generating economies of scale in your administration. We will not grow our administrative cost as fast as we grow sales.
We have actually the ambition to grow significantly less. How do we do this? We invest in technology, of course, including AI. We invest into new systems to standardize, to harmonize, to make us faster, and to make us more transparent, for us to be enabled to do what we need to do every year a little bit better. Now bear in mind, we will continue to invest more into R&D and into technology. So while we will save money every year on administration, we will continue to invest in R&D, we will continue to invest in technology to keep our technological and scientific leadership. Let me double down on how we grow gross margin. You see two concepts here on this slide. One being our asset capacity optimization, and on the other hand, portfolio mix optimization. These two are interlinked and intertwined.
On the left, asset capacity optimization is really about driving two things: increasing the capacity of an asset and increasing the margin you generate out of this asset. Over the last two years, we have built for every single asset a multi-year plan that actually drives these two axes upwards. How do we do this? You see this at the bottom. Things like downtime optimization, debottlenecking, cycle time improvements. Gordon will actually touch on this and give you more examples and more data actually on the biologics network. This is really the bread and butter for a manufacturing company. On the right, portfolio mix optimization. Why is this interesting? This is what you do if you assume an asset to have a finite capacity. If you think you cannot grow the capacity anymore, what do you do?
You still look at every single product that you produce in this asset, and you try to increase the margin of that product. How do you do that? You can reprice. You can do process development and process improvement. You can find maybe a better asset to transfer that product because it is more profitable in another asset, and backfill with a more interesting new product. We do this all the time, and the beautiful thing about portfolio mix optimization is you increase margin with limited to no incremental capital. This is much cheaper than building a new factory. So we do this all the time, and I think we have grown, and we have shown you that example before. We have grown the margin of our small molecule business platform at the time over 10 points by doing a combination of these two things.
This works, and this is what we have in front of us for all our assets in the network. Number three in the structural growth compounder, cash. Cash is king. Margins are important, but margins don't matter if you don't extract the cash out of the margin to be able to fund our future and to reinvest that capital. Over the last two years, we've spent a lot more time, a lot more effort, a lot more organizational focus to actually drive cash and drive cash conversion. Again, how will we do this over time? Three levers. They're not new. Many company apply them. We've doubled down on really focusing the organization on these three. One, EBITDA margin improvement. I just spoke to you about this. These are the drivers. We will grow margin. This will increase the cash available to the company.
Number two, higher CapEx efficiency. Now with our CapEx already at a level that is, for us, steady state, we told you the model is between 14%-19% CapEx in percent of sales. We are in that range today. The intensity of CapEx is not something that will drive a lot of increasing cash flow conversion. Nevertheless, this is something we need to focus, and our engineering and operations teams are constantly looking at ways to invest or to build assets more cheaply, more effectively, more quickly. Number three is something that is much more important, which takes a lot of effort. This is trade working capital management. We are a capital-intensive business. We are a working capital-intensive business. But this is not something that we need to take as a constant, as a given. We need to work on this.
We need to work through ways to liberate cash out of working capital, which includes, of course, looking at inventory, which includes looking at quality release times, which looks at standardizing raw materials across the organization, having a better visibility of our inventory across the company. As I mentioned in the past already, we are investing into a new SAP S/4HANA system called Nexus, which will give us a lot more visibility on our inventory, which will harmonize processes across the organization and allow us to drive and to work on trade working capital in a much more effective way over the next years. Now, once we have the cash, we reinvest that into growth. You've seen that page back in 2023, actually. While this page depicts our world as phases, phase one, two, three, four, this is not how we run our investments.
We run a continuous cycle of investments, always looking at where do we find pockets in the market where there's demand that we can fulfill at high returns. For illustrative purposes, we show this to you on a graph with phases. Why? Because this shows beautifully how you first invest, then comes the revenue, and the beautiful thing is once these revenue are here, they stay for a very, very long time. We have durable cash flows and returns and sales coming from these assets for decades. This is what this page shows very well. That's why we kept it. Please don't keep in your head that these are phases and we suddenly start phase IV and phase V. We don't do that. But this page, I think, shows beautifully what's happening and how the business model works.
As you can see at the end, we have the phase that starts in 2026 with these three new assets. Three assets will not make it. We will continue to add and add and add new assets. Another key things to note here, the ROIC on all these periods is at or above 30%. We've delivered on the return on these phases and on these assets according to our thresholds. This is what gives us the confidence to drive ROIC over time to 2x- 3x current WACC. How will ROIC grow? That's what I have on my next page. 2025, we reported a ROIC of 12%. From here, three things will take ROIC to 2x- 3x of WACC.
Number one, higher profit margins, again, shows you the importance of driving margins and the discussion we had, and Wolfgang had this, and I had this. Number two, higher CapEx efficiency. Again, we're spending 10%-1 3% of capital on growth. We need to be very efficient to deliver more capacity at a lower price point. Third, lower trade working capital intensity. These three drivers will drive our ROIC to 2x- 3x today's WACC. Now important, at every single point in time, our ROIC includes what we call something like a capital stock. This is capital we have already invested for future growth. This is always part of the ROIC today. This is growth that will come in the future, revenues, returns that will come in the future. Second, we have infrastructure and goodwill.
Like many other company, we need infrastructure, we need wastewater treatment, we need warehouses, we need quality buildings. They don't generate any revenue, they don't generate any return, but you need them. So our underlying run rate ROIC, if you want, is much higher and will be much higher than 2x- 3x WACC. Now we often get the question: Philippe, tell me, did the assets deliver? Did you pass asset deliver? That's what you see on the right. We've depicted a few assets that are at or clear or very near to their full utilization and to their peak utilization. You see that these assets, and these are large assets. I'm not going to go through them. You can take a look at these are really large assets. They are all delivering above 30% ROIC today.
By adding more of these assets over time, this is what will lift ROIC to the levels we're predicting for the midterm. Our capital allocation framework, I'll be very quick because we haven't changed it. We kept it. This works for us. This starts by really having priority number one, which is to invest in our current base assets. We need to secure the future. We need to make sure that these assets continue to operate at the best level. Number two, our commitment to dividends. We have now 10 years of progressive dividend policy, and this will continue. New this year, yes, we are expecting the proceeds from the partial exit of CHI. This should come this year, roughly CHF 1.7 billion that we will get, and this then creates what we call discretionary capital or discretionary cash.
We use this cash to reinvest into organic and inorganic opportunities at high returns, and being really diligent and disciplined on where we invest and how we invest that money. I will not repeat our organic strategy because Wolfgang just did so. Should we not be able to find opportunities to invest the capital, neither organic nor inorganic, we will return that money to shareholders. We have done this in the past. We have also promised a CHF 500 million share buyback as soon as CHI closes. On the right, you see that as the company grows, margins improve, cash conversions improve. Our leverage will go down significantly over the next few years, providing a significant capital flexibility to do either more investments, organic or inorganic, or actually returning money to shareholders. So bringing this all together. A high conviction for our 10%-13% growth over the midterm.
We have the assets in place. We know how to get and where to get that growth. Second, we have put all the actions in place to deliver margins that will grow and our CORE EBITDA to grow ahead of sales with a new ambition to be in the high 30%s. Add on to this our increased focus on cash, our increased focus on ROIC, and this creates the beautiful model that we call the structural growth compounder. Now I would love to hand over already to Daniel. However, I owe you a Q3 update. So shifting gears to the very near term after speaking about the future. We are very happy today to report that we can confirm our outlook that we increased back in July. We are on track. We had actually a very good momentum during Q3, allowing us to confirm two things.
One, our growth for the year of 11%-12% in constant currency, and our margin outlook, which was upgraded in H1 to 33%-34% of CORE EBITDA margin. Two, three quick words by platform just to give you a short snapshot on Integrated Biologics. Again, a very healthy growth momentum across the platform, both for mammalian and for drug product. You see this. You are in Vacaville for the people that are here, for the people online. Vacaville is progressing well. We are on track with our construction. We told you that there is a shutdown for one of the assets in Vacaville. This is ongoing, and this is on track. Then our large-scale mammalian facility in Visp is actually also ramping up as planned.
For Advanced Synthesis, we continue to see great opportunities across both small molecules and conjugation, and the market remains a very attractive market. Important to note for Advanced Synthesis, because they had a fantastic first half. We mentioned that this was a very H1-loaded year for Advanced Synthesis. So the growth is expected to be more or less flat for the second half. This is versus a very strong H1 and versus a very strong H2 last year, and so this is by no mean an indication of the dynamic of this business or of the prediction for next year. This was expected. This is developing as we had expected back in the first half. Cell & Gene doing really well on our Specialized Modalities, sorry, doing very well on Cell & Gene. A little bit of catch-up from H1 and showing good growth in that business.
