Ladies and gentlemen, welcome to the Lonza Investor Conference Call and Live Webcast. I am Moira, the Chorus Call operator. I would like to remind you that all participants will be in listen-only mode and the conference has been recorded. The presentation will be followed by a Q&A session. You can register for questions over the conference call by pressing star and one on your telephone and follow the presentation over the webcast. Please limit yourself to one question and then re-enter the queue in case you have a follow-up. In the webcast, we have a chat box which should only be used if your question cannot be heard over the phone line. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Wolfgang Wienand, CEO. Please go ahead, sir.
Yeah, thank you, Moira. Good morning, ladies and gentlemen, and thank you for joining us at such short notice. This morning, we have announced an important strategic step for Lonza. We have signed an agreement to acquire five U.S. CDMO manufacturing facilities from Merck KGaA. The transaction expands our capabilities in bioconjugation, high-potency payload-linkers, viral vectors, and non-viral delivery solutions. It also strengthens our presence in the United States, the largest and most important pharmaceutical market in the world.
Most importantly, this is a strong example of our One Lonza strategy in action and our disciplined approach to capital allocation and value creation for our shareholders. We are adding differentiated infrastructure, experienced teams, and attractive customer pipelines that we can connect to our global Lonza operating system, science, technology, and commercial reach.
Before we start, please take a moment to note the disclaimer and the forward-looking statements applicable to today's presentation. Let me briefly take you through today's agenda. I will start with an overview of the transaction and explain the strategic rationale, including how the acquired network strengthens Lonza's highly differentiated Innovation-to-Launch Integrator model. I will then discuss the underlying market opportunities for bioconjugates and viral vectors. Then Philippe will follow with the financial impact of the transaction and the path to value creation.
I will return to discuss how the acquisition fits into our M&A framework and our Organic Growth Model before we take your questions together with Christian Seufert, Head of the business platform Advanced Synthesis, and Daniel Palmacci, responsible for Specialized Modalities, both with us in the call. Let me begin with the key messages.
We have signed an agreement to acquire five well-invested U.S. CDMO sites and related businesses from Merck KGaA, subject to customary closing conditions. The transaction is fully in line with the One Lonza strategy by adding capabilities in bioconjugation and high-potency payload-linkers to our network and expanding our position in viral vectors, all this in the U.S. Together, these technologies support highly attractive pharma pipelines and strong long-term outsourcing demand. Strategically, the acquisition strengthens our Innovation-to-Launch Integrator model. It adds infrastructure in the U.S., where many of our customers are based, and connects this infrastructure with Lonza's operating system, scientific expertise, technology portfolio, and global customer base. The enterprise valuation is in the low to mid triple-digit millions Swiss francs, the consideration to be paid in cash.
We expect the acquired business to contribute sales of around CHF 250 million at a positive Core EBITDA margin in FY 2028, the first year it will be part of Lonza for a whole year. As the business develops towards peak in the mid-2030s, we see potential for significant sales growth and improving profitability, reaching a margin level broadly neutral to the group margin expected by that time.
In short, we are acquiring a well-established and well-invested CDMO business with highly attractive capabilities, along with around 1,100 highly skilled people, but also a platform that we can expand further and are convinced can become a valuable part of our company. We are acquiring it at an enterprise valuation which we believe is very attractive, considering the value creation potential of these assets as part of One Lonza. Let us move into the transaction overview and strategic rationale.
Starting with the key transaction terms and facts. As mentioned, the valuation is in the low to mid triple-digit millions Swiss francs. The transaction will be funded from cash at hand and existing credit facilities, while reconfirming our commitment to a BBB+ credit rating. Closing is expected in mid-2027. In FY 2028, the acquired business is expected to generate approximately CHF 250 million in annual sales and a positive Core EBITDA margin.
It includes five U.S. sites and around 1,100 highly experienced employees. Approximately 2/3 of current sales come from bioconjugation and high-potency payload-linkers. Viral vectors and non-viral delivery solutions each account for roughly 15%-20%. All sites are well-invested CDMO sites with established clinical and commercial manufacturing activities, experienced local teams, and further expansion potential. At the same time, utilization is still way below the level we believe can be achieved.
