Indian Opportunities
There has been much talk about the effect U.S. regulatory action, particularly the Biosecure Act, will have. Some see it as an opportunity for Indian players to grow at China’s expense. There has been much talk about the effect U.S. regulatory action, particularly the Biosecure Act, will have. Some see it as an opportunity for Indian players to grow at China’s expense. However, the Indians present at the roundtable were cautious. The Act is not yet law for a start.
Sudarshan Jain, secretary general of the Indian Pharmaceutical Alliance (IPA) trade association, highlighted three challenges India must address before it can compete evenly: skills, because China invested so heavily in them, scalability, and ‘common support’. “We are working on all three fronts, but industry will not shift just because of the Biosecure Act. It'll take years to make a difference.”
No one has yet made significant business as a result of the Act, Chava agreed. Any company wanting to move a project from China will want to see the same scale, skills, and regulatory compliance. India currently lacks technical capabilities in scale-up. “I think it'll start at some point of time but it's too early to know what the impact of the Biosecure Act will be.”
Akhil Ravi, CEO of another Indian CDMO, Aurigene Pharmaceutical Services, noted that China still only accounts for about 15-20% of small molecule manufacturing by value. Most of the rest is still in the U.S. and Europe. The industry is already moving to ‘China +1’ for intermediates and registered starting materials (RSMs), but not so much on the DS side. India, in his view, may not yet have the capability to make a serious dent in RSMs but a significant shift is already going on in APIs and intermediates.
There has been much talk about the effect U.S. regulatory action, particularly the Biosecure Act, will have. Some see it as an opportunity for Indian players to grow at China’s expense.
“Up to a certain scale, I think India can definitely add to that value chain,” he said. “The talent is there to a certain extent, though it has to scale up.” The challenge is more financial: the cost of invested capital in India is higher than in China and Europe and investing is riskier. However, even before Biosecure, more companies were already looking at options in India.
Many are now testing the waters in India with a few pilot programs or small projects to test the waters. “Would it happen in the next five years? Probably, yes. While few are shifting production to India, the propensity to source APIs and intermediates or carry out process development in India relative to China is much higher.”
Biosecure has certainly stimulated conversations that might not have happened otherwise, Miller said, but, particularly with drugs on shorter lifecycles changing commercial manufacturing is not easy. There could also be ‘grandfather’ clauses for critical medicines. “Biosecure doesn't define and will not define our strategy.”
For Blocher, what is really driving strategies is the geopolitical situation leading to a desire to secure supply chains. U.S. companies were already seeking to de-risk the supply chain and become more independent of China well before Biosecure. Their strategies vary. Some want to be completely out of China, others will diversify when they need to.
The key question may lie in the CRO business, he added, because WuXi AppTec is heavily present here and is explicitly named in the Biosecure Act. If its share is taken away, the work could go back to Europe, India or even university start-ups, which were players before the Chinese CROs emerged.
In Dottikon’s experience, well-established Indian companies are useful sources for intermediates. “They have catalogue products and long-term experience, so you have a reliable supply at reasonable price. The question is whether they can fill the higher intermediate gap that is breaking off from China.” However, does India have the capitalist mindset that evolved in China “to be fast, and make new things, and adopt to the needs of the customer? That's where I'm sceptical because changing social structures takes decades.”
Consolidation has been discussed in the CDMO space since well before the CDMO concept existed. It has never really happened, of course, but now some are talking about the need for the 300 or so CDMOs to be whittled down to around 50 as the demand for more integrated services and large scale become the norm. Will it be different this time?
The biologics space is already heavily consolidated. Stapleton said that if anything, there could be more opportunities for small players because many newer drugs will not need the massive bioreactor volume the CDMOs have been putting in. Geographical diversification in supply could tend in the same direction, partly as a reaction to the COVID situation when vaccines became available much earlier in some regions than others. Mabion is having conversations on that with many companies.
Kaus, by contrast, envisaged a consolidation driven in part by CDMOs getting into biologics by buying the smaller players, while Confetti stressed the crucial role of flexibility and service that might be compromised in a massive, complex organisation. Ravi, meanwhile, noted that one reason why the small molecule space is so fragmented is that “the technology that so diverse that it's hard to keep adding and making it like one giant piece” and setting up as a specialist in one field is not excessively costly.
