Biomanufacturing Onshoring 2026: GLP-1, CDMO and Reshoring

Shaheen Chohan (00:00):
The global pharma and biotech sector is in the midst of a robust capital spending cycle, with a number of forces driving this surge. There's the structural shift towards outsourced base manufacturing and an urgent, industry-wide push to build advanced manufacturing capacity, all coming at a time when US reshoring and supply chain resilience of tariff pressure is now reshaping the location of much of the past spending patterns. The big question is, are we watching a temporary CapEx boom, or has the industry permanently changed around how and where it now manufactures?
Welcome to Navigating the Currents of Change, where we bring together over four decades of trusted, researched data and industry insights, built for the Answer Age. Let's dive in. My name is Shaheen Chohan, and I lead Global Analytics here at Industrial Info Resources. And to help me unpick some of the trends and put some answers to those questions, I'm delighted to be joined by two of our industry experts. Annette Kreuger is IIR’s Senior Vice President of Global Pharma and Biotech Research. And I'm also joined by Steve Leggett, who is IIR's Vice President of North America Pharma and Biotech Research. Welcome to you both.

Shaheen Chohan (01:40):
Now, Steve, if I could start with you first. Reshoring is a big theme at the moment. Certainly, since the pandemic. And that's obviously been driven a lot by this strategic imperative about building supply chain security. And that's clearly starting to see a lot of big capital projects now being announced and committed to in the US. How is this actually translating into construction activity across the industry, and do we think that's going to be - all of that banked capital spending is going to be a reality?

Steve Leggett (02:13):
Great top-of-mind question, Shaheen. Reshoring, onshoring, as of mid-year this year is no longer a political debate. It is pivoted squarely to domestic large scale CMG manufacturing, construction of fill finished facilities and supporting infrastructure. In prior years while R&D real estate has faced oversupply, bio manufacturing facility construction remains the former bio industry's primary growth engine. Following major investment announcements in early 2025, driven by US trade policies and tariffs, incentives and supply chain vulnerabilities, 2026 has marked a major transition into design and physical construction of biopharma facilities. Multi-million dollar commitments by major pharma companies have come to fruition. Concerns such as Eli Lilly, AstraZeneca, Johnson and Johnson, UCB, Roche, Genentech and Boston Scientific are progressing through design into active, groundbreaking insight work.
Now, not all pharma real estate is growing equally. Construction activity is heavily concentrated in high demand products. Skyrocketing demand for weight loss treatments. The catchword there and the definition is GLP-1s has driven massive capital deployment for APIs. Aseptic fill finish lines, drug product, assembly plants, biologics, selling gene therapies, large scale commercial bioreactor capacity, and cell therapy manufacturing continue to see sustained long term construction build outs. Now, while major biopharma hubs have historically concentrated in Boston or the Boston Cambridge area, the San Francisco Bay area and San Diego manufacturing construction is expanding into new regional corridors due to land availability, power grid access, and lower operating costs. And these areas include North Carolina, where AbbVie and Roche Genentech are building, Georgia, where UCB is coming over from Europe, and we have emerging industrial market states like Indiana, where Eli Lilly is building out their major campuses in Lebanon and Indianapolis. Virginia also has a Lilly project as well as AstraZeneca. UCB is going to Georgia, and Lilly is also building in Alabama and Texas. Major large capital, grassroot greenfield projects.
So this is all coming where once was just buzzwords and political rhetoric, people are reshoring and onshoring because of the, as you said, the supply chain concerns and then the domestic incentives that they get when they come here.

Shaheen Chohan (05:08):
Well, I mean, there's one thing about supply chain concerns, and that was a big, big front of mine topic. You know, during Covid, post-Covid. But do you think that, a lot of these big and their billion dollar commitments being made by Big Pharma, the CEOs are all making big announcements about either relocating or building grassroot production capacity in the US. Do you think that is the fear of tariff? And if we did say did see that fear of tariff go away, do you think maybe some of these big commitments may actually not come to fruition?