This is where our focus as a pure-play CDMO and our highly differentiated Innovation-to-Launch Integrator model become important. By integrating the sites into One Lonza, we intend to broaden the customer pipeline, increase utilization, and progressively increase sales and profitability. This slide provides an overview of the sites and their differentiated capabilities. St. Louis, Missouri, is focused on bioconjugation. It has a proven clinical and commercial manufacturing track record, a robust pipeline, and ongoing expansions.
The site adds more than 300 employees with specialized expertise. Madison and Verona, both in Wisconsin, provide high-potency payload-linker manufacturing. The facilities combine advanced containment with more than 30 years of expertise and have been expanded and upgraded in recent years. Carlsbad in California is a modern viral vector facility that became operational in 2022. It offers a diversified viral vector platform and integrates drug substance manufacturing with aseptic fill-and-finish capabilities.
This adds a dedicated commercial-scale viral vector hub to our existing U.S. cell and gene network. Indianapolis in Indiana adds non-viral delivery capabilities, including lipid nanoparticles, liposomes, and PEGylated proteins, with integrated drug substance manufacturing and also aseptic fill-and-finish capabilities. Across the five sites, we are adding specialized talent, relevant customer programs, proven development and commercial manufacturing capabilities, and a platform for further growth.
The capabilities complement our existing network, and they significantly expand our footprint in the U.S., a key market for us. The strategic rationale of the transaction has three main parts. First, the transaction unlocks growth opportunities across One Lonza. It increases our exposure to high-growth bioconjugation, payload-linker, and viral vector opportunities. It also accelerates our U.S. expansion by adding existing, well-invested CDMO capacities rather than requiring us to build every capability from the ground up.
The sites will also serve as a platform for future investments in the U.S. By expanding our U.S. presence, the transaction will also increase the resilience of our overall global network in a geopolitical context. Second, it creates a complementary U.S. network for bioconjugates and payload linkers. Together with our large U.S. mammalian drug substance footprint, we can offer an end-to-end U.S. drug substance manufacturing for ADCs and other bioconjugates.
The acquired sites also broaden our development pipeline and add small and mid-scale capacity that complements our established mid-to-large-scale capabilities in Visp in Switzerland. Third, it expands our cell and gene offering with a dedicated viral vector site. Carlsbad adds diversified viral vector manufacturing, integrated aseptic fill-and-finish, and established commercial capabilities. This complements our leading cell therapy network and increases our exposure to emerging opportunities such as in vivo CAR-T and gene therapies in general.
Taken together, the acquisition brings our Innovation-to-Launch Integrator model closer to customers and ultimately to the regions where therapies will be supplied to patients. Let's now take a closer look at Advanced Synthesis. Lonza already operates a comprehensive integrated bioconjugation and payload linker network. The acquired sites add important complementary clinical and commercial capabilities in the U.S. In early stage, Oss and Nansha allow us to capture molecules through our differentiated linker and payload IP and upstream payload linker chemistry.
For clinical development, Madison and Verona add U.S. payload linker capacity, while St. Louis adds U.S. bioconjugation. These sites complement our established offering for clinical manufacturing in Visp and will allow us to capture attractive opportunities of the innovative bioconjugates pipeline in the market. At commercial scale, Madison and Verona add payload linker manufacturing in the U.S., while St. Louis provides commercial bioconjugation capacity alongside our Visp site in Switzerland.
Our strategic advantage is the integrated network run by Lonza's operating system. We can engage customers earlier, work on more programs as they progress, and provide options in Europe and the U.S. as products move from clinical development to commercial manufacturing for launch. This strengthens the breadth, resilience, and customer relevance of our offering. Turning to Specialized Modalities, the acquisition adds an important new element to our cell and gene network. Lonza already operates a comprehensive cell therapy network across the United States, Europe, and Asia, with strong late-stage and commercial exposure. Carlsbad adds a complementary U.S. viral vector hub. It is an established commercial facility with a diversified suspension platform, including lentivirus, AAV, and other virus types. It also adds integrated aseptic fill-and-finish capabilities, which we did not have before at that scale.