Microbial really performing, continue to performing well. Our bioscience business normalizing after a very strong first half this year. Also here for Specialized Modalities, everything on track as expected in July. FX to finish on this. Again, we had expected, and we are expecting a headwind from the dollar versus the Swiss franc. This is not new. The latest view with rates as of October would be probably to have a headwind of 2%-3% on our top line. With that, I close my section. I will welcome Daniel to take us through the Q&A, and welcome back Wolfgang on stage.
Thank you. Thank you, Philippe.
Yes. Go ahead.
Very good. Thank you very much, Philippe. Thank you very much, Wolfgang. Just setting a little bit of organizational background. We will now quickly start preparing the stage here for 2-3 minutes until Wolfgang and Philippe then come back. I will quickly use that time to introduce myself. Most of you know me, of course. My name is Daniel Buchta. I am Head of Investor Relations here at Lonza. Pleasure to have you here also from my side. Just very briefly, obviously, IR has told me a lot of things. You can show as many slides as you want, but there will be always questions. I am happy to take them. Give us a quick moment, please. Welcome back, Wolfgang. Welcome back, Philippe. So how are we going to do it? One second. As I said, there is always interest to ask questions.
We would start here in the room, as you already did. Raise your hands, please. Quickly state your name, institution. Request would be to limit it to one question. I know one question can be very long. Please try to stick to that one. Starting here in the room, who would like to have the first question? James? Question does come with a mic.
Thank you. James Quigley from Goldman Sachs. Thanks for that. That was brilliant. You've reiterated the CDMO growth corridor of 10%-13% based on 14%-19% CapEx. But with the current guidance, you're currently delivering 10%-13%, but over the past five years, you've spent 20%-30% on CapEx. How do you reconcile the difference here? What are the inefficiencies in the previous CapEx? Was it slower ramp of those facilities? Why is the growth from the forward-looking CapEx faster or more efficient than the backward-looking CapEx? Or why is the high intensity CapEx period not driven faster growth?
Yeah. Thank you, James. Maybe I take the first part of the answer. First, probably twofold. For one, indeed, there has been some, let's say, catch-up CapEx to be invested into infrastructure systems.
Wolfgang. I think your mic is not working. You want to turn it on?
So happy to repeat. Can you hear me now?
Very good.
Sorry for that. Thanks, James, for a great question. Probably twofold answer. First of all, there was some catch-up CapEx to be invested by the company in terms of infrastructure systems from what we didn't do in the late 2010s. Second part is, and I kind of shared the approach that we kind of amplified and changed over the last two years in terms of CapEx efficiency, how mindful are we about defining the right scope? How mindful are we about really investing at a top-tier technical reference cost level? So these are the answers, and what you're currently seeing in terms of this equilibrium, somewhat, of top-line growth of 10%-13% on average over time, kind of accompanied by a CapEx intensity of mid to high teens of percentages of sales is what you can expect from us going forward to deliver upon our organic growth model.
I don't know. Anything to add from your side, Philippe?
No, I think you've said it all. I think maybe a few assets that, of course, did not have this durability. I think, too, that you're all aware of one is our site in China that actually was invested into and then closed, was a small biologic site for DS and DP. Then, of course, the Moderna investment, which was a great business opportunity and a great thing for the world, but which of course did not have a durability. So these are just some examples that of course things sometimes do not fully work. But otherwise nothing to add.
Very good. Thank you, gentlemen. Let's continue there on the backside with another James, actually.
Hi. Thanks for taking my question. It's James Vane-Tempest from Jefferies. We've heard a lot about ROIC today. I think at first half in the Q&A, it was mentioned that ROIC is currently close to 2x WACC. So with a midterm target of 2x-3x with improving margins and the levers you mentioned, what drives the lower end being approximately the same? I'm just kind of curious if in the framework you've given, if that's more the investments may need to be remaining high, or if you think your cost of capital's going up, or if it's just merely conservatism. Thank you.
Let me start. I probably would rather see it as an improvement over time, surpassing the lower threshold to then further increase. It's more time dimension. I don't know. Anything?
No, I think this is it. I think again, there is always variability in what we do and the years in which we make. Again, when we tell you margins of high 30%s, this can also be a couple of points different. This will always depend on the actual delivery on these growth projects. I think you need to give us some leeway to manage this and sometimes maybe also continue to invest ahead of what we have planned. So there is variability in the delivery over the next five years, which is just normal course of business.
Yeah. For the sake of completeness, your question of is it kind of anticipating increasing WACC, that is not what we try to build into the model because no one knows. Which is why this somewhat addition of WACC as of 2026 kind of makes sense. But we thought rather than giving a percentage figure, it might be just more tangible to say, two to three times our cost of capital. That is the potential that we see in Lonza, which I thought is a right message for you. Thank you.
Very good. Zain, you have the mic already.
Zain from JPMorgan . Thanks for taking the question and for the presentation as well, it was great. Question is on ADC market. I think in 2023, you said the ADC conjugation market was maybe just north of $1 billion. 2028, you are expecting it to be about $1.8 billion- $1.9 billion at that point in time. Just can you remind us where we are now in terms of the ADC conjugation market size, roughly? More specifically than that, how your market share has evolved since 2023 within that market, how you are thinking about that longer term as well in terms of your market share development, given a lot of the origination on some of the newer ADCs that are coming out of China.
Yeah. No, thank you, Zain. We actually don't share specific market shares, but what we share is we are the market leader in that space, and we are the one which actually have been able to bring commercial ADCs to the market. And we have the commercial capacity as one of the few CDMOs in the world, and expect to continue to grow in this very attractive modality. What we also need to keep in mind is how to define the value of that market. There's a mAb in it, there's a payload in it, a linker, bioconjugation, and probably also drug product. Our mAb revenues related to ADCs are not part of the Advanced Synthesis business platform revenues. They're actually part of the Integrated Biologics revenues.
I guess the key takeaway is we are the market leader in that space in terms of commercial volumes, capacity, in terms of ability and proof points, having brought commercial ADCs to the market. We are the market leader in terms of the breadth of the ADC toolbox in terms of payload, linker, and different offerings in terms of how to manage the release of the payload. And we are actually very happy about that business and how it evolves over time.
Very good. I would say we take one more question.
Maybe a thought, because this question of why Lonza operates as a multimodality, a CDMO, and I hope that I was able to actually explain this box of once a molecule is in it never leaves again. Let's make sure that it has many molecules that could get into that box. That's one thought. But if you ask yourself why Lonza has been able to develop this very strong position in the market, think about it. We had small molecules, highly potent APIs. We had mAbs at the time. We actually have been able to also do formulation development works. So essentially, when the modality started to take off, we have been ready to build it all together. And with the complexity of future modalities ever-increasing, and we have the capabilities, and we are ready to take on the next manufacturing challenge.
One of our most complex molecules, or I probably wouldn't call it a molecule anymore, but rather conjugate, actually consists of more than 30 components, all of them in the end in the drug substance itself. This you cannot do if you're just a mAb player. You need to be able to master it all, and that is what makes us special at Lonza, if that is a useful thought for you.
Yeah, I think it was. We take one more question from the room, then we go to the online audience, and then of course come back. No worries. Let's take Charles from RBC.
Thank you. Thank you. Charles Weston from RBC. My question is around the 10%-13% CapEx for growth CapEx. You're going to end up with substantially more cash than you could spend in a 10%-13% growth CapEx window as part of your 14%-19%. You're happy to spend some of that excess cash in acquisitions, which in the case of Vacaville is kind of like accelerated CapEx, but not necessarily in organic CapEx because you've given yourself that narrow window. So there seems to be a, I don't know, a confusion in my mind that you're happy to sort of spend.
Yeah.
CapEx in an inorganic way, but not in an organic way.
Right.
Can you just talk about how you think about whether that constrains you?
Thank you, Charles. I think a great question. Maybe going back to the organic growth model itself, which is not a static thing. It is kind of built on what we see in terms of underlying market opportunities. If that should ever change, we would adjust the model. It would go up or down, for one. Second thought is in terms of the number of high-value opportunities from the market coming our way. It is not that we would leave opportunities on the table. In terms of us applying the financial thresholds to deliver the returns and the improvement of returns, as we just shared with you, this is probably the growth rate that we currently see in terms of those high-value organic market opportunities. My second to last slide was about M&A indeed, and I think the headline was kind of accelerating the organic growth model.
As opportunities arise which actually survive the test of CDMO model provides for value, Lonza Engine provides for differentiation, we will be ready to double down. Which then also can lead as an outcome to a step up in terms of the starting point for the next organic growth then, with the acquired asset becoming part of our base. Depending on the kind of the archetype of M&A that we expect to be able to execute over the next years, we will have to talk about them in a different way. Let us assume Vacaville, for example. We kind of took it on board with the Roche business, which was not really CDMO business. It is just what happened to be in the site, and it enabled us to take it over without spoiling our P&L.