Annette Kreuger (05:50):
No. What I really think is tariffs change almost daily now. Weekly. They're protecting, as Steve had mentioned, their high profit products and its GLP1, CGT therapy. Anything that you can think of that, I want to say my famous line, acronyms make money for the drug industry. You know, they got a little bit scared. We saw some closures and cancellations of projects in Europe as a result of this fear. But when they go in wholeheartedly, they're actually building these projects. We're seeing it all over the United States now. It's become a bigger playing field. China is making a huge push. They're mimicking the United States in bio construction, be it for APIs, advanced pharmaceutical ingredients, both small molecule and the bulk drug product for bio drugs selling gene therapy, they're going after it aggressively. And they've also changed in that commercial research. They're developing drugs now. So that's been an interesting turn of events. And these things are happening. What we're seeing is that there's the United States and then there's China. Those are the two dominant players right now in the drug industry for manufacturing.

Shaheen Chohan (07:16):
Looking at the composition of spending. You know, we saw that big surge coming out of Covid. A lot of production capacity built. And it's kind of softened a little bit. The type of spending that we're seeing, there was a big grassroot build out and I know there's a lot of new facilities still being planned. A lot of it attached with the, you know, the need to avoid tariffs and all of that kind of good stuff. But are we seeing a pivot maybe in the type of spending back to sort of expansion type projects over, you know, grassroot developments?

Annette Kreuger (07:52):
Well, you can blame AI automation, high tech. Why you're seeing a lot of grassroot and greenfield projects, is that legacy facilities or brownfields re retrofitting those or expanding onto them, while in the past was more economical and quicker, and it behooved the company. But with all this automation and special piping and analytics and AI control systems and automation, it's cheaper and better and quicker to build a greenfield grassroot facility. And so those aren't going away. It's not that it's maybe more expensive in the front end, but it makes it easier and quicker for the company to do what they need to do to supply the drug to market at a quicker, more efficient pace. So that's not going away.

Shaheen Chohan (08:59):
So you see a lot more of the ramp up in I guess drug manufacturing is going to be coming actually specifically from expansions at existing operational facilities as opposed to, you know, a big wave of grassroot development.

Steve Leggett (09:05):
In the next five years, yes. But as far as the Lilly projects, the Johnson and Johnson, Genentech, they are building grassroot projects so they can do everything at once. I mean, build it into the facility and not have to worry about the constraints that a legacy building would have. So it's going to peter down to that. It's going to flatten out, and then you'll start seeing the more expansions in the renovations. But as for right now, because of the high-tech automation and AI, you're going to see these green fields continue to flesh out. But there is going to be a drop off kind of back to where we were, where we're adding on or rebuilding facilities.

Annette Kreuger (09:51):
What's interesting is grassroot construction at all, but disappeared back in 2009, 2010 when the huge offshore, all the tax rates changed, everything went and big pharma left. We had massive plants close. It's come back.
And when they go all in. Here's something that's very interesting with the industry. As Steve said, we have grassroot plants being built now, but they don't drop that kind of multi-million multi-billion dollar investment without plans for expansion. And these new plants are very easy to expand with the modern techniques. Modular construction, single use systems, plug and play and all that's built in. This build out, most of them are over the next 5 to 10 years. But there's future plans there. I can guarantee you that anything over $50 million, $100 million initial investment has plans for a build out. A lot of times they'll build the shell and core and won't equip the whole thing. That'll be the phase two. Phase three. It all depends on the land, which is why Texas is so attractive.

Shaheen Chohan (10:53):
Now, Annette, you touched on the growth in the outsourcing model and obviously global CMO and CDO market that continues to kind of grow rapidly. And certainly the US is seeing some, you know, some super high, strong demand for this sort of high value manufacturing. And I guess you touched on China and India. They're also looking at this as a possible model to expand their production capacity, right? Before we get into the details of, is this a big sort of structural change across the industry? Could you just define CDMO and CMO? What does that mean?