This is strategically relevant for Lonza because viral vectors remain a critical enabling technology for both in vivo gene therapies and ex vivo cell therapies. The site also provides critical scale and an experienced team in a technically highly demanding field. By combining Carlsbad with our existing cell and gene capabilities, we can offer customers a broader and more integrated pathway from vector manufacturing to cell therapy and fill and finish. This acquisition is also a very tangible example of how we deliver on the commitments we made at our recent Capital Markets Day and before. We said that we would selectively use bolt-on M&A to strengthen One Lonza and add strategic capabilities where they complement our existing network. Today's transaction does exactly that. At the same time, we are bringing capacity closer to our customers.
This is particularly important in the U.S., where demand for innovative pharma manufacturing continues to exceed available supply and where many of our customers are based. Importantly, this strengthens the resilience of our overall global network. With our sizable manufacturing presence across the U.S., Europe, and Asia, across key modalities, we are uniquely positioned among CDMOs to provide customers with strong supply options across three continents.
We continue to say what we do, and then we do what we say, strengthening One Lonza, moving closer to our customers, and building an even more resilient and competitive global infrastructure. Having looked at the strategic fit of the transaction, let's now take a look at the market opportunities coming along with it. The starting point is important. Lonza operates across a broad range of pharmaceutical technologies, but we deliberately invest ahead of the market in selected next-wave modalities.
This is a key element for us to maintain low-teens CER sales growth, not only short and mid-term, but also in the long run. Some technologies are already large, absolute growth markets. Others are smaller today, but are growing rapidly and will very likely become meaningful contributors over time. ADCs, other bioconjugates, and biovectors sit in this attractive part of the market. They combine strong expected growth with meaningful technical complexity.
That complexity matters because it raises the value of specialized development and manufacturing expertise, as we can provide them as the Innovation-to-Launch Integrator. Today's acquisition is not a short-term capacity decision. It is a long-term strategic choice based on the depth of the pharmaceutical pipeline, the growing number of clinical successes, and the need for reliable, scalable manufacturing. Our approach is to prepare ourselves before these markets become mature.
We did this successfully in biologics, and we have built highly differentiated capabilities in bioconjugation over many years. With today's acquisition, we are doubling down on this and adding capabilities that will support our future growth. Let me now look more closely at the bioconjugation market. The attractiveness of bioconjugation starts with the pipeline. There are around 1,200 bioconjugated molecules in development or on the market. Approximately 70% use cytotoxic payloads, including ADCs, while the remaining 30% are non-cytotoxic bioconjugates, for example, antibody-oligonucleotide conjugates. But what is particularly important for us is the maturity of this pipeline.
Around 130 molecules are already in phase II and around 80 in phase III. As these programs progress, we expect the number of marketed bioconjugates to more than double from around 100 today to more than 200 by 2033. This translates directly into significant commercial opportunity with rising volume demand growth.
Global bioconjugation pharmaceutical sales are expected to increase from around $30 billion today to around $110 billion by 2033, representing growth of around 18% per year. So this is not a market opportunity based only on a large early-stage pipeline. There's already a substantial number of molecules moving through mid and late-stage clinical development towards commercialization, creating increasing demand for reliable, specialized CDMO manufacturing capacity.
That is exactly where Lonza is now even better positioned with today's acquisition, combined with our experience in bioconjugation and the integrated capabilities we have built across the value chain. We see a similarly compelling long-term opportunity in viral vectors. The development pipeline is already substantial, with around 1,200 molecules across in vivo and ex vivo viral vector therapies. Again, what matters is not only the size of the pipeline, but its progression.
Around 250 molecules are already in phase II or phase III, and we expect approximately 50 of these late-stage programs to reach the market by 2033. This provides a strong foundation for future volume demand. The global viral vector pharma market is expected to grow from around $9.5 billion today to $40 billion-$50 billion by 2033, or more than 20% per year. The key point is that commercial launches change the manufacturing requirement. Customers need reliable scale, robust quality systems, validated processes, and increasingly, integrated aseptic fill-and-finish. These are not capabilities that can be created overnight, and manufacturing complexity has consistently proven as a challenge in the industry. Carlsbad provides an established platform, an experienced team, and commercial capabilities that can participate in this growth.