What we did not do at the time is telling you, look, this Roche business is actually not growing. If anything, it is going down until 2028. But we stick to our top line A growth ambition within the organic growth model. But there might be cases where we actually take on an underutilized pharma asset, where we actually need the period to really transform it as an asset and also as a business into a CDMO business, which then needs to grow within our 10%-13% on average over time again. If we acquire a CDMO business, probably the expectation is it should grow at the same pace as our existing base CDMO business. So that is probably how we should look at it.
M&A providing, depending on the archetypes for a step-up, leading to a higher CAGR, of course, but then continuing to grow after transformation within the remnants of our organic growth model. Does that make sense?
I think so. Thank you.
Okay. Thank you, Charles.
Thank you, Wolfgang. Thank you, Charles. Looking at Chorus Call, can we get the first question from the webcast, please?
The first question from the phone comes from Thibault Boutherin from Morgan Stanley. Please go ahead.
Yes, thank you very much for taking my question. Just to come back on the innovation to launch integrator concept and your comments about integrating molecules from preclinical or phase I. When we look at the current trends in the biopharma industry, what we see is more and more innovation coming from the China biotech ecosystem. So molecules originating from China before being licensed by multinational companies for phase II or more. Can you talk a little bit about the consequence for Lonza, for your business model, and can you give us colors on molecules that have originated from China, and then ended up being partnered with Lonza for manufacturing down the line?
Thank you, Thibault, for the question. I had a hard time to understand, but I assume that the transcript reflects what you are asking us. First of all, it is about how we deal with the increasing amount of innovation coming from China, and how that translates into what we do at Lonza. Is it an opportunity? Is it a threat? Is it anything? I guess my answer to that is, first of all, we are a global company, and our self-reflection, our identity is that in theory, any innovation, independent from where it's coming from, we should be the place to take it from innovation to launch. That applies to Chinese innovation as well.
In the end, we need to set up ourselves in a way that, both U.S., European, Chinese innovation, is something that we can turn into an opportunity for our customers and patients. So where are we today? To kind of provide you some anecdotal evidence here. We are already developing and manufacturing innovative molecules that have been developed by Chinese biotech companies. How so? This is the example, actually, after one of our clients announced an acquisition of a phase II asset out of China, they actually called me and told me, "Wolfgang, I need a different supply chain. What I acquired in terms of clinical efficacy is great product, but the supply chain is horrible." Right? If you think about what defines the value potential for a pharmaceutical company acquiring an innovative pharmaceutical asset, it's two things. It's clinical efficacy and it's availability.
Every day that you actually lose and are not able to supply, from the day of launch is missed peak sales opportunity. This is a key ingredient for the success of our clients, and we are the partner being able to build robust, resilient, high-tech supply chains for all the Western markets for any key modality in our portfolio. This is example one. Example two is how do we get closer to Chinese innovators themselves, not relying on Western pharmaceutical companies acquiring and bringing it to us, which is always welcome. But we need to get close to biotech innovation in China as well. Where are we in this regard? We have a strong side in Nansha, which is a small molecule side, which increasing R&D capabilities, offering services based on linker technology, based on our ability to develop small molecules to Chinese biotech innovators.
That's already happening today by design. We are also providing our technology, be it the GS expression system, be it linker technology, Synaffix, to Chinese innovators, and they are using it already today. With our technology in it, we have a great starting point to later become the party to take it from innovation to Western markets. There's a clear strategic intention within Lonza to make sure that we, and actually in the end, patients worldwide benefit from Chinese innovation as well. What we will most likely not do is to actually expose ourselves to the Chinese market in the sense of developing Chinese innovation in China for China, because that's probably a place where we shouldn't try to compete. Whatever we will do to make sure that innovation from China lands in our assets, will be in an asset-light shape or form.
Very good. Thank you, Wolfgang. I think that was probably the biggest challenge of the day, at least so far.
I hope I actually hit the question. I'm not sure, but.
I think the direction was right. Thank you.
Directional right. That's not a compliment, I guess.
It was not meant that way.
But good enough for today, I guess.
Can we have the next question from the webcast, please?
The next question comes from Falko Friedrichs from Deutsche Bank. Please go ahead.
Thank you for taking my question. How do you view the current M&A landscape in the industry, and how likely do you think that attractive assets could come to the market over the next, let's say, one to two years? Do you already have certain indications that such attractive assets could become available for sale? Thank you.
Yeah, thank you, Falko. A quick answer is, first of all, I think it's only fair, and you can expect that from us, that we are transparent about our intentions in terms of both organic investments, but also M&A, and I think we have been. Otherwise, for me, a strict rule applies. We only talk about M&A as soon as we actually have signed a deal, for one. Otherwise, it's still fair for you to ask, how is our view on a potential pipeline? What I can tell is the strategy in M&A team that we have been building since the middle of 2024 is, first of all, a strong team, a very capable team, and actually is building a strong pipeline of potential M&A opportunities.
In doing so, and I say that with all respect, we of course, talk to professional advisors, investment banks, because from time to time, they actually bring great ideas and unlock assets which could be attractive to Lonza. However, we don't sit and wait, and we are actually not shy in proactively approaching owners of assets which would actually be a great fit to Lonza. And while they might not even know that they eventually will sell their assets, we will actually start conversations early on. This is now not Lonza, but my past at a different company. The best deals that I've been able to actually enter into have been those which are prepared for years. So that you, especially with private owners, start a conversation early on to then be ready as soon as the time has come.
What I'm trying to say is, we're not shy. We are proactively approaching owners, and we will let you know as soon as we have found the right asset and have been able to acquire it at a value-adding valuation.
Very good. In the interest of time, let's come.
Thank you.
Back to the audience here.
Thank you, Falko.
Taking Charles here.
Thank you. Charles Pitman- King from Barclays. One key question we get from investors is just in terms of protecting and improving ROIC over time, especially in a world of potential rising competition and the ongoing discussion around potential overcapacity. Just in terms of the ROIC targets you've given us today, can you comment a bit more on how you're seeing RFPs and pricing evolve with capacity optimization, knowing pricing is relatively less in focus for pharma companies? Also just what assumptions you've made to protect the downside risks.
Yeah. Let me start with world of rising competition. First of all, as soon as you start to be complacent and overconfident, that is the point in time when you start losing. I am the opposite of that. We at One Lonza are the opposite of that. We are very mindful. At the same time, we have total clarity about how to differentiate, and I did my best today to explain this very special moat that we have created within Lonza to you, which is hard, I would say, to replicate for others. At least it would take a lot of money and a lot of time. For me, it is clear when it comes to really answering the key value questions for our customers, which is efficacy, not our business, but manufacturability, we are the place to go, and we continue to be the place to go.
That is in itself giving us confidence that we will be able to deliver on our business aspirations, for one. The second question is around overcapacity. On this one, kind of linked to the first part of my answer. I do not see us being in a capacity race, just not. We define the amount of market opportunity coming our way, and then define what that means for our capacity expansion. We are not in a capacity race because what we are offering is very different and is very differentiated, as compared to many other offers in the CDMO space. Capacity on that, again, we are very mindful of how capacity and demand evolve over time. We shared it on a global view, part of my presentation.
The thought that I did not really elaborate on was that in the world, how it is evolving, the global supply-demand equation does not really matter that much anymore because people are looking for more regional supply-demand balances. Here we continue to see a very healthy structural undersupply in the key regions where we believe, as Lonza, we can extract most of the value, especially in the U.S., where there is continued structural undersupply, and nothing that has been announced as of today by any CDMO, including us or the big pharma companies, will fundamentally change that. Also, in this regard, not only healthy business model, but healthy market dynamics. The assumptions to protect downside risk in the end is being excellent and delivering on our value proposition, and that will keep customers with us. While, again, let us always be mindful, the future is uncertain.
We believe we have all the reasons to be confident, to be able to deliver on our promises. Anything to add?
No.
Very good. Taking also someone from the right here, Odysseas maybe?
Thank you for taking my questions. Odysseas from BNP Paribas. Can I ask one on the quarters? Could you explain why demand on Bioscience is normalizing in Q3, as in what drove the strong H1 that is not there in Q3? I am asking because we have not heard any of your bioprocessing peers call underlying deceleration on the media side yet.
Should I take it? Yeah. Thanks, Odysseas. I would not read too much into this. I think we had a very strong first half for our bioscience business, and this is a very niche business that is not representative of the overall supply or tools business overall or industry. I think we have a few businesses where we have a more concentrated customer pool, if you want, and we had large orders in the first half that did not repeat in the second half, which we were not supposed to repeat in the second half. That is why we call this normalization. This is not a slowdown or anything. It is just a normalization. So, do not read too much into this. It is a healthy business, just imbalanced first and second half.