Annette Kreuger (11:45):
A CMO is a contract manufacturing organization. A CDMO is a contract development manufacturing organization. We’re seeing more and more just becoming CDMOs where they actually do drug development as well. And it's very attractive to the industry, which is a huge sea change from how it used to be. When a drug company invests $1 billion to bring a drug to market, after all the trials and tribulations that it goes through, it's highly proprietary. To turn that over to a contract manufacturer, there's got to be a level of trust, and they almost have to be, I mean, drug manufacturing plants are so regulated and so pure and clean. They have to be. CMOs and CDMOs almost have to be better, because I'm trusting you with a multi-billion dollar selling drug to make. And a lot of these new drugs don't have huge capacity requirements. So it behooves them. I've got a trusted partner, you're going to dedicate this new production line. You're going to dedicate a portion of your plant, in some cases the entire plant, for my needs. Drug companies do not like to be in the drug manufacturing business. They are, but we saw during Covid when the partnership really, really grew. It's contracted a little bit, but now it's coming back up.

Steve Leggett (13:12):
People may think of CMOs and CDMOs as capacity partners, and that's usually what the industry thinks. However, as Annette said, they are fully vetted. They have the restrictions on them more so than usually than a pharmaceutical company or they want to be so they can do the regulatory affairs part of it, the standard operating procedures, just as an extension of the company. So it's more of a regulatory and capacity, not just a co-pack or a capacity. So they're very valuable and they can scale up very quickly. They usually use single use or they have modular and they get a contract. Now it takes a while to hammer out the contract, but once they do, they can scale up quickly with new equipment, and it's usually single use or modular, so they can just shove it in there.

Shaheen Chohan (14:00):
Now, Annette, I'd like to come back to sort of policy incentives and tariffs and obviously supply chain. This is quite a complex interplay of sort of policy driven factors and frameworks. How is this kind of influencing now where companies actually choose to manufacture? How are these factors sort of affecting site location? You know, you talked a little earlier about even in the US, there used to be legacy regional sort of hubs. And this is now sort of spreading, you know, capital activities going across the market. And I guess a little bit the CMO and the CDMO involvement and growth in the market is also helping shift the distribution and location of this spending. Can you just share some insights?

Annette Kreuger (14:50):
It's open. Those legacy locations aren't going anywhere. They're firmly entrenched. Money, land and labor. Because labor is at a premium right now. Skilled labor. Both to build the plants and to work in them. So, like I said, they're going to still always be the Mid-Atlantic, the northeast, the New England, the West Coast. Texas has been determined to become the third coast for a while. And they're putting everything into it. They're giving land. We're watching GC's, EPC firms that traditionally never touched a pharma job, were available, as happened on Eli Lilly Project just north of Houston here. And it kind of took some things, people by surprise. But as I said before, the tariffs are too variable. Of course they want to protect their profits and not have to get all these owners charges, but it's the strong incentives. You know, nobody would guess that the Great Lakes has some of the highest spend in the entire country right now. Thank you, Eli Lilly. So it's kind of exciting for the industry, be it a CMO because those can be smaller plants too. And like Steve said, it's not just capacity. These companies have honed it to a science almost. And let's say we can have these big, huge plant complexes owned by the, you know, the owners. Those CMOs can be smaller and scattered throughout the country and help with capacity and also the supply chain delivering it. So it's an exciting time. It's a real exciting time with opportunities throughout the country.

Shaheen Chohan (16:29):
Following up on that, Annette, you talked about new EPCs and new contractors getting involved in the market. I guess it's just booming and it's an attractive place to play. But also you said that labor is really a challenge at the moment. And of course, I would assume that the big growth in the high tech sectors like data centers and semiconductors, that must be drawing a little bit of that labor supply out of the marketplace. So would you say for pharma and biotech developers of these big billion dollar projects, is it a challenge securing the right labor?

Annette Kreuger (17:05):
Well, with the labor, that's where we're seeing a big shift of nontraditional companies jump over into the pharma-bio market and say, we can, you know, a plant is a plant, even though a pharma-bio plant is very specialized with the equipment construction of it. If you meet the certifications and they know how to build advanced manufacturing plants, but the labor both to build it and work in the plant. So we're seeing training programs being set up not only for the construction, but also for the operation of it. Be it maintenance, all the way up to scientists. And there's been a huge push like I'll come back to Texas again at A&M. They've been with local community colleges, having training programs for maintenance. And people would say, well, why would I do that? They can go into a very high paying job and it's attractive. Because even with AI and all the technology, you need skilled labor in that plant and how to run it. You need people. The technical aspect is huge on that, so it's really quite wonderful for every location across the country. There's opportunities now that didn't exist before.