Integrated into One Lonza, we believe the site can benefit from a broader pipeline, stronger customer access, and our Lonza operating system. With that, let me hand over to Philippe, who will explain the financial profile, our capital allocation, and the balance sheet impact of the transaction. Philippe, over to you.
Thank you, Wolfgang, and good morning to you all. Let's now look at the financial impact of the acquisition and how we expect to create value over time. Let me start with the financial profile and value creation potential of the acquisition. As Wolfgang outlined, we are acquiring an established CDMO-ready business with existing customers, revenues, and capabilities. Following the initial M&A step-up, the business will become part of our Organic Growth Model.
For full year 2028, we expect sales of approximately CHF 250 million with a negligible Core EBITDA contribution and an insignificant dilution to the group margin. From there, we expect a significant sales growth trajectory, which should be slightly growth accretive to Lonza Group, reaching peak sales in the mid-2030s as we progressively increase utilization of the acquired capacity.
Core EBITDA will grow ahead of sales, with increasing capacity utilization, a more favorable product mix with more commercial products, new business acquisitions, and integration into the Lonza global network, driving gradual margin expansion until becoming neutral to the expected future group margins in the mid-2030s. We also expect the acquisition to become accretive to group ROIC. Importantly, there is no change to our 2026 outlook, nor to the upgraded midterm financial ambitions of our Organic Growth Model, as laid out to you at our recent Capital Markets Day.
The key message here is that we are acquiring well-invested CDMO sites that provide an attractive platform for future growth. As we increase utilization of the acquired assets and evolve the product mix, we expect to drive both strong sales growth and a material improvement in profitability.
And this, together with the attractive purchase price, is ultimately how we expect to create substantial shareholder value from this acquisition. Let me finally put the acquisition into the context of our broader capital allocation framework and balance sheet. Our priorities remain unchanged. The cash generation of our business funds the investments required to maintain our existing infrastructure, systems, and assets, as well as a progressive dividend. In addition, the exit from CHI will provide CHF 1.7 billion of proceeds, further increasing our financial flexibility.
We are deploying part of that capacity for this acquisition and for our broader growth agenda, be it organic or inorganic, and we continue to do so in a highly disciplined manner, as today's acquisition demonstrates. As communicated at our recent Capital Markets Day, we intend to invest more than CHF 7 billion through 2030 for organic CapEx.
Note that even after closing the Merck acquisition, we expect to retain significant balance sheet flexibility while maintaining our BBB+ credit rating. This leaves us with the capacity to pursue further value-accretive bolt-on acquisitions, like the one at hand, to strengthen our strategic position while meeting our return criteria. When we generate capital beyond the needs of the business over time, our framework remains clear. Surplus capital will be returned to shareholders, as demonstrated by the CHF 500 million share buyback we have announced, which will start upon closing of the CHI transaction.
In summary, we can fund our growth, maintain financial discipline, and preserve optionality at the same time. We are deploying our balance sheet where we see attractive opportunities, while retaining flexibility for both further acquisitions and shareholder returns. With that, let me hand back to you, Wolfgang.
Yeah, thank you, Philippe. Let me bring this back to our One Lonza strategy and how we think about acquisitions going forward. We operate in a fragmented CDMO industry, and we continue to see a broad set of opportunities across underutilized pharma assets, established CDMO businesses, and innovative technology platforms. But we are disciplined in how we assess these opportunities, as we are when we deploy our capital. We look at where an acquisition can strengthen our position across Integrated Biologics, Advanced Synthesis, Specialized Modalities, CDMO offerings, and also look beyond today.
And we carefully assess where we can create meaningful differentiation by applying the Lonza Engine to create value. Over the past three years, we have clearly doubled down on bolt-on acquisitions. Vacaville significantly strengthened our position in Integrated Biologics.
