Daily Management Review

Big Pharma's Interests Outside Of China Boost Indian Pharmaceutical Manufacturers


Big Pharma's Interests Outside Of China Boost Indian Pharmaceutical Manufacturers
Drugmakers are attempting to reduce their reliance on Chinese contractors that manufacture pharmaceuticals used in clinical trials and early-stage manufacturing, according to reports based on interviews with ten industry executives and analysts. This trend is advantageous to competitors in India.
Due to the speed and low cost that contract drugmakers in China offer, the country has been the favoured site for a variety of pharmaceutical research and production services for almost 20 years.
Despite a trade battle between the United States and China during the Trump administration and supply chain disruptions faced by other businesses due to the COVID-19 epidemic, the partnership remained relatively stable. However, as hostilities with China worsen, more Western governments are advising businesses to "de-risk" their supply chains by removing any exposure to the Asian powerhouse.
This is pushing several biotech businesses to think about sourcing active pharmaceutical ingredients (API) for clinical trials and other outsourced work from manufacturers in India.
"Today you're probably not sending an RFP (request for proposal) to a Chinese company," said Tommy Erdei, global co-head of healthcare investment banking at Jefferies. "It's like, 'I don't want to know, it doesn't matter if they can do it for cheaper, I'm not going to start putting my product into China'."
Dr. Ashish Nimgaonkar, the creator of Glyscend Therapeutics, a biotech company based in the United States that is exploring medicines for obesity and type 2 diabetes in early studies, concurred. "All of the factors over the past several years have made China a less attractive option for us," he stated.
Nimgaonkar told Reuters that Indian contract development and manufacturing organisations (CDMOs) would be chosen over Chinese ones when Glyscend launches an RFP further in the development stage of the drugs it has in trials.
Syngene, Aragen Life Sciences, Piramal Pharma Solutions, and Sai Life Sciences, four of India's leading CDMOs, told Reuters that they have received more inquiries and interest from Western pharmaceutical companies this year, including significant multinationals.
Sales have increased by 25% to 30% in recent years, according to Sai, who declined to comment on profit growth. According to the other businesses, their most recent quarter saw significant earnings growth.
Top business executives at the companies stated that some clients desire to use India as a second manufacturing source in addition to China. Some are even requesting to start their supply networks in India in order to escape China.
The full benefit for these Indian manufacturers will not be immediate, said Peter DeYoung, CEO of Piramal Pharma Solutions.
Early-stage medicines will take longer to reach the market, he added, at which point contracts for outsourcing companies such as his will become more profitable.
Biologic drugs, which need a higher level of regulatory approval than conventional medications, are produced by well-known Chinese CDMOs, according to Helen Chen, Greater China Managing Partner at L.E.K. Consulting in Shanghai.
It can take three to five years to hire a new company for complicated operations like biologic manufacturing, she continued. "It's really not something that (companies) just pick up and move like shoes."
In an attempt to improve sales and brand recognition for its $42 billion pharmaceutical industry, India is looking to expand its presence in the pharma services market.
However, worries about weak oversight continue. According to Nimgaonkar, Indian CDMOs must take additional steps to guarantee that their reputation for high standards is comparable to that of Chinese and Western companies.
The FDA in the United States issued a warning in February on the usage of an eye drop manufactured in India that was connected to a drug-resistant bacterium outbreak that resulted in one fatality in the country.
The CDMO business in India is expected to generate $15.6 billion in sales this year, according to research firm Mordor Intelligence, located in India, as opposed to $27.1 billion in China. However, during the next five years, it predicts that revenues from India's industry will expand, on average, at more than 11% yearly, compared to roughly 9.6% for China.
The FDA regularly inspects the Indian CDMOs' facilities, according to information provided to Reuters. A representative for the FDA declined to comment.
According to DeYoung, Piramal Pharma has received requests this year from customers for "backward integration to India," which entails sourcing even the most basic raw materials from the nation rather than China. Piramal attempts to lower the percentage of raw materials it purchases from China, which now stands at 15%.
According to Sai Life Sciences, in order to satisfy demand, it has nearly doubled its manufacturing capacity since 2019 and plans to increase another 25% in the upcoming year.
Chief commercial officer Ramesh Subramanian of Aragen, a privately held Indian company that has expanded from 2,500 to 4,500 workers over the last five years, stated that new contracts with biotech companies in the West contributed to the company's 21% revenue growth in the previous year.
He declined to name them, but Aragen indicated that seven of the ten largest pharmaceutical corporations are among his clientele.
The change is most noticeable in conventional pharmaceuticals' drug discovery efforts.
"New biotechs are deciding to put eggs in both the Indian and China baskets from the start," Subramanian said.