Contract development and manufacturing organisations (CDMO) are seeing a revival in funding, and an increase in business enquiries, says India Ratings and Research, of the companies it reviews.
“The green shoots are already visible, as over 60 per cent of listed pharma have witnessed an increase in the number of enquires for new businesses, and 33 per cent of them believe that the (US Biosecure Act) act, if implemented, can be a business driver,” a note on the report said.
Companies have said that they were seeing a revival in funding and clients were shifting projects to India (from China), Nishith Sanghvi, Associate Director and Co-Head Pharma and Healthcare, India Ratings & Research, told businessline. In fact, this is resulting in companies investing in capacity expansions, as well, he added.
A host of Indian drugmakers are in the CDMO space, including Piramal Pharma, Suven Pharma, JB Pharma and Syngene, for example, besides other drugmakers who are not pure-play CDMOs or CROs (contract research organisations).
In fact, the report says, the proposed Act “will lead to re-orientation of supply chains, given the restriction on US federal agencies procuring equipment and services from certain “biotechnology companies of concern,” primarily large Chinese pharma companies.” Consequently, the supply of numerous drugs used in clinical trials and critical raw materials is expected to be impacted, given the trade that most pharma companies have with these agencies, the report said, outlining opportunities to act as alternatives. The report reviewed about 15 drugmakers and sees the revival in business sentiment lift CROs as well, an official said.
USFDA red-flag
However, the report comes even as the USFDA recently red-flagged data integrity concerns from some CROs. It called out the falsified data and poor quality management at some of the CROS they had inspected. Industry-watchers said, such incidents were limited to specific CROs, and industry-representatives worked with multinationals with whom they had long-term partnerships.
Nevertheless, the report points out, significant capacity expansion was being undertaken by its portfolio companies in the CDMO and CRO space, given the “China+1 and onshoring initiatives being undertaken globally”. The companies reviewed also benefitted from “government grants/interest-free loans to bolster onshoring initiatives by North American governments”, it added.
“CDMO players, which were impacted due to weaker capacity utilisation during FY22/FY23 owing to higher capex in the past, witnessed operating leverage benefits play out during FY24, despite debt levels remaining unchanged, leading to an improvement in their credit metrics. While capex requirements will remain high, leverage levels will remain consistent with the revised ratings,” said Vivek Jain, Director, Corporate Ratings, Ind-Ra.