The Merck transaction now adds attractive capabilities across our businesses, particularly in Advanced Synthesis and Specialized Modalities, and enhances our reach in the U.S. And we have complemented this with targeted technology additions. All these acquisitions and agreements become part of One Lonza, allowing us to leverage our unique global CDMO infrastructure, our Lonza operating system, the deep scientific and technological expertise of our people, and our trusted customer relationships throughout the pharmaceutical industry. And we are ready to continue. We have the strategic clarity, the financial flexibility, and a clear framework for where acquisitions can create value. Where we see the right opportunities, we will continue to use bolt-on M&A to accelerate our Organic Growth Model and strengthen One Lonza. This slide brings the transaction back to our Organic Growth Model.
The model is built on disciplined investments, low teens organic CER sales growth on average over time, Core EBITDA growth ahead of sales, with the ambition to expand our margin expansion towards the high 30s in the midterm. This is unchanged from what we communicated at our recent Capital Markets Day in Vacaville, also considering this transaction. The acquired business will add an initial step-up in sales in 2027.
From there, we expect the new assets to support our group CER sales growth trajectory as the sites are integrated into One Lonza, customer pipelines expand, and utilization increases. Peak sales are expected in the mid-2030s. The acquired businesses will initially come with a low Core EBITDA margin, but profitability will improve steadily as we increase utilization and the share of commercial products, reaching neutrality to the group margin level expected in the mid-2030s.
All this is consistent with the structural growth compounder model we presented at our Capital Markets Day. Cash comes growth creates more cash, repeat. Meaning, we reinvest that cash at attractive returns and new growth opportunities. Value-accretive acquisitions can accelerate this model when they fit strategically, benefit from the Lonza Engine, and meet our financial thresholds. Let me conclude with my four key takeaways. First, the acquisition strengthens the resilience and relevance of our global network.
It adds a second bioconjugation payload linker manufacturing hub alongside Visp and a dedicated bioreactor platform, all in the U.S. as a key market for Lonza. Second, it accelerates our U.S. expansion plans, acquiring well-invested CDMO facilities with experienced teams that provide strong platforms for future investments as market demand evolves, rather than building every capability from the ground up.
Third, we expect the acquired businesses to deliver significant profitable growth over time. As we bring new business into the sites, increase utilization, and evolve the mix, we expect profitability to progressively expand and reach the expected future group margin level by the mid-2030s. And lastly, we see compelling value creation potential for our customers, patients, and our shareholders. By connecting these assets to our global infrastructure, operating systems, science, technology, intelligence, and customer relationships, we intend to unlock their full value potential as part of One Lonza.
This is what our Innovation-to-Launch Integrator model is designed to do: support customers at any phase, at any scale, across technologies, and across the globe to translate their breakthrough innovations into viable therapies for millions of patients worldwide. Thank you for your attention. Philippe and I, together with Christian and Daniel, will now be happy to take your questions.
We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you have entered the queue. Kindly limit yourself to one question only. You can get back in line again for any follow-up questions. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to use only handsets. In case of difficulties with understanding your questions on the phone line, we will ask you to submit your question via the chat box on the webcast. Anyone who has a question may press star and one at this time. The first question comes from the line of Zain Ebrahim from JPMorgan. Please go ahead.
Hello, Zain Ebrahim, JPMorgan. Thanks for taking the question. The question is, I think you covered it, but what proportion roughly at the moment is from antibody-drug conjugates? I think you said two-thirds of bioconjugation and 10%-15% is high-potency payload-linkers, so presumably that is about 75% right now. But where do you expect that to go in terms of at peak in the mid-2030s? Do you expect different growth profiles for the different businesses?
Yeah. Hi, Zain. Great to have you. Maybe to first of all indeed confirm what you just said, or might slightly add to it. Indeed, we said 60%-70% is related to bioconjugation payload-linkers, 15%-20% for the other technologies. All three are high-growth modalities. There are different market reports out there, but you probably could argue them being at around 20% or even above, yeah? They will all, in our view, evolve over time, but we actually don't share specific growth trajectories for individual technologies, for individual assets. But that is the market that we are operating in, why we actually are so happy about us having been able to acquire those assets and even strengthen and expand our activities in those spaces.
Thanks very much.
Thank you, Zain.
The next question comes from the line of Charles Weston from RBC Capital Markets. Please go ahead.