Maybe using that opportunity, and we had that discussion during half year reporting. When you think about what you can expect from us in terms of future growth, do not do the math like H1 being super, H2 kind of normalizing, and this is not the case. If you think about our future, take 2026 as we will deliver it, and that is a starting point for us to continue to grow within, let us say, the framework that we shared with you today.
Very good. Progressing. Yeah Paul.
Paul Knight at KeyBanc. You mentioned earlier that you would gain perhaps 100 basis points- 200 basis points on outsourcing from global biopharma. Do you have examples of how much they could save or have saved by outsourcing? Is it 10%? Is it 50%? I think we're in the.
Yeah.
Facility today is one great example of that decision being made.
Yeah.
Ultimately, it just seems conservative that you are guiding maybe 1%-2%, and outsourcing to me seems dramatically higher in this world of biologic production.
Mm-hmm. Thank you, Paul. To make sure that I answer towards the right KPI, when you say savings, it is CapEx savings, right?
Full cost of drug.
Okay.
Manufacturing costs.
Manufacturing costs.
Manufacturing costs.
Manufacturing costs, right. Yeah. Actually, I don't have a precise figure in my mind for that. It's more a directional view, which we substantiate, of course, but leading us to the 1%-2%. What is interesting, though, and I didn't elaborate on that, but if you look at the figures that I shared for the historic and expected CapEx of big pharma going forward being at 3%, then growing at 6%-7%, it means constantly not adding the necessary amount of capacity to their own networks that they would need to support their own growth. That I think it's a strong indication for the thesis of outsourcing continuing. In terms of manufacturing costs and how much more efficient, let's say, outsourced supply is, there's also not one size fits all answer to that.
But what is true in the end is that we, as a CDMO, through high utilization, through flexibility in our assets, I would dare saying also through efficiency, right? How diligent, how intense we are in terms of operational excellence. We create the space to earn the margin that we need as a return on our assets so that for a pharmaceutical company, it actually makes sense to not invest themselves, but rather outsource to us. There is one additional element, which is not so much a COGS argument, but it is a write-off argument.
I think we all remember those incidents where actually big pharma companies in the expectation of the next blockbuster in phase III being in the making, investing CHF 500 million, CHF 1 billion, CHF 1.5 billion, and then I have a famous example in mind I won't share, then this falling apart write-off of CHF 1 billion. This kind of additional write-off costs in the sense of opportunity costs is also coming on top of the overall economic equation, which is strongly in favor of outsourcing to reliable, high-quality vendors like Lonza.
If I can just add.
Please. Sure.
One thing. I think the reason for outsourcing is not primarily cost. It is availability of the asset. It is the scientific knowledge that we bring. It is the availability of a location that that company may not have. So it is not just about costs. If they decide to outsource, it is very often a strategic decision of a company to be partially outsourced, to be mainly outsourced, to be very limited outsourced, and as a component of knowledge that is not necessarily a Frank.
Yeah. Thank you, Philippe. If I may build on that, we actually are very mindful of checking that our assumptions about customer behavior decision-making actually is true. Again, once a year, our annual surveys. The top five criteria for our customers to outsource and to decide for a supplier like Lonza, number one is quality. Number five is price, which doesn't mean it doesn't matter. Of course, you need to be somewhat competitive overall, but it is just number five. Number two to four are our people, technology, security of supply, which again, all speaks in favor of Lonza for all the reasons that I shared before. Thank you. Of course, it is important, but it is not the key deciding factor for someone to come to Lonza. Innovation to launch integrator. Unique.
Maybe conscious of time. Yeah, pretty good still. I would say one final question. I mentioned it already yesterday in my dinner speech. That is the famous one. Who wants to take it? Sebastian?
Sebastian Bray of Berenberg Bank. Thank you for taking my question. Can I ask about the slide 39 showing the drivers of the margin improvement at Lonza? I am not entirely clear on what the difference between operating leverage and commercial and operational excellence is, and the reason I ask this is that the reference to the India project where SG&A was transferred over to one place is actually given under operating leverage, and my thought on operating leverage is that this is better utilizing existing assets as opposed to changing operating costs. Related to that, we haven't talked much about Cell & Gene, but this is the one area where I think the Lonza asset base is most underutilized. Is this rounding error in margin improvement out to 2030 and then the upside is beyond that, or does it make a meaningful contribution during the period? Thank you.
You take it?
I will start, yeah. No, thanks, Sebastian. Thank you for the clarifying question. For us, operating leverage is really about administrative cost. We call this SAR, which is sales, administrative, and R&D. When we talk about operating leverage, it's really economies of scale in the administration side. Please exclude R&D because, as I said, we will continue to grow and invest into R&D. But everything that is admin, my costs and finance and HR and all these costs that we have in the company, this is what we call operating leverage. We will not grow this cost by any means in any shape or form at the speed of sales growth. This creates a leverage, a margin leverage over time. So that's what we call operating leverage.
The other one is really what we do on the gross margin side, so better asset utilization, squeezing out more batches out of the same asset- turnover improvement, reduction of downtimes, et cetera. This is the way we separate. So operational excellence or operational improvements versus operating leverage. Right. So that's the way we separate. If that's clear, then I think on Cell & Gene, today was not about Cell & Gene. I think we are in Vacaville. We are in a Biologics side, so we'll do a really deep dive on Biologics today. Of course, we like Cell & Gene, and we continue to invest in Cell & Gene, but today was not the frame to give you a deep dive on Cell & Gene as well.
Very good.
Yeah.
That was a good segue into Gordon's section, actually, finishing off with Integrated Biologics. Thank you very much, gentlemen.
Thank you so much.
Thanks for the questions.
Yeah, that was good. Thanks.
Yeah.
We do not miss my motion.
Hi, good morning, everyone. For those of you who don't know me, my name's Gordon Bates. I've been with Lonza for coming up for 24 years, so quite some significant change in our company over 24 years. I have worked in operational excellence roles, operations roles, sales leadership roles, and for the last 10 years been managing businesses in Lonza. I come back to biologics after having spent the first 12 years of my career at Lonza in April last year following the reorganization. I used to have a proper job. I ran one of our biologics facilities. Today what I want to do is give you some kind of perspective or insight on how we look at the biologics market and how does that translate into our thinking of our business. Firstly, I'm sure you'd all agree that the biologics market is extremely attractive.
Probably why you're here today, and you've made the effort to come, and thank you for doing that. We see that the market will grow at high single digit, but also what we see is clinical pipelines growing. So the attractiveness of the market in growth, but also the development of more innovation coming through. There is a trend that we see, and I think we probably all recognize that more and more biotech companies and pharma companies are getting expedited approvals. Those expedited approvals then really leads to the fact that we need to move fast now to be able to bring drugs quicker and to be able to service patients. You can see in the numbers the increase over the last 10 years from 30%- 70%. Speed's going to be a competitive advantage.
Now, we also see this increasing complexity, and I think Wolfgang briefly talked about that, and if you think about the Mammalian market, and you've got standard mAbs, and you've got these new molecular formats, whether it's bispecifics, trispecific fusion proteins, you see a change, but you see it even deeper. Even deeper when you move back through clinical pipelines and preclinical. Here you can see the complexity is increasing. Now, that complexity, these things are not easy to develop. These things are not easy to manufacture unless you have deep scientific expertise. Fortunately for Lonza, we do have that expertise, and we're able to then be successful in developing the more complex molecular formats. Again, no news, but the trend for biotech to own innovation continues, and we project that will continue even further into 2030.
Now, I mentioned that biotechs are increasing, and also if you see on the right-hand side, if you go back 15 years ago or even further back, the trend for biotechs to take their molecules to approval wasn't really there so much, and it's changed a lot over the last 15 years. Now, of course, it's great news if you're a manufacturing company, because most of those companies don't have capacity, don't have the ability to be able to do that themselves, so they need partners like Lonza. The number of blockbuster drugs that we see today, 80 blockbuster drugs we see today, and Lonza manufactures 30% of those. Our projections, if you look through the next five years, is that will increase to 110. As a rule of thumb, these blockbusters, as they increase to 110, they're going to need more volume to be manufactured.
Now of the 110, there is 40,41 of them that are already approved. They are just not blockbusters today. So over the next five years, those products will increase. There is only about six products that are not yet approved in that total number. You can see Lonza's representation, knowing what is in our pipeline today, knowing the products we manufacture today, we expect our manufacturing to grow to 30%-40%. You are going to get volume growth from blockbuster drugs increasing even more. But look at the change in phase III, the number of products that will be in phase III in 2030, and a 40% growth in that number of products. Of course, guess what? Those products need volume to be manufactured. Not just the growth in blockbusters, but you also need them to manufacture the increasing number of phase III molecules.
