In a significant industry shift, pharmaceutical manufacturers are veering away from heavy reliance on Chinese contractors for drug production used in clinical trials and early-stage manufacturing, leading to a notable surge in interest in India as an alternative destination.

Interviews conducted with industry experts and executives reveal this transformative trend impacting the pharmaceutical landscape.

For nearly two decades, China held sway as the preferred location for pharmaceutical research and manufacturing services due to its cost-effectiveness and swift operations offered by contract drugmakers, Reuters reported.

However, escalating tensions, coupled with concerns over supply chain vulnerabilities heightened during the U.S.-China trade war and the disruptions witnessed across various sectors during the COVID-19 pandemic, have prompted a reassessment.

Western governments' recommendations to "de-risk" supply chains from dependence on China have spurred biotech companies to explore Indian manufacturers for producing active pharmaceutical ingredients (API) crucial for clinical trials and outsourced operations.

Tommy Erdei, global co-head of healthcare investment banking at Jefferies, highlighted this shifting sentiment, stating, "Today, many companies are hesitant to engage Chinese firms despite potential cost advantages, preferring to seek alternatives outside China for their products."

Dr. Ashish Nimgaonkar, founder of Glyscend Therapeutics, emphasized the diminishing appeal of China, stating, "Factors in recent years have made China less appealing for us."

This inclination toward India as a preferred destination for pharmaceutical manufacturing and research has spurred increased interest from Western pharma giants in India's contract development and manufacturing organizations (CDMOs). Notably, industry leaders such as Syngene, Aragen Life Sciences, Piramal Pharma Solutions, and Sai Life Sciences reported a surge in inquiries and interest from major multinational companies.

The strategic pivot to India as a viable alternative aligns with the nation's aspirations to secure a more substantial foothold in the pharmaceutical services sector. However, concerns persist regarding quality standards. While Indian CDMOs are routinely inspected by the U.S. FDA, challenges regarding quality parity with Western and Chinese counterparts persist.

Despite the projected revenue from India's CDMO industry standing at $15.6 billion this year compared to China's $27.1 billion, India's industry is forecasted to witness rapid growth, outpacing China with an estimated annual growth rate of over 11% in the next five years.

Piramal Pharma Solutions and Sai Life Sciences have witnessed an uptick in demands, with clients seeking to establish supply chains from India, reducing reliance on China for even the most basic raw materials. Moreover, Aragen, witnessing significant revenue growth, attributed part of the 21% rise last year to new contracts with Western biotech firms.

The perceptible shift toward India for drug discovery and manufacturing underscores the evolving dynamics, with new biotechs opting to diversify their manufacturing bases between India and China from inception, signaling a pivotal change in the pharmaceutical landscape.