Hello. Thanks for taking the question. I just wanted to ask you about timelines. If I compare to Vacaville, you said it's going to take seven to eight years to fill from zero after the Roche revenues decline. But here you're talking about a similar timeframe despite the market being arguably faster growth, and these assets already being CDMO-ready rather than pharma assets. If you could just comment on that. I wonder if I could just squeeze in just a clarification. Your chart on margins were clearly labeled as illustrative, but would we be wildly inaccurate if we got our rulers out to get a sense of how dilutive that margin will be? Thank you.
You start?
Yes. Hi, Charles. Yes, you should know it by now. Yes, the chart is illustrative, and don't use your ruler. I think we said the margin is positive today. That should suffice for now. We have, I think, big ambitions to actually grow the margins to be group neutral at peak. I think that's the important message here, there's significant margin accretion to come.
Yeah. To add to that, hi, Charles. Indeed, I mean, the end peak sales is kind of defined by peak utilization and the capacity available, right? As such, and us giving a timeline to that doesn't really say much, but in the end, it is a significant growth trajectory that we are expecting for those businesses. That is probably the kind of speed at which you can grow such a business. There is a capacity available, but we will also be ready to actually add capacity with evolving market demands over time.
Thank you.
Thank you, Charles.
The next question comes from the line of Justin Smith from Bernstein. Please go ahead.
Thank you for taking my question. Just a quick one. With regards to future acquisitions, can you just share a few thoughts with regards to just the human bandwidth you have got to integrate different acquisitions at the same time? I would just love to understand if that is a rate-limiting step to further external growth. Thank you.
Right. Yeah. Thank you, Justin. Yeah, I mean, if you would ask me right now, did we do hard work over the last days and weeks and the teams, I actually would probably say yes. On the other hand, we are ambitious people and an ambitious company with strong teams, and I think our integration capabilities, as we have proven them during Vacaville, and will prove them this time again, they actually make it rather efficient.
So it is not that we would actually be able to do that only every three years or so. So we continuously work on adding to our M&A pipeline, and then, of course, look at the most attractive opportunities. But if we see them, we will not hesitate to actually act on them, and that can also include us working in parallel if need be.
But for now, confirm that what was a hard piece of work, and with integration ahead of us, will continue to be hard work, but we do have bandwidth.
Super. Thank you, and congratulations on the deal.
Thank you, Justin.
The next question comes from Charles Pitman-King from Barclays. Please go ahead.
Hi, guys. Thanks so much for taking my question. Just in terms of the demand and understanding your point about timelines, I am just wondering if you can confirm the expected impact from existing contracts at these sites, in terms of, can we assume these remain unimpacted? And just when thinking about the strength of demand, have you seen a bolus of demand to date which is helping to de-risk your confidence in being able to enhance utilization versus what Merck was able to achieve? Have you had to say no to prior customers due to lack of capacity in the U.S., or is this all just incremental and based on your strong expectation for future demand? Thank you.
Maybe you start.
Yeah, I can start. I think in terms of demand, Wolfgang explained it, that the sites in the U.S. complement our existing network in Visp. It is also adding a lot of clinical capacities in the U.S., which I think is something that we were lacking indeed in Visp. I think that is one angle. The second one is that we are just much closer to customers, and we know there is a large number of U.S. customers for ADCs, and these can be much better served out of the U.S.
Thank you.
The next question comes from the line of James Quigley from Goldman Sachs. Please go ahead.
Morning. Thank you for taking my questions. I have got one on the relative capacity utilization between areas. So bioconjugates, we have seen very strong growth in your Advanced Synthesis business, and we have seen some challenges in cell and gene therapies, partly driven by biotech funding, et cetera. On a relative basis, should we expect that the bioconjugates business for these plants is at a relatively higher capacity utilization versus the viral vector business and the delivery systems business?
Just trying to get a sense of which area, as you move forward with increasing the capacity utilization, which area could be more impactful or more dependent on reaching your peak sales and margin guidance over time? Thank you.
Hi, James. Thank you for the question. Actually, wouldn't really be able to comment on that. There is available capacity across all the technologies that we acquire, and hence, we actually expect to grow all of them. We have a presence and access to markets in bioconjugation, payload linkers, based on what we are already doing today, and it is, as you said, an attractive growth business. We also have a presence in viral vectors. Market access, we are actually confident about. Available capacity is across technologies, and hence, we expect growth across all three technologies.
