Amee Shah Upadhyaya CFA, CA
The US BioSecure Act of 2024 is expected to create a favourable environment for pharmaceutical and biotechnology companies in emerging markets such as India. The Act, which should become law by the end of the year, aims to curb American collaboration with certain Chinese biotech giants due to concerns over the potential misuse of US genomic data. The legislation has thus created a strategic opening for India’s and other emerging countries’ contract development and manufacturing organisation (“CDMO”) sectors to rise as a global alternative.
- BioSecure Act Impact: The Act curbs US-China biotech collaborations, spurring opportunities for emerging markets in pharma supply chains.
- India's Growth Potential: The Act’s restrictions position Indian CDMOs to gain market share, potentially rivaling China’s industry dominance.
- Investor Interest: Market trends reveal increased returns in emerging pharma sectors, driven by the BioSecure Act’s shift in US collaborations.
Currently, China’s CDMO industry holds an 8% share of the global market, whereas India’s share stands at just 2.7%. Since the BioSecure Act will likely require US drugmakers to sever ties with certain Chinese contractors by 2032 to retain their positions on Medicare and Medicaid, US pharmaceutical companies will actively seek alternative supply chains. This shift presents a golden opportunity for Indian CDMOs to expand their footprint and to challenge China’s dominance in the industry.
Currently, China is one of the biggest suppliers of complex peptide, immunotherapy, and antibody drugs to pharmaceutical companies in the US and the EU. A significant number of US- and EU-headquartered companies that have computer software assurances (“CSAs”), licensing agreements or partnership agreements with certain named Chinese companies risk being blacklisted.
The impact of the BioSecure Act has already been felt in the financial markets. After the