Now, as a manufacturing company, we have to translate that data into what does it mean in volume. You can see on the right-hand side is this will translate into 40% increase in the amount of volume that needs to be manufactured. So today, more than 60 tons will grow to more than 100 tons in the future. Now I get a lot of questions about biosimilars. Biosimilars volume will grow. Here you can see in the gray at the bottom, the volume for biosimilars will grow, but it is a very small proportion of the total volume that will be needed. Maybe 15% is going to be biosimilars. The majority of the growth, that 40% growth that is coming, the majority of that is coming through innovative drugs. So thinking about volume now, translating into volume.
If you look at that volume and you try and put that into different buckets of demand, what I have tried to show you here is that if you could imagine small volume products, less than 50 kg, mid volume products up to 250 kg, and large volume more than 250 kg. You take all the commercial products that were in the market in 2025, what you can see is 22% of them have large volume needs, and you have got 34%, 44%. Now, in terms of trying to mirror that volume, what you can see is that of those 22% products that are large volume, it translates into 80% of the volume falls into that category of more than 250 kg. So now I then translate that and say, what type of scales in manufacturing would you need for that varying range of product demand?
Along the bottom, you see small scale, 1kL-2kL, mid scale, 2kL-12kL, and large scale, more than 12kL. Now, just maybe interesting point of reference for Lonza, if you look at our capacity, 75% of our capacity is in large scale, 20% is in mid scale, and 5% is in small scale. We are in Vacaville today. So Vacaville has two major production lines. One of them is mid scale, 12kL, and one of them is large scale at 25kL. So you can see in terms of the types of volumes that will be needed between mid scale and large scale, you are talking around about 50%, 55% of those products will have volumes that are typically linked with the scales that we have here in Vacaville.
What this kind of message, I think, is important to recognize is that if you were to over-index just on one scale, you actually miss out on servicing the needs across that high range of demand that comes. Lonza, of course, is present across all of these three scales, and if you look at all of our installed reactors, we have more than 20 production lines in terms of our reactor capacity in each of these three buckets. Now, this headline data that you see that you think, "Okay, well, how does that headline data on improving cell line productivity, how does that headline data then influence some of the discussions that I've just shared with you in terms of where those volumes are?" Here, if you take 465 commercial products that are marketed today, the average titer of those 465 products is 3.1 g per liter.
Now, as you start to hear the kind of headlines, Lonza's leading, by the way, in terms of increasing the productivity of cell lines, and I'll show you some of that data later, but as a leader in improving the productivity of our cell lines, then you start to say, "Well, how does that influence and make you think about capacity in the future?" Now, if you kind of just do a simple thought experiment and say, let's say 40 products, 50 products are going to be approved every year by the FDA. Let's say those products that are going to be improved will be 7.5 g- 10 g per liter. This will take some time for this figure of 3.1 g to change. By my estimation, it could take 15 to 25 years before that 3 g even becomes 6 g.
Here, I think when you go back to the previous slide and you think about those different buckets, what's the kind of message? If anyone remembers the 2023 Capital Markets Day, when I was running the small molecule business, I said, to steal from Mark Twain a bit, "Rumors of the death of small molecules are greatly exaggerated." I think you need to hear the same thing today. Rumors of the death of large-scale mammalian capacity are over-exaggerated. But mid-scale, small scale will become more relevant. It will become more relevant.
But if you look at the right-hand side, you can see that the amount of capacity that's needed for the increasing volume, the 40% increase in volume I mentioned to you, and how much and how long it's going to take before these high-producing cell lines start to dominate the approved product portfolio, that there's many years ahead of us where large-scale capacity will remain dominant and needed. So bring in maybe this outside-in perspective to a close. Some kind of take-away messages there. It's a highly attractive market, both with commercial products growing and clinical pipelines. With more expedited approval, speed is a competitive advantage. The complexity that we're seeing in the new molecular formats of molecules and the ownership of biotech companies, and the fact that they're taking them to approval. The need for large-scale manufacturing very much still there, but increasing relevance for mid-scale.
Not just having a breadth of manufacturing assets is important as we do, but also having the volume of manufacturing assets across that breadth, like I mentioned, 20 different production reactors in every scale at Lonza. So maybe bringing that section to a close. Then I move on to thinking more about an inside perspective at Lonza. So what Wolfgang mentioned, Lonza is a kind of innovation-to-launch integrator. So I am going to talk a little bit more about INB now. Maybe just to hold the three priorities that we have for INB. Number one is to be present throughout the product life cycle. So from early development all the way through to commercial manufacturing.
Number two is we want to be a high-reliability organization, and Wolfgang talked about the fact that when our customers come and talk to us, the quality is number one, security of supply before we get to discussions about price. So we want to be a high-reliability organization. Number three, of course, we want to make the customer experience great. You all know this, that if you have a great experience, then customers will come back. Of course, our relationships that we have with our customers are extremely sticky over many years. Just a few kind of brief points about INB. So if you break down our customers, you can see customers dominated by the U.S. at 45%, but we have customers all around the world, so it is a global company with a global customer base and also a globally installed asset base.
In terms of our customer segmentation, most of our customers are biotechs. So 75% of our customers are biotechs. Again, that mirrors what I showed earlier on in terms of the ownership of pipelines were almost the same, that 75% owned by biotechs. Our revenue split, although, is different. So our revenue split is 70% with large pharma and 30% with biotechs. Of course, we have many, many products with these large pharma companies. So many products rather than just one, where typically with biotechs you may have one to three products. In terms of the entry point of all of the molecules that we have in our pipeline and portfolio today, many of them come to us when they are commercial.
When they come to us when they are commercial, it is either for good reason. Demand is increasing, then they need to have additional demand, so come to us to be able to contract in that capacity. Number two, security of supply, dual sourcing. So not just to have one supply point around the world. Number three, a rescue mission. When someone else has screwed up and they need a highly reliable supplier, then that is the other entry point that we see. Looking at our pipeline, you can see here that I said we want to be present throughout the product life cycle, and we already are present throughout the product life cycle. Ways in which molecules can enter into our pipeline. So we can start right at the front, where we are developing molecules. We are doing the early development work.
Secondly, molecules can drop in at different clinical phases and molecules can drop in commercially. I just shared with you the breakdown of when those molecules arrive with us. Here you can see our revenue breakdown. Our revenue is very much dominated by commercial products, which of course bring great security and good visibility of what's coming ahead of us with 15%, 5% going through clinical phases. We are present throughout that life cycle, and we're happy for people to drop in anywhere. Again, the more new molecules that we do at the front end, the more we can take advantage of the scientific expertise that we have, knowing that those relationships are going to be very sticky.
Wolfgang introduced this model you saw earlier on, infrastructure, operating systems, science, technology and intelligence. I'd like to use that model just to continue giving you a little bit more insight into INB. To reiterate what you heard earlier on, we're a manufacturing company. It's crystal clear that we're a manufacturing company. There's no doubt in anyone's mind. When you're a manufacturing company, value gets created in a manufacturing company, in laboratories or in factories. That's the value creation engine. Here, the value capture part of our business is through our commercial team in terms of the contracts that we sign. Make no mistake about it, if your value creation engine isn't working, if that isn't good in labs and in factories, the best commercial person in the world has no chance to do anything. So we're a manufacturing company.
It's very clear and it's explicit. Here you can see the range of capacities that we have across different territories. We're present across all major geographies. We have the range from small all the way through to large capacity, including development services. What I've highlighted on this slide, you'll see in yellow is the types of capacities that we've added over the last years, and those investments coming online since 2025. Remember the picture I showed you with the distribution of the volumes between large, mid, and small, and the fact that you're going to see increasing volumes, but you're also going to see that mid, small scale is going to grow in importance, but in no way damaging to large scale volume.
Looking at these yellow placeholders you see in small scale in the U.S., we have added in our Portsmouth facility disposable bioreactors, 8x 2kL with two purification suites, and here we also add mid-scale with 6kL production, and we just recently approved to take our 4kL by 6kL production up to 6kL by 6kL. Then in terms of mid-scale Vacaville 12kL and large scale Vacaville acquisition at 25kL. So our investments are reflecting what we see in the market in terms of that varying demand that will be needed. In Europe, again, small scale, we have small scale capacity that we've added in our Slough U.K. facility, so mostly 1kL, but we added 2kL this year. In Visp, we have 1kL and 2kL assets that are running and in large scale, of course, the major investment in our 6kL by 120kL, which just recently received Swissmedic approval.
