Indian CDMO Stocks in the Spotlight: US House to Vote on BIOSECURE Act Next Week

The BIOSECURE Act  is attracting significant attention as the U.S. House plans to vote on the legislation during the week of September 9. Introduced in January, the bill aims to halt federal contracts with specific Chinese biotech equipment and service providers over national security concerns. As the Act advances, it positions Indian CDMOs to benefit by limiting U.S. partnerships with Chinese firms. Analysts project that Indian Contract Development and Manufacturing Organization (CDMO) companies will gain from this shift, as it redirects global pharmaceutical outsourcing away from China.

BIOSECURE Act Gains Momentum: US House to Review Legislation Targeting Chinese Biotech Firms Next Week

After encountering a roadblock earlier this summer, the BIOSECURE Act may gain fresh momentum next week. The U.S. House of Representatives plans to review the bill during the week of September 9, according to their official website. Introduced in January, the bill aims to stop federal contracts with specific Chinese biotech equipment and service providers due to national security concerns.

Currently, the bill names five Chinese life science companies, including R&D leader WuXi AppTec and its manufacturing-focused counterpart, WuXi Biologics. However, the list could expand to include additional companies in the future. As the bill progresses, it highlights these firms and others like BGI Group, MGI, and Complete Genomics as having potential links to China’s military or intelligence agencies.

In response, WuXi AppTec and WuXi Biologics have consistently denied the allegations. They refute claims that they, along with the mentioned genomics companies, maintain ties with China’s military, internal security forces, or intelligence agencies. Consequently, this debate underscores ongoing tensions over national security and foreign partnerships.

Indian CDMO Stocks to Watch as US House Votes on BIOSECURE Act

Analysts project that the Act will benefit Indian CDMO companies, as it seeks to restrict global pharmaceutical companies from outsourcing to China. According to Praful Bohra, Director – Research at InCred Capital, “We anticipate that the BIOSECURE Act will significantly benefit Indian CDMOs and are optimistic about this development.” Although the Act gives US companies until 2032 to phase out collaborations with five listed Chinese CDMOs, it is likely that clients will increasingly turn to non-Chinese CDMOs for new projects. This shift is expected to positively impact CDMOs in the US, EU, and Korea.

Impact on Indian CDMO Companies

The Indian CDMO market is projected to grow at a CAGR of 14.67%, reaching a value of USD 44.69 billion by 2029. This growth comes from increased opportunities in contract research and active pharmaceutical ingredients (API). The brokerage report highlights that China’s declining market share is a major driver of India’s CDMO industry expansion. China’s previous dominance was due to generous government support and lower labor costs. However, trade restrictions and the COVID-19 pandemic led to supply chain disruptions, benefiting Indian CDMO businesses as large firms began to shift contracts to India.

Key Beneficiaries and Recent Investments

Indian companies have traditionally excelled in small molecules and are now expanding into large molecules. Companies like Piramal Pharma and Suven Pharma are driving advancements in the antibody-drug conjugate space, opening new opportunities. Major players are making significant investments, with Aurobindo establishing a biologics facility, Alkem launching a US CDMO facility, and Gland Pharma acquiring Cenexi. These moves underscore the sector’s growing importance. Proximity to key markets like the US and EU strengthens client coordination. Divi’s Laboratories, Suven Pharma, Neuland Labs, Piramal Pharma, and One Source stand to benefit significantly, while Glenmark Life Sciences, Laurus Labs, Gland Pharma, and Jubilant Pharma also show potential, depending on their capacities and capabilities.

BIOSECURE Act Moves to Fast-Track Consideration: Likely Path through Defense Bill, Faces Industry Concerns

The BIOSECURE Act is slated for consideration under the House’s “suspension of the rules” procedure, a fast-track method for passing noncontroversial measures. However, standalone bills often face a less common path in the Senate. Instead, the legislation is likely to be incorporated into the annual defense policy bill.

Since its introduction by former Republican congressman Mike Gallagher earlier this year, BIOSECURE has gained significant bipartisan support. The bill advanced from the House Oversight Committee with a strong 40-1 vote in May. Despite this, a proposed House vote to include the bill as an amendment to the 2025 National Defense Authorization Act (NDAA) failed in June.

As the bill progresses, industry experts express concerns about the complex process U.S. drugmakers face in severing ties with Chinese contractors. The current bill requires drugmakers to end relationships with named Chinese contractors by 2032 to maintain their positions on Medicare and Medicaid. According to a recent L.E.K. Consulting survey, the bill has already significantly eroded U.S. life science companies’ confidence in working with Chinese firms.

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Author

Bernice Lottering