India Emerges as Key Player in Pharma Supply Chain Shift Amid Global De-risking Efforts

In a strategic move to diversify and de-risk their supply chains, pharmaceutical companies are increasingly turning to Indian manufacturers, marking a significant shift from their longstanding reliance on China. Interviews with industry experts and executives reveal that India is gaining prominence as a preferred destination for pharmaceutical research and manufacturing services.

For nearly two decades, China has been the go-to location for pharmaceutical research and manufacturing, thanks to the cost-effectiveness and speed offered by contract drugmakers in the region. This trend persisted even during the U.S.-China trade tensions and the disruptions caused by the COVID-19 pandemic. However, escalating tensions with China have prompted a global reevaluation of supply chain strategies, with Western governments advising companies to reduce exposure to the Asian giant.

This recalibration is driving biotech companies to consider Indian manufacturers for the production of active pharmaceutical ingredients (API) used in clinical trials and other outsourced work. Tommy Erdei, global co-head of healthcare investment banking at Jefferies, notes, “Today you’re probably not sending an RFP to a Chinese company,” indicating a growing reluctance to rely solely on China for pharmaceutical production.

Dr. Ashish Nimgaonkar, founder of Glyscend Therapeutics, a U.S.-based biotech firm, concurs, stating that various factors have made China a less attractive option. Nimgaonkar asserts that when issuing requests for proposal (RFP) in later stages of drug development, Indian contract development and manufacturing organizations (CDMOs) would be preferred over their Chinese counterparts.

Major Indian CDMOs, including Syngene, Aragen Life Sciences, Piramal Pharma Solutions, and Sai Life Sciences, report increased interest and requests from Western pharma companies, signaling a potential boon for the Indian pharmaceutical industry. While the full benefits for Indian manufacturers may take time to materialize, executives at these firms report strong profit growth in recent quarters.

Peter DeYoung, CEO of Piramal Pharma Solutions, acknowledges that the transition won’t be immediate, especially for complex processes like biologic manufacturing, where Chinese CDMOs have a stronghold. However, the trend indicates a broader shift in the pharmaceutical landscape.

India, aiming for a larger share in the global pharma services sector, faces persistent concerns about lax oversight. Nimgaonkar emphasizes the need for Indian CDMOs to align with Western and Chinese quality standards. Despite concerns, Indian CDMOs assert routine inspections by the U.S. Food and Drug Administration (FDA), emphasizing their commitment to quality.

The shift towards India is not merely limited to manufacturing; clients are requesting “backward integration to India,” a move towards sourcing even basic raw materials from the country instead of China. Piramal Pharma has received requests for such integration, reflecting a broader effort to reduce dependence on Chinese raw materials.

India’s pharmaceutical industry, estimated at $42 billion, seeks to solidify its position in the global market. Concerns about lax oversight persist, with a February warning from the FDA regarding an Indian-made eye drop linked to a drug-resistant bacteria outbreak in the U.S. However, Indian CDMOs express confidence in routine FDA inspections.

While China currently leads in CDMO revenue, India is projected to experience rapid growth, with estimates suggesting an annual growth rate of over 11% over the next five years. Indian CDMOs are expanding their capacities to meet growing demand, with Sai Life Sciences nearly doubling its manufacturing capacity since 2019.

Ramesh Subramanian, Chief Commercial Officer of Aragen, notes a significant revenue growth of 21% last year, driven partly by new contracts with Western biotech firms. The shift is particularly evident in drug discovery work for conventional pharmaceuticals, with new biotechs opting to diversify their supply chains from the start, placing their trust in both Indian and Chinese capabilities. As pharmaceutical companies globally embark on supply chain de-risking, India stands poised to play a pivotal role in shaping the future of the pharmaceutical industry.

Credits: Reuters

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