Thank you.
Thank you, James.
Next question comes from the line of Daniel Jelovcan from ZKB. Please go ahead.
Yeah. Good morning. Just one question. Can you disclose what Merck used for their internal manufacturing? I mean, Merck has a pharma division, so just the share of wallet which you buy. Was there any contract related that you maybe have a purchase commitment for their equipment going forward in order for the nice deal, actually? Thanks.
Yeah. Thank you, Daniel. Thanks for being with us. I would pass it on to Christian to briefly comment on that.
Yeah, Daniel, I would not assume that there is a contract in place with Merck. The business was primarily focused on third-party sales and third-party revenue.
Okay. Thank you.
The next question comes from the line of Jamie Clark from Rothschild & Co. Please go ahead.
In terms of the bioconjugation and payload linker capacity you have acquired, you say that is more clinical versus what you have in Switzerland. Is that something you can expand over time into commercial capacity, or would you be looking at further acquisitions to do that? Then just briefly, on the viral vector plant you have acquired, that is now your second viral vector facility in the U.S. I guess there is overcapacity in many areas of cell and gene. Is that an area where there is overcapacity, and how do you think about your U.S. cell and gene footprint over time? Thank you.
Yeah. Thank you, Jamie. On the first question, indeed, we acquire an attractive pipeline around bioconjugation. When we spoke about evolution of product mix, of course, there is a certain expectation that some of those assets actually make it to a commercial launch and increase utilization as well. But the assets acquired from Merck include also commercial-scale manufacturing, on top of the commercial-scale manufacturing that we already have in Visp. So in the end, if you look at the total product lifecycle journey, we will now be even better able to cover early phases, early phase development activities up to commercial launch. With regard to viral vectors, indeed, we have a viral vector facility in Houston, where actually the viral vector business is, compared to the cell and gene business, the smaller part of the business.
We actually believe that this combination with a commercial-scale viral vector plant from Merck, also in the U.S., coming with an attractive pipeline, in the end will strengthen that business. So our concern in this regard is not overcapacity, but of course, we will always be mindful in looking at supply-demand balances before adding additional capacity also in this space.
Thank you.
Thank you.
The next question comes from the line of Rupen Boyadjian from Finanz und Wirtschaft. Please go ahead.
Hello. Thanks for taking my question. Can you be a little bit more specific about the price? Low to mid triple-digit million, that's a range from CHF 100 million- CHF 600 million or so. Where will it land, and is it contingent on certain milestones that you give such a broad range?
Yeah. Hi, Rupen. We, of course, as customary, precisely agreed upon the wording on the acquisition price with the seller. But if you would shoot for somewhere in the middle of the range that you just mentioned, that probably would be roundabout the right view on the acquisition price.
Okay, thanks.
One last question, ladies and gentlemen, please.
Today's last question comes from the line of Odysseas Manesiotis from BNP Paribas. Please go ahead.
Hi. Thanks for taking my question. Just a quick one. The fill and finish capacity acquired, is that enough to cover all of your U.S. needs for biologics, or is it a bit of a stretch?
Hi, Odysseas. Thank you for the question. I mean, the aseptic fill-and-finish capacity that we acquire on the two sites in Carlsbad and Indianapolis, they're actually, in terms of scale, tailored towards the activities of those sites. It's not that we now could use this capacity to actually fill our CHF 4 billion mammalian biologics business also on those sites. This is really related to the activities on those sites, which actually makes it such a strong offering, because that's what customers expect in highly sensitive technologies like viral vectors and also non-viral delivery systems, that you can actually do it, drug substances and drug products, including formulation on the same site.
Understood. Thank you.
Okay. Thank you.
Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Wolfgang Wienand, CEO, for any closing remarks.
Thank you, Moira. Indeed, to close, we are pleased with this transaction. I hope that came across. It strengthens our network in the U.S., expands our capabilities, and creates a strong platform for future growth. Above all, it reinforces our ambition to be the Innovation-to-Launch Integrator for our customers at any phase, any scale, across technologies, and across the globe. Thank you for joining us this morning.
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