Shaheen Chohan (18:31):
Staring into the crystal ball a little bit. Let's take a look, I guess 3 to 5 years out. But do you see the current wave of investment across the industry? Biotech, biomanufacturing, CMO, CDMO Facilities. Do you see this as being sustained long term, or are we kind of approaching some kind of peak that's a little bit fragile, that if we don't see this sort of stick of the tariff as being as the kind of the stick or indeed the, the carrot, if this gets pulled away, we may actually see some of that CapEx probably, you know, disappear. Is it sustainable or are we coming to a peak?

Annette Kreuger (19:08):
Well, everything's got a peak. I'm going to let Steve start with this, and then I'll go into my thoughts on it, because he's got the North American perspective. And then it builds upon globally.

Steve Leggett (19:15):
Thanks, Shaheen. Good question. People think, will this last forever? We always ask that for the good things in life, right? We see this as a sustained long term growth trend, but not a continuation of the current boom at the same pace across every segment. Over the next 3 to 5 years, construction activity will likely shift from a broad wave of announcements to a more selective, demand-driven market. As most industries have. The underlying demand is real, aging population, rising medicine consumption, the growth of biologics, GLP1 drugs, antibody conjugates, selling gene therapies, and more complex injectable products all require special manufacturing capacity. Drug companies are also outsourcing more development and production, and industry forecasts generally project CDMO demand growth about 7 to 9% CAGR through 2030. Geopolitical fragmentation and desire to manufacture closer to major markets provide another structural tailwind.

Annette Kreuger (20:30):
As Steve said, it can't last. It won't last. We saw during Covid, everyone's like, you're going to grow 28% every year. No, it'll do what it always does. Goes back to the high single digit, some years flirting with low double digits, but it's a necessity. And going back to what we've always said, you have a built-in market for it. The population globally is getting older and as one ages, you need not only drugs to keep you alive and healthy, but we like looking good as we age. And that whole vanity market is a very huge portion of it. And that's emerging in China too, which is a new thing.

Shaheen Chohan (21:16):
So Annette, in closure, if you could offer just, I guess, one piece of advice to any of those pharma or CMO, CDMO, project owners out there, what advice would you give them? Those folks who are sitting with capital projects that they've got at planning.

Annette Kreuger (21:41):
You want to go with the best team to design the most flexible, multi-product plant. Because GLP1s weren't even on the radar a few years ago, and now they've just exploded, not just for weight loss. Like another popular drug, Viagra. Their original purpose was not for weight loss, it was for diabetes. And then they saw the side effect and said, we can make billions on this. You've got to be flexible. You have to have a strong product pipeline. Going back again, you need to make sure that the area that you're locating to support you and those incentives are in place, and you work closely with the intellectual property of the area. You can't go anywhere where there's no universities. They're essential. You can have community colleges, which are great, but there's got to be a major university with a strong medical program, biopharma program, and that could lead to a lot of different things. But the team, the labor, and that it's got the flexibility for multi-products and growth in place. It's a great time. There's a lot of, I know the recent bio conference just last month in San Diego. Site selection, you had every virtually every state going, come we'll help you. We'll do whatever you want because they're high paying jobs and the standard of living that it can transform an entire small town. So you have to take all those things into perspective and understand that the wonder drug of today, there could be side effects that we're not aware of yet, which sounds kind of cruel, but then they'll have to be another drug to cure those.

Shaheen Chohan (23:30):
That brings us to the end of our discussion. I think it's fair to say that IIR’s data points firmly towards structural change rather than a passing investment cycle, and that the near to mid-term outlook isn't for a spending peak, followed by retrenchment, but for a sustained and elevated baseline of capital intensity as the industry permanently kind of prefigures where and how it manufacturers. So all that leaves me to do is now say a very big thanks to you, Annette, and to you, Steve, for sharing your insights and perspectives today. And finally, a big thanks to all of you who've joined us today. I hope we have helped you all better navigate some of the currents of change that we're seeing. Welcome to the Answer Age.