A visit to Sai Life Sciences’ manufacturing facility in Bindar, Karnataka, India in September 2023 provides insight into the global pharmaceutical industry’s increasing reliance on Indian manufacturers amidst growing tensions with China. This shift is being driven by drugmakers seeking to lessen their dependence on Chinese contractors who produce drugs used in clinical trials and early-stage manufacturing.
For nearly two decades, China has been the preferred location for pharmaceutical research and manufacturing services due to lower costs and faster production offered by contract drugmakers. However, increasing tensions with China, the U.S.-China trade war, and supply chain disruptions during the COVID-19 pandemic have prompted Western governments to recommend diversifying supply chains away from China.
This has led to a growing interest in Indian manufacturers, particularly in producing active pharmaceutical ingredients (API) for clinical trials and other outsourced work. Several industry executives and experts have noted the shift away from Chinese contractors, and Indian manufacturers are benefitting from this change.
Tommy Erdei, global co-head of healthcare investment banking at Jefferies, stated that companies are increasingly hesitant to engage Chinese firms, favoring Indian contract development and manufacturing organizations (CDMOs) instead. U.S.-based biotech firm Glyscend Therapeutics, for example, plans to issue requests for proposals (RFPs) to Indian CDMOs for their medicines in trials, rather than Chinese ones.
Indian CDMOs such as Syngene, Aragen Life Sciences, Piramal Pharma Solutions, and Sai Life Sciences have reported increased interest and requests from Western pharma companies, including major multinationals. These companies are also experiencing significant profit growth, with some customers seeking to add India as a second manufacturing source or transition their supply chains entirely from China to India.
While the full benefits for Indian manufacturers may not be immediate, with complex manufacturing processes such as biologics taking three to five years to transition to a new firm, the growth potential is significant. Indian CDMOs are focused on meeting quality standards and growing their reputation within the global pharmaceutical services sector.
The Indian pharmaceutical industry is on a trajectory for strong growth, with revenues from India’s CDMO industry estimated to grow more than 11% annually over the next five years. This signals a shift in the global pharmaceutical supply chain dynamics, as Western companies seek to diversify their manufacturing sources and move away from a heavy reliance on Chinese contractors.
As India seeks a bigger foothold in the pharmaceutical services sector, Indian manufacturers are poised to play a more significant role in the global pharmaceutical industry, with the potential to offer an alternative to the traditional reliance on Chinese contract drugmakers.