In Asia, we haven't added so much recently, but we also have small scale 5x 2kL in Singapore and our large scale assets. Here, while we've continued to invest, you should expect to see more investment coming from Lonza, and you should expect that that will be reflected in terms of some of the dynamics that we see in the market. Now, if you contrast that to our competition, then you can see that Lonza pretty much across all regions is present in development services, in small scale, in mid scale and large scale. Nobody else has that range across those different geographies. There was a question, and Wolfgang talked about supply and demand. He gave great credit to our group of intelligence people. That's competitive intelligence, market intelligence, and they've built some amazing models.
Here, while we used to look at global capacity and supply and demand, Wolfgang said it and I repeat it, we track every single molecule in clinical development. We track every commercial molecule and what the estimates are for growth of those. We look at the attrition rates. We look at the residence time of how long it stays in each clinical phase so that we can see what that demand picture is. In terms of supply, we track every single installed asset that's pharma or CDMO, every announcement that's made, including our own, we add into that. So we really understand on a long-term view what that supply and demand imbalance could be, and then that informs some of our thinking about where we are.
Now, of course, we always did that globally, and now in the scenarios that Wolfgang laid out in thinking about the resilience of the company for the long term, we need to start looking at that more in a regional basis. What we see is that regional imbalance in the U.S., and it's probably not a surprise because you all, I'm sure, appreciate how much product comes into the U.S. from outside of the U.S. Lonza, heavily present in the U.S. with nearly two-thirds of our capacity already based in the U.S. and you'll get a firsthand sight of that as you go around the site today. So in terms of infrastructure, extremely well-placed. Now, I think Wolfgang said, when he introduced the operating system, that it was kind of quite complex. My slide's a lot more complex, by the way, than what Wolfgang introduced.
It's just peeking under the hood, and I'm not going to go through it. But we have seven subsystems, and these subsystems kind of feed each other. At the heart of that is the critical molecule attributes. So when a customer brings a product to us and says, "This is the target product profile," we convert that to what are the critical quality attributes that we're going to release this product by and what are the critical process parameters that we need to control in manufacturing to be able to be successful? Every time we do a product, we have these feedback loops which compound knowledge in our knowledge engine. The next molecule we do benefits from the last one that we did.
We have a tremendous amount of data, and we have this closed-loop feedback and our operating system is based on the principles of systems thinking, a high-reliability organization, and lean manufacturing. Here you will see some proof points in terms of the outputs of that. 100 tech transfers a year. 98% of the first batch we ever run in GMP for a process that is never ever been run before, 98% success. It is astonishing. It is building on the knowledge and the feedback loops into our engine that the next molecule benefits from the last one. In terms of our support for regulatory submissions, and I mentioned earlier on more and more biotechs taking their own products to approval, they are using our services to be able to support CMC section writing to do that.
We have never had any rejection of a product that was submitted by our customers because of something that Lonza did. I think, again, that is kind of testament to the knowledge and the heritage of our company. I said that INB has three clear priorities in terms of being present throughout the product life cycle, being a high-reliability organization, and making the customer experience great. Every single member of my team, whether they are in operations, they know in operations how many batches we are going to need to produce, what the cycle times are going to need to produce, what it is in terms of changeover and productivity that is going to be needed. In R&D, what technologies are going to be needed to smash bottlenecks? When do they need to be deployed in a factory and reduced to practice? It is not intellectual gratification.
Our investment in R&D has to show performance in labs and factories. In fact, in the last year, we killed 1/3 of the programs that were in R&D because they were too close to intellectual gratification rather than something that would be translated into benefit in the factories. Over the midterm, what we expect with the operational excellence work that we are doing is we expect a 20% batch throughput increase from existing assets. We have very detailed plans of how we are going to do that because our team have been around every single site in the last year to go through and look at where we can improve all of our processes. In terms of kind of cost efficiency, we want to be able to obviously grow, and someone asked a question about operational leverage, that we will grow sales more than cost.
Again, we look at the ways that we are working. We look at workflows and say, "Does this make sense?" We already start making a lot of changes and thinking about where can we use the benefit of AI. Because when we scale this company, having the same number of people, we have great people. Finding great people is not so easy. Scaling this company to make sure that we can use our great people who focus on what they are brilliant at, not tying them up in things that are transactional where potentially we can use AI to help do that after we organize workflows. On the commercial side, again, I mentioned our teams know exactly what they need to do. I mentioned operations, R&D. Our commercial team know exactly how many molecules they need to bring in, into which small, mid, large scale.
They know exactly what the pricing needs to be in that regard, because we have the supply-demand models that I mentioned earlier on. We manage our portfolios very intentionally down to an asset level, and make sure then that the programs that are coming into our assets are going to meet our ambitions to be able to deliver increased margin. With what we can see, we know that pricing, someone mentioned pricing, is we apply value pricing across the world. If we see opportunities where we're bringing something unique, is then we maximize the value from that with our value pricing models, and know which levers up and down we can adjust to influence our pricing. The number of products that we have over the midterm, we expect 2.5x as many products in the future as we have today.
Now in terms of science, in my opinion, we're the world leaders in DNA design and vector engineering. Our GS system continues to evolve, continues to support improved productivity, stability of the cell line. If you look into the market of the 465 commercial molecules that are derived from CHO-based cells, 110 of them use Lonza's technology. If I'd have presented to you last week, that number would've been 109. We continue to see products being approved using Lonza's technology. I mentioned that speed's a competitive advantage and the number of expedited approvals is increasing, and I mentioned that we've got these more complex molecular formats coming through. Over the last 12 months, we've made significant efforts to reduce the timeline for us to be able to bring gene to IND timelines down.
If you think about that in the context of a biotech company that's burning cash, needs to get to the next milestone before they can generate the next level of funding to be able to carry that on. Our timelines now are industry leading and in terms of complex molecules, at six months, I would say 18 months ago, we would be telling you that number was 13, 15 months. We've made unbelievable progress with the work that we've done. In terms of productivity, I mentioned to you the industry average is 3.1g. Lonza's not that different in terms of our portfolio, but we continue to push the improvements in productivity of cell lines so that what you'll see in many years to come is that we're able to then bring much more productive cell lines.
If we do that, and we will do that, and we already start to see the first evidence, that range of scales from large scale, mid scale, small scale, is needed to be able to satisfy all of the demand. Now, practical example that contributes to speed is this is some work where we are taking the data. You remember the Knowledge Engine? Knowledge Engine has all of our data in that. I can tell you it's going to be a huge effort for us to get that data, put it into a format that we can do something to be able to leverage that to drive further improvement in performance. Here, for a first example and many more models to be built is when you take our screening work on which resins to use for our downstream processing.
In the past, that would've taken many screening experiments, would've taken 12 weeks to do that. Then we leverage our data. Today it's four weeks with leveraging data. But next year, we will launch the predictive model that based on all of that data, then using AI to make a predictive view of what we should do and where, we'll start that development process and finish it with a confirmatory experiment in less than a week. So it's a first sign of how we build models, and of course, the intent is to reduce the amount of wet lab work that we do. If we reduce the amount of wet lab work we do, it drives cost down so that the benefit then makes us even more competitive. And of course, it reduces the amount of capacity that you use in labs, which means you can take more programs.
So you end up in a virtuous cycle of being able to feed that funnel at the beginning with more and more programs, knowing that there's a stickiness in those programs as you develop them through clinic, providing that they survive. Now, here you see a picture bringing it to life that you have an example on the top of a small biotech company that's been with us for 15 years, where we have supported programs from them around the world in all of our different assets, Slough, Singapore, and Singapore, Portsmouth, Visp. And a U.S. large pharma customer below. Again, you can see that they're taking advantage and using our assets all around the world where we've done development, small scale work in the U.K. and in Switzerland, and drug product development that we have in Basel.
Now what you don't see on here, of course, I think is the missing launch commercial side of drug product. So you don't see that on the right. I think when we show you this picture in a couple of years, that would be filled because of the investments that we're making in drug product. And those investments, it's an adjacency to where we were in drug substance. We made a first entry in 2016 into drug product with services, then the acquisition that we made of the Stein site from Novartis, and then the investments that we've made over recent years. It's a very attractive market. The size of the market, and the growth rate is something that's attractive with huge value in the biologic segment of the market.
But there's also actually huge value in small molecules in terms of certain value pools where we think we can play much stronger and have more accessibility because the volume that are available in small molecules expands the size of just the biologics market, even though the value is there probably by a factor of two in terms of high-value pools. So we've demonstrated that we want to go in this direction by the money that we've put behind investment, and our future ambition is to be a serious player in drug product. Now, first signs of, I think, very, very positive acceptance from our customer base. If you look today, remember that funnel coming in at the beginning, not dropping in? That funnel coming in at the beginning, 100% of all the new programs where we're doing the development work, the drug substance and drug product is integrated.
Already 100% integrated. Where they are dropping in, you remember at the top, dropping in, whether it is in clinical, whether it is in commercial, 70% now of those that are dropping in, they are dropping in and we are providing the drug product service for that as well. I think once the assets come online that we are investing in, then we are going to see a much more and rapid acceleration around that. Why?
I think being able to manage an end-to-end supply chain with many, many different nodes, if you are a small biotech company, remember, biotech 75% of the clinical pipelines, having to go to someone for the mAb, having to go to someone for the chemical payload and linker, having to go to someone for the bioconjugation, having to go to someone for the drug product, it is just an unmanageable task for them in terms of where they should be putting their effort. Lonza to be able to offer that across modalities or even within modalities if it is just drug substance, drug product, we think that that is a huge benefit to our customers.
Of course, with the increasing complexity that we talked about in new molecular formats, being able to think about drug product formulation when you are also manufacturing the drug substance at the same time with the same company brings significant benefit. Now, I want to close there, but just maybe a few obvious statements you have heard already that the scientific expertise and the operating system from Lonza is repeatedly proven over many years, and it enables accelerated clinical timelines and successful approvals. Our global network across scales in major regions and with the volume of reactor capacity to be able to support that highly varying amount of kilograms that are needed.
I told you that we have absolute clarity on our priorities, and as we move into execution, we start to see the first evidence of that, and the team are crystal clear what we need to do, and it provides clarity in all of our decision-making and will then support and sustain the growth numbers that Philippe showed you that we bring in the future. Again, maybe to leave a last thought is with the transparency that we have of all of the molecules that in phase III in our current pipeline over the next two years between 2026, 2028, we expect that we will be making 50%-70% more commercial products in the future than we manufacture today, subject to some clinical attrition.
I will leave it there, but hopefully, there was something there that brought to life a little bit what Philippe and Wolfgang were saying about how we translate thinking around the market into actionable and executable plans and how we think about where we need to invest. Thank you for your attention.
Thank you very much, Gordon. I really have to say, I think very interesting presentation. It also puts a lot of things that Wolfgang has mentioned probably a bit more conceptually into business practice in real life. It also resonates very well with me what we have discussed here with investors probably over the last couple of years already showing these slides. Thanks for that. It makes my life also easier probably going forward. With that, we will jump into the next Q&A session. We have 20 minutes. Again, we would start here in the room and then take some questions on the webcast. Justin, you had your hand raised before already. Let's start with you.
Thank you very much. Justin Smith from Bernstein. Gordon, just on slide 68, can I check if I have just misinterpreted? It sounded almost like you are saying that you do not necessarily need drug product fill and finish within the U.S. as infrastructure. Have I interpreted that correctly, or is it a case that the long-term ambition is that you would still want that kind of infrastructure in the U.S.?
I did not mean to infer that. Just for clarity, is that we want to be a meaningful player in drug product. To be a meaningful player, you need critical mass of capacity, and you need geographical presence. We have made the first steps over the last 10 years in that direction, put a significant amount of money behind it. If you remember, one of Wolfgang's slides had a blue dot on it, drug product in the U.S. That is something that we would think about.
Very good. Daniel.
Daniel Jelovcan from ZKB. I am just a bit puzzled by the 3.1 g you showed today for the whole mAb market.
Yeah.
Then you showed the 12 g on the latest.
Yeah.
mAbs, including most of your peers.
Yeah.
And then you said your personal comment is that in 15 to 20 years.
Yeah.
It will only be 6 g. I am a bit puzzled to understand why it takes so long.
Yeah.
When you have innovative drugs, the weight of the 12 g should increase the overall yields, in my view.
Yeah. No, I agree. Of course it will. The question is, how many need to be approved at that level, and how long would it take, for example, 200 drugs to be approved at 7 g, 8 g, 9 g, 10 g, 11 g, 12 g per liter? The timeline, because all of those titers that you see that are very high are all in early development. With a median time of 11 years to approval, it is going to take time before the 3 g even gets higher to 6 g.
I was trying to draw the comparison there that it will take a significant time before you see the science that is bringing higher producing cell lines into really changing the average grams per liter in the molecules that will be in the market, which is why we still need to have large scale manufacturing capacity, and why the relevance of mid-scale and small scale will increase as those high producing cell lines start to come to commercialization.
Okay, so the 12 g is in early stage development.
Yeah, exactly.
Oh, okay.
Yeah.
Thanks.
Thank you very much. Let's continue with Patrick, over there.
Thanks. Patrick Rafaisz from UBS. Gordon, you showed us the slide with the batch throughput increase.
Yeah.
Midterm 20%. I was wondering, because you said you went through all the sites and assets individually.
Yeah.
What is the current, let's say, operational inefficiency that's most common across the assets that you can improve? Related to that, not sure if you can answer, but.
Yeah.
Would similar numbers or ambitions exist for the other platforms within Lonza?
Well, actually, when Wolfgang showed one slide of the Lonza strategy, what you saw in there was five One Lonza programs. One of the One Lonza programs is called Turbocharge, and within Turbocharge, we have sub-programs which we call Productivity Improvement, Early Phase Acceleration, and by definition, a One Lonza program means it's relevant across all of the different platforms. The second part of your question in what did we learn? Actually, the strength of the learning was because what we did is we brought people from different facilities to participate in doing the work, just so that that learning could be shared across facilities. For example, if we did something in Singapore, people from Vacaville, people from Porriño, people from Slough, would go and participate in that.
What we saw from that work is that the best of the best that we have around the network, when we bring the best of the best together, then we see a significant improvement. The second thing's in terms of cycle times and changeover times, the ability to be able to influence non-process related activity, because some of those aspects on process, if you want to make a change, then there'll be a regulatory update. To be able to influence the things that don't need a regulatory update, and some of them needed a modest amount of CapEx to be able to smash bottlenecks and then increase throughput. A simple example, our large-scale columns in Singapore were manually packed. So we approved the investment to go to automated column packing, and then it saves time as part of that changeover.
As you rightly heard it, every single asset has a plan, and we make sure that we execute on those and we start to see the first evidence of that.
Thank you. Let's continue with Zain, here on the left.
Hello. Zain Ebrahim from JP Morgan. Thanks for taking the question. Just wanted to follow up on Daniel's question on the yields, and it's a slightly different question, which is, in terms of your perspective on the yield from today to 2030, so 3.1 g a liter to 3.4 g- 3.7 g.
Yeah.
What data are you using to get confidence in that industry average? And the reason I ask that is because I can think of one pharma company that's talked about improving productivity to get.
Yeah.
From 2 g- 4.8 g per liter in the coming years.
Yeah.
Just what data are you using to be comfortable with.
Yeah, that's industry data. It's not my data. That's industry data. Then I triangulate and check what's the Lonza internal commercial products, what's the average, and it's about the same. I triangulate what I'm hearing with what we know, and then we then think about what that means and the implications for the manufacturing capacities and scales that we will need.
Very brief answer. Let's continue with Charles from Barclays.
Thank you very much. Charles Pitman-King from Barclays. Just coming back to Vacaville, it was quite like the highlighting the fact that you are targeting this greater than CHF 2 billion peak sales target.
Yeah.
In early 2030s, I think, coming into today, people were hoping for further information on how de-risked this opportunity is. You have highlighted why you deserve to win, but wondering if you can just give us any more commentary on specifically where we are today versus the five contracts.
Yeah.
Announced at the end of year.
For Vacaville, and you will see some of that when you go around today, I am pretty happy where we are. We are ahead of where we thought we needed to be. We have to adapt the facility to be able to accommodate a much broader range of products than that which we inherited. For example, certain cell lines, you need to be able to get more gases into the cell lines in the bioreactor. That setup was not there, so we need to adapt the bioreactor to be able to do that. As we see increasing titers, we need more capacity to hold buffer. We need more capacity to hold media. Purification generally is the bottleneck in the industry at the moment.
Then we'll increase the size of columns that we have to be able to make sure that we deal with some of those bottleneck challenges, as well as some kind of infrastructure warehouse, QC expansion, and then some of the control systems to allow us to be able to move products around the network because it's the Lonza platform standard. Those pieces of work are going on now. Wolfgang mentioned that first product's been successfully transferred. We then have many products that are going to be transferred over the next three years. The ramp-up of those products, clearly, you're not going to make the volumes of them from day one. You need to do the engineering batch, then you need to do the validation batches. You need the approval from the regulatory authorities while you're manufacturing batches.
Then the combined effect of that build of portfolio is where we see in the early 2030s the peak sales that will come from the asset. But, it's a fabulous asset, fabulous people. We couldn't be more happy that we acquired this asset.
Very good. Thank you, Gordon. You started setting the stage already for the site visit. I would say we go to the webcast, take one or two questions from there as well before we come back to the room here. Chorus Call.
So far, there are no further questions.
No questions? Okay. Then happy to continue here in the room. Taking on the right side. What is your?
I think they've gone to bed.
Huh?
They've gone to bed.
Thanks, Daniel. Odysseas from BNP . Gordon, on your point on how long it may take for average titer improvements, we are seeing some leniency from regulators on biologics, specifically biosimilars, to take chemical equivalents as good enough for drug approvals instead of needing to run an entire trial. I want to know, could this extend to regulators being more lenient to approve new, more efficient processes with improved titers for existing drugs, especially the ones that you've been producing for years now? Does it remain the case that the majority of these savings stay with you rather than passed on most of the time? Is any of that baked into.
Yeah.
Your 20% batch throughput increase assumption for existing capacity?
Yeah. If you remember the number on the number of blockbusters that will come through to 110 over the years, I said that there's only six that are not yet approved in that number, and 41 of them already approved but will grow. That means there's a lot of legacy products in there, and those legacy products obviously contributing to the lower yield that you see relative to the headlines that you see, certainly that Lonza publish, and we're really pretty proud of what we do in terms of productivity cell line.
If you said to an innovator company, "Take this old molecule, move it into a current modern cell line expression system that will improve the productivity," then in my view, because I can't speak for them, but in my view, is the relative amount of work that would need to be done, even if you said they could show comparability and they didn't have to go through a long, extended period of time, the refiling of that in all of the different countries that they operate, they would rather use their resources for launching new products than spending time going backwards to think about old products and improving those. So, it's a personal view. I can't say whether there's a right way of doing that. It would just be my view of why there's no great desire to go and do that, because they want to think about new products.
Very good. Charles, here on the left.
Thank you. Charles Weston from RBC again. Thanks. Just wanted to come onto the 20% improvement in batch productivity.
Yeah.
That's an incredibly high number if you can just run it from the existing facilities.
Yeah.
When I look at the cost structure, materials and energy is about 1/3 of your COGS, less than a quarter of your sales. With that as background, what drop through, from a margin perspective, do you get from an incremental batch?
Yeah.
That comes through from the existing facility.
Yeah. Maybe a few comments on productivity, right? I said that we believe that capacity is a challenge, right? How we approach the challenge of capacity three ways. Number one, improve the output of existing assets that you have. Number two is adding capacity to existing sites where you've already got fixed cost infrastructure, and you amortize the costs over an increased amount of output. Number three then is whether it's M&A or whether we're making choices about where we'll invest. I think Philippe gave you the numbers of our guidance in terms of the future, and you can see that there's a major contribution of the productivity improvements in the guidance that Philippe provided in terms of our margin expectations over the midterm.
Very clear. Let's do Charlie here.
Hi, Charlie Haywood with Bank of America. Thanks for taking the question. Just to follow up on the Vacaville comment where you said you're happy with where you are and ahead of where you wanted to be. Is that a CapEx progress point or a contracting point? Could you provide an update on the latest sort of CapEx progress for the site and the steps you're taking over 2027 and 2028? The reason I ask is there's some investor focus on the potential for your CapEx to be completed earlier than expected and to see some site sales accelerate maybe in the back end of 2028 instead of 2029. Thank you.
Yeah. I mentioned we're kind of on progress with the work we're doing. Do I think it will be accelerated? I don't think that will be any significant acceleration. In terms of your question around acceleration of sales, as a more general comment, I think that would be a result of the portfolio, how that portfolio evolves as we bring products in. You have the ramp-up of products. If the demand for some of those products is extremely high, then you could see acceleration of sales because you'd have done the tech transfer, and you just get the benefit of more batches, and that would allow us to accelerate sales. But that's going to be a demand question and would be hard to judge that at this stage what the forecast demand that we would get from our customers.
Very good. We have time for two more questions, I think. Let's start with Matt and then.
Hi. Yes, Matthew Parisi from KeyBanc Capital Markets. Thank you for the questions. We've seen an increase in 483s and quality issues at competitor facilities, and just wondering if you could talk to the potential.
Sorry, can you speak up?
Oh, sorry, yes. We have seen an increase in 483s and quality issues at competitor facilities. Just wondering if you could talk to the potential opportunity that exists to win additional contracts in clinical stage and commercial molecules.
Yeah. I think Wolfgang was really clear that quality is our right to operate in this business, and rightly so. You have seen 483s. Of course, we have 483s as well. What we make sure that we do is the 483s that happen outside, we use that as a kind of trigger to improve our own internal system to say, "Okay, if that was a 483 somewhere else, let's just double down and make sure that we wouldn't get that 483." If we do get a 483, we also then make sure that we are using the learning from that, not just on the site where the 483 was quoted, but across the whole network. You can look at that as, at least for us, it's kind of feedback that tests the rigor and the discipline of our quality system.
That feedback loop I mentioned in our operating system is designed to make sure that we're always improving on that. We get, I don't know, hundreds of inspections every year by our customers, and then, of course, the regulators. Having other eyes looking at your quality system, we see it as a very positive thing to be able to improve. The second part of your question was, is it an opportunity? If you remember when I talked about molecules dropping in at commercial, I said it's either because good news, demand's high, security of supply, where they want dual supply, or it's because somebody else screwed up, and then you can take advantage of that. Sometimes.
Very good. One final one. Let's take James here, just in the first row as well.
Thank you very much. James Quigley from Goldman Sachs. Gordon, one thing that wasn't mentioned in the presentation was continuous manufacturing or process intensification.
Yeah.
What are Lonza doing in this area? How important could it be for the future? To what extent are customers asking you or showing demand or willingness to get into this area?
Yeah.
And also, what are the regulators saying?
Yeah. So it's kind of an interesting debate, isn't it? Between continuous and intensified fed-batch or N-1, if people kind of understand that language about where are you going to get benefit between the two. I should have spoken about it. I forgot. So thanks for the reminder. We're already making a commercial product with intensified fed-batch already. We make that. We are already doing development program work in GMP manufacturing using N-1. When we design our facilities, we're also designing it ready for that as well. Probably next month, I think, if I'm not mistaken, or the month after, we'll run our first 20K N-1 as well. So we're very active on it, and we set our assets up to be able to do it. Customers, depending on the product, happy to do so.
Regulators, we're already making a commercial product anyway, so we've already seen the approval for that.
Very good.
Okay.
Thank you very much, Gordon.
All right.
Maybe closing the session, I would ask Wolfgang to come back on stage.
Do you want me to stay? Should I stay here?
Yeah.
Okay.
Thank you, Gordon. Thank you, Daniel. To close the first part of the day, also for the ladies and gentlemen being with us virtually, reminding us of what we heard today, what we shared with you. First of all, we keep the promises we make, which is important in terms of you trusting us that we actually maximize value capture for our clients, their patients, but of course, also for you as our shareholders. Second takeaway from our side is actually we created something special over the last years, which we call the innovation to launch integrator, which is a complex operating system which we maximize in the sense of getting as many opportunities into the system, which will then almost never leave it again.
Which is good for us, which is good for our clients, because we actually answer a key question of our customers, which is not a procurement question first and foremost, but actually a value question, which is this new innovative pharmaceutical asset manufacturable? We are not in a capacity race, we are actually in a value capture race, and we are leading in this regard. We actually shared with you how we think about the financial evolution of our company, the financial engine, which we see as a structural growth compounder in terms of us growing at high rates, 10%-13% on average over time, with CORE EBITDA margins expanding and improving as opposed to what we shared with you two years ago. So the upgrade of our organic growth model, which then translates through an ever-increasing free cash flow conversion in terms of percentages of EBITDA.
Which actually translates into cash, where we actually have the opportunity to reinvest this cash at very attractive high returns, which then leads to this very attractive compounding effect. The ROIC over time with ever more growth projects at least 30% ROIC per asset, ROIC of the Group are going up. The last part is Vacaville is a great place to be. We are extremely happy and proud of what the team in Vacaville, as part of the overall organization together, achieved already. We are very happy about the progress that we are making in terms of elevating this asset to become as flexible as we need it for a CDMO operation. The quality of the asset itself is great, and we are building on a very strong team, which actually pushes us forward here in Vacaville, but also across our Integrated Biologics network.
Overall, we are One Lonza, and we are looking forward to, together with you, going to a future in which we will compound value for the benefit of our clients, millions of patients worldwide, for the benefit of the people at One Lonza, which are actually great and capable in terms of taking innovations to launch. We are looking forward to also create superior value for our owners, being our shareholders. Thank you so much. Looking forward to share lunch with you, and then take a look, touch and feel what it is, and what it means to be at Vacaville and operate that facility with a great team. Thank you so much for being with us, and good evening to Europe, and let's go and have lunch together. Thank you so much.