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India seeks a seat at the drug services tableManufacturers want to replace China as the next destination for making custom pharmaceutical ingredients
August 20, 2024
For over a decade, China has been the preferred destination for US pharmaceutical companies looking to outsource drug development chemistry. Low labor costs, advanced infrastructure, and a wealth of skilled chemists all work to China’s advantage as a low-cost drug services hub.
But amid rising geopolitical tensions between China and the US, India is positioning itself as the best alternative to China in the custom drug services market. Indian contract development and manufacturing organizations (CDMOs) say investing in infrastructure and training young chemists will attract Western pharma and biotechnology clients looking to extricate themselves from China. But others question whether Indian firms can stand on their own—given their dependence on China for certain services—and whether they can create brand reputations comparable to some of their European and Chinese counterparts.
These questions aren’t deterring Indian companies. Sibaji Biswas, chief financial officer at Syngene International, one of India’s major drug services firms, says the country’s CDMOs have deliberately tried to market themselves as alternatives to Chinese companies.
“Large pharma clients are actively looking to restructure their supply chains to mitigate potential risks, especially after seeing the COVID-19 pandemic supply chain disruptions,” Biswas says. He adds that the US Biosecure Act—a bill that seeks to stop firms that receive federal funds from using select Chinese service companies—further encouraged the industry to move away from a China-centric supply chain.
The bill was introduced in January and amended in May but hasn’t progressed in the last few months. The House Rules Committee kept the Biosecure Act out of the National Defense Authorization Act for fiscal 2025.
Jordi Robinson, chief commercial officer of the Madhya Pradesh, India–based CDMO Navin Molecular, says the number of clients approaching his company has spiked. “People are beginning to express concerns around China,” he says. “They don’t want to move away from China fully but want a second source in India.”
To many, the rise in CDMO services being offered by India doesn’t come as a surprise. After all, several Indian companies have long possessed the building blocks of a world-class CDMO business. The country is already a big player in preclinical drug discovery services and a global supplier of generic drugs—both finished consumer products and the active pharmaceutical ingredients (APIs) that go into them.
India also has plenty of talented young chemists. “A decade ago the chemists would take off to foreign lands for better prospects,” Robinson says. “But now, with the rising middle class in India and increased wages, people don’t necessarily see the need to go abroad to seek a good living.”
Like other Indian CDMOs, Navin is investing in new manufacturing capacity. Last month it announced a $35 million expansion at its site in Dewas, India, that will add a 9,000 m2 plant and nearly double the site’s overall capacity.
The project will prepare Navin for the commercial launch of two small-molecule drugs it is developing for two European pharma companies. But Robinson says the expansion will also support demand from new customers, especially those that want to remove some of their eggs from the China basket.
According to the research firm India Ratings and Research, Indian CDMOs and drug discovery services firms are likely to see increased orders from the US pharmaceutical industry over the next 18 months as companies prepare for the possible passage of the Biosecure Act. The firm’s analysis of 15 Indian companies found that over 60% have had a rise in new-business inquiries since the bill was introduced.
Meanwhile, a few Indian companies with established CDMO businesses are reaping the rewards. Piramal Pharma Solutions, which offers services ranging from preclinical drug discovery to commercial-stage drug production, generated $126 million in sales from its CDMO segment in the second quarter, an 18% increase from the year-earlier period. The company says that for the first time, the revenue it earned from custom manufacturing programs surpassed that of generic drug projects.
Another Indian CDMO, Hikal, also reported a jump in second-quarter sales from the same period in 2023. A third firm, Laurus Labs, posted a drop in sales in the quarter, though its CDMO business has grown considerably since 2020.
Other Indian companies are just beginning to eye new opportunities. In June, Lupin, the world’s biggest generic-drug maker, announced its entry into the CDMO business. The company says the new subsidiary, Lupin Manufacturing Solutions, will be headed by Abdelaziz Toumi, a veteran of well-established Western CDMOs, who will be based in Switzerland.
Investments from venture capital and private equity firms have picked up as well. An example is Suven Pharmaceuticals’ recent merger with a rival, Cohance Lifesciences, owned by the Boston-based private equity firm Advent International.
Ashu Tandon, chief commercial officer of the Indian CDMO Aragen Life Sciences, says he isn’t surprised by rising investment in the CDMO market. India is flush with companies offering preclinical drug discovery services, he says. For such firms, known as contract research organizations (CROs), entering the CDMO business is a natural progression.
“If you are doing early-stage drug discovery, those candidates will go into the clinic for clinical trials, which will then be commercialized,” Tandon says. “CROs know that somebody will need to develop and manufacture them, so many have entered the CDMO market.”
But the picture isn’t completely rosy, and scaling up may not be straightforward for every firm. India is heavily dependent on China for the raw materials needed to make APIs. Moreover, the country imports more than 50% of the APIs it needs to support its generic-drug business. “This is one area where India needs to catch up a little bit,” Tandon says.
Nailesh Bhatt, CEO of New Jersey–based Vgyaan Pharmaceuticals, says incentives under the Narendra Modi–led government are meant to encourage Indian companies to be self-reliant and to have a local supply chain. But only a few Indian CDMOs have actually followed through. “It is much cheaper for Indian companies to import raw materials from China than to make them indigenously,” Bhatt says.
Roger LaForce, a managing director of the Chinese drug services company DorraPharma, points to a few other roadblocks that may impede the rise of Indian CDMOs. Unlike generic medicines, which are made formulaically, customized drug services focus on developing patented molecules, which often require specialized capabilities, LaForce says.
He believes established Indian CDMOs could end up with substantial slices of the growing cake. LaForce warns that the business could prove challenging for new entrants, however.
“Many newcomers want to enter the CDMO business because maybe some financial advisers have now told them this is the new trend,” he says. “Apart from having manufacturing plants, and R&D labs and technologies, CDMOs need other skills like the ability to get a steady inflow of new projects and opportunities. Not every company has that as its core skill.”
LaForce also notes the differences between Indian and Chinese infrastructure, including roads, highways, railways, seaports, and energy. He says he was often impressed when he visited Indian pharmaceutical chemical plants on the outskirts of cities but that the roads he traveled to get there were often unpaved and crowded with cattle.
Navin’s Robinson acknowledges the country’s infrastructure issues. He also often finds himself fighting to dispel notions about bureaucracy and the work ethic in India. “Some still believe that Indian companies are going to cut corners,” he says. “They think Indian companies may be cheaper but they will do things half as good compared to a Chinese company.”
Despite the challenges, Robinson is clear that he wants Navin Molecular to be a strong alternative to China in every sense and provide services that can go head to head with any top-notch Western or Chinese CDMO. “We basically have to do everything that the Swiss CDMOs do, but at a low price,” he says. “I think that’s the best way to kind of push the business in India.”
Source – Chemical & Engineering News
