The proposed US Biosecure Act, which aims to restrict certain biotech and pharmaceutical contracts involving China, could open up a significant opportunity for Indian contract development and manufacturing organizations (CDMOs) over the next few years. According to Nandini Piramal, Chairperson of Piramal Pharma, the Act could contribute to the broader push for reshoring of pharmaceutical supply chains in the US, creating potential opportunities for Indian manufacturers.
Although the Act is still in its early stages and has to pass through several legislative and regulatory processes, Piramal believes that it will take time to implement and have a meaningful financial impact. The Act includes a grandfathering clause of around five years, allowing companies to continue with existing contracts before being required to transition. This means that pharmaceutical companies will need to start planning relocations well before the deadline.
Piramal Pharma, with its existing manufacturing footprint in North America, is well-positioned to benefit from the potential opportunity. The company has seen an uptick in requests for proposals (RFPs) from US clients, although it’s too early for firm decisions or large-scale conversions. Piramal noted that the Chinese industry is still cheaper due to its scale, but even a partial shift of global pharma outsourcing away from China could be meaningful for Indian companies.
The financial impact of the Biosecure Act on Indian CDMOs is expected to emerge over the medium term, with Piramal estimating it to be around three to five years. The potential upside from the Act reinforces the longer-term China+1 thesis for Indian pharma manufacturing, even as companies and investors wait for greater legislative clarity and tangible order wins.
Piramal also noted that the industry is aware of the potential changes and is preparing for them, but it’s too early to commit definitively. The company has seen some funding uptick in the US biotech sector, but it’s still muted optimism, and decisions are being made, but it’s too soon to commit definitively.
In terms of the company’s performance, Piramal stated that they can stick to their guidance of flat revenue growth and margins likely to be in the moderate to low teens for the year. However, some of these decisions will take time to show up in the P&L, and it’s too early for a decision. Overall, the proposed US Biosecure Act presents a potential opportunity for Indian CDMOs, and Piramal Pharma is well-positioned to benefit from it.