Indian pharma manufacturers gain momentum as alternatives to Chinese partners

In a significant industry shift, pharmaceutical companies are actively exploring alternatives to Chinese contractors for drug production, driven by concerns over geopolitical tensions and supply chain vulnerabilities. According to a Reuters report,industry executives and experts reveal a growing trend favouring Indian manufacturers over their Chinese counterparts.

China has been the preferred destination for pharmaceutical research and manufacturing services for nearly two decades, thanks to cost-effectiveness and rapid production capabilities offered by contract drugmakers. This relationship endured challenges from the U.S-China trade war and disruptions caused by the COVID-19 pandemic.

Changing dynamics: Seeking to 'de-risk' supply chains

Rising tensions with China have prompted Western governments to advise companies to 'de-risk' their supply chains. As a result, some biotech firms are now considering manufacturers in India to produce active pharmaceutical ingredients (API) for clinical trials and other outsourced work.

Tommy Erdei, Global Co-head of Healthcare Investment Banking at Jefferies, told Reuters, "Today, you're probably not sending an RFP to a Chinese company. 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."

Biotech companies turn to India: A growing trend

Dr. Ashish Nimgaonkar, the founder of Glyscend Therapeutics, told Reuters that factors over the past several years have made China a less attractive option. When issuing Requests for Proposal (RFP) for medicines in later development stages, Indian contract development and manufacturing organizations (CDMOs) are now preferred over Chinese ones.

Four of India's largest CDMOs—Syngene, Aragen Life Sciences, Piramal Pharma Solutions, and Sai Life Sciences—report increased interest and requests from Western pharma companies, including major multinationals.

While the full benefit for Indian manufacturers won't be immediate, there is a notable surge in interest. India aims to strengthen its position in the pharma services sector, boosting sales and enhancing the reputation of its $42 billion pharmaceutical industry. Despite concerns over oversight, Indian CDMOs are actively working to match Western and Chinese standards in quality.

Regulatory scrutiny and growth projections

The U.S. Food and Drug Administration (FDA) warned about an eye drop made in India in February. However, Indian CDMOs stress routine inspections by the FDA. Mordor Intelligence estimates India's CDMO industry revenue to be $15.6 billion in 2023, with a projected annual growth rate of over 11% for the next five years.

Some clients request 'backward integration to India' where even basic raw materials are sourced from India instead of China. Piramal Pharma Solutions has received such requests, indicating a broader shift in the supply chain.

Sai Life Sciences reports almost doubling its manufacturing capacity since 2019 and is set to add another 25% in the next year to meet growing demand. The industry shift is particularly evident in drug discovery work for conventional pharmaceuticals.

Bottomline

The pharmaceutical industry's move to diversify its manufacturing sources marks a pivotal moment, with Indian manufacturers poised to significantly reshape global supply chains. As tensions persist and the industry navigates geopolitical uncertainties, the landscape of pharmaceutical manufacturing is undergoing a transformative shift.