'China Plus 1' Drives Early Wins for India’s Pharma Sector, Full Gains Expected in 3–5 Years

India's contract research and manufacturing sector is starting to benefit from the global "China+1" diversification strategy, according to Goldman Sachs’ latest industry tour report. It showed that several companies, particularly in the pharmaceutical and biotech sectors, were ch, reporting early signs of business conversion.

The investment bank hosted meetings with 10 listed and unlisted Indian CRO and CDMO firms across Bengaluru and Hyderabad last week. It was observed that large pharmaceutical companies are now beginning to shift parts of their outsourcing pipeline to India.

Firms like Syngene, Neuland Labs and Divi’s have started converting RFQs (request for quotations) into pilot projects or initial contracts over the last 1-1.5 years. But the report said that the financial impact will likely materialise over a 3–5 year horizon.

The 'China Plus One' strategy is a business technique in which corporations diversify their manufacturing and supply chains by expanding into countries other than China while still keeping a presence in China.

According to the report, while commercial projects began moving out of China post Covid, over the last 8-12 months they have seen a significant change in sentiment toward moving development as well, with big pharma / well funded biotechs moving first (big pharma moving meticulously however and not urgently). Biotechs showing some hesitation to avoid switching costs in a challenging funding environment.

Syngene, for instance, has signed contracts stemming from pilot projects related to geographic supply chain diversification. Neuland Labs secured three projects from a large innovator shifting out of China, and TheraNym Bio, a subsidiary of Aurobindo Pharma, announced a decade-long commercial manufacturing deal with Merck Sharp & Dohme.

Companies are also ramping up investments in emerging areas such as biologics, peptides, antibody-drug conjugates (ADCs), and oligonucleotides. Aragen is building a new biologics development facility in Bengaluru, while Cohance and Piramal Pharma have scaled up their ADC capacities.

Despite the momentum, lack of domestic innovation, conservative managements and outflow of talent, remain the key challenges. "While talent remains a key risk to scaling up as the industry sees very high attrition at entry level of scientists (due to employee poaching), managements have not only been focusing on inhouse retention tools but also formed an industry body called IPSO to streamline hiring/practices," the report noted.