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Outsourcing

Indian drug services companies pull in cash

Rising interest from Western drugmakers has led to increased investment in the segment

by Aayushi Pratap
January 13, 2025

 

A building with the Aragen logo on it. The building is surrounded by many trees.
Credit: Aragen
Indian drug services firms such as Aragen are raising capital and ramping up facilities.

Indian firms want to rebrand the country as the next big destination for Western pharmaceutical and biotechnology companies looking to outsource drug development. In recent months, several Indian contract development and manufacturing organizations (CDMOs) have gone public or raised venture-backed funds in an effort to realize this goal.

Aragen Life Sciences announced on Jan. 13 that it has secured a $100 million investment from Quadria Capital, a private equity fund focused on Asian health-care companies.

Aragen, based in Hyderabad, says it will use the funds to boost manufacturing capacity for newer treatment modalities, such as peptides, oligonucleotides, and antibody-drug conjugates (ADCs), and to add artificial intelligence tools for drug discovery.

“Getting private equity investment is a much faster way to access funds. However, we also intend to go public sometime in the next year,” Manni Kantipudi, CEO of Aragen, says in an email.

In the past month, at least two other Indian CDMOs made initial public offerings (IPOs) of stock, raising hundreds of millions of dollars. Anthem Biosciences, headquartered in Bangalore, the country’s information technology capital, announced plans on Dec. 31 for a $397 million public offering. Founded in 2007, the company employs 1,500 people and offers services ranging from drug discovery to commercial drug manufacturing.

And Sai Life Sciences, based in Telangana, raised $358 million in a December IPO. Like Anthem, Sai, which has over 2,800 employees in India, the US, the UK, and Japan, offers services across drug discovery, development, and manufacturing.

In its IPO prospectus, Anthem states that India’s pharmaceutical services ecosystem has been aided by factors such as the government’s Make in India scheme and favorable policies around foreign investment. The prospectus also says that the COVID-19 pandemic and a rise in geopolitical tension have prompted global pharmaceutical companies, many of which are heavily dependent on China for services, to scout for new destinations such as India.

Anthem says it works with several small and emerging biotech companies and a handful of big names such as Bayer. Like Aragen, it plans to ramp up the ability to produce up-and-coming large molecules such as oligonucleotides, peptides, and ADCs.

Investors following Indian CDMOs say the sector performed exceptionally in 2024, possibly because of the Biosecure Act, proposed US legislation that seeks to prohibit US pharma and biotech companies from working with five Chinese firms, including a leading CDMO, WuXi AppTec.

Alok Dalal, a research analyst at the investment firm Jefferies Financial Group, writes in a recent note to investors that, even if lawmakers eventually kill the Biosecure Act, the outlook for Indian CDMOs will remain positive. Their ability to move research-stage molecules to more-advanced clinical stages and commercialization, as well as opportunities in glucagon-like peptide 1 (GLP-1) weight-loss drugs and other peptides, should keep the momentum alive for the Indian CDMO market, he says.

But Dalal calls 2025 “the year of reckoning.” It will be “a ‘show-me’ year for the sector, where actual earnings delivery will delineate winners from laggards,” he writes.

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