Focus: Indian drug manufacturers benefit from Big Pharma interest beyond China

Piramal Pharma (Mumbai)

27/11/2023 24:01

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      Drugmakers seek supply chain security, look outside China
    

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      Indian contract drugmakers see increased interest, strong
growth
    

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      Lax regulation concerns with India persist
    

  
    By Maggie Fick, Andrew Silver and Rishika  Sadam
       LONDON/SHANGHAI/HYDERABAD, Nov 27 (Reuters) - Drugmakers
are seeking to limit their reliance on Chinese contractors who
produce drugs used in clinical trials and early-stage
manufacturing, a move that is benefiting rivals in India,
according to interviews with 10 industry executives and experts.
    China has for nearly 20 years been the preferred location
for a range of pharmaceutical research and manufacturing
services due to the low cost and speed offered by contract
drugmakers there. 
    That relationship largely held firm despite a U.S.-China
trade war under the Trump administration and supply chain havoc
experienced by other industries during the COVID-19 pandemic.
But increasing tensions with China have prompted more Western
governments to recommend that companies "de-risk" supply chains
from exposure to the Asian superpower.
    That is leading some biotech companies to consider using
manufacturers in India to produce active pharmaceutical
ingredient (API) for clinical trials or other outsourced work.
    "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 founder of Glyscend Therapeutics,
a U.S.-based biotech firm testing treatments for type 2 diabetes
and obesity in early trials, agreed. "All of the factors over
the past several years have made China a less attractive option
for us," he said. 
    Nimgaonkar told Reuters that when Glyscend issues an RFP
later in the development stage of the medicines it has in
trials, Indian contract development and manufacturing
organisations (CDMOs) would be preferred over Chinese ones.
    Four of India's largest CDMOs - Syngene  SYNN.NS , Aragen
Life Sciences, Piramal Pharma Solutions  PIRM.NS , and Sai Life
Sciences - told Reuters they have this year seen increased
interest and requests from Western pharma companies, including
major multinationals. 
    Sai declined to comment on profit growth but said sales have
grown 25%-30% in recent years. The other companies said they
reported strong profit growth in the most recent quarter.
    Top executives at the firms said some customers want to add
India as a second source, in addition to China, for
manufacturing. Others are seeking to leave China and even making
requests to originate supply chains in India.
    The full benefit for these Indian manufacturers will not be
immediate, said Peter DeYoung, CEO of Piramal Pharma Solutions. 
    It will take time for treatments in early development to
make it to the market, when contracts would become more
lucrative for outsourcing firms like his, he said.
    Chinese CDMOs are established makers of biologic drugs,
which require a higher threshold of regulatory approval than
conventional medicines, said Helen Chen, Greater China Managing
Partner at L.E.K. Consulting in Shanghai. 
    Hiring a new firm for complex work such as biologic
manufacturing can take three to five years, she added. "It's
really not something that (companies) just pick up and move like
shoes."
    
    STRONG GROWTH
    India is seeking a bigger foothold in the pharma services
sector to boost sales and reputation for its $42 billion
pharmaceuticals industry. 
    But concerns over lax oversight persist. Nimgaonkar said
Indian CDMOs need to do more to ensure their reputation on
quality standards matches Western and Chinese ones.
    In February, the U.S. Food and Drug Administration (FDA)
warned against using an eye drop made in India linked to the
outbreak of a drug-resistant bacteria in the United States that
caused one death.
    India-based research firm Mordor Intelligence estimates
revenue from India's CDMO industry at $15.6 billion this year
compared to $27.1 billion in China. But it estimates revenues
from India's industry will grow, on average, at more than 11%
annually over the next five years, compared to about 9.6% for
China. 
    The Indian CDMOs told Reuters that their facilities are
routinely inspected by the FDA. An FDA spokesperson declined to
comment.
    Piramal Pharma has this year received requests from clients
for "backward integration to India", which means that even the
most basic raw materials are sourced from the country instead of
China, said DeYoung. Piramal buys about 15% of its raw materials
from China but is trying to reduce that.
    Sai Life Sciences said it almost doubled manufacturing
capacity since 2019 and is adding another 25% in the next year
or so to meet demand.  
    Ramesh Subramanian, chief commercial officer of Aragen, a
privately-owned Indian firm that has grown from 2,500 to 4,500
employees in the past five years, said revenue growth of 21%
last year was partly driven by new contracts with Western
biotech firms. Aragen counts seven of the 10 biggest pharma
companies as clients, he said, declining to name them.
    The shift is particularly evident in drug discovery work for
conventional pharmaceuticals.
    "New biotechs are deciding to put eggs in both the Indian
and China baskets from the start," Subramanian said. 
    

 (Reporting by Maggie Fick in London, Andrew Silver in Shanghai
and Rishika Sadam in Hyderabad;
Editing by Michele Gershberg and Catherine Evans)
 ((maggie.fick@thomsonreuters.com; +44 7890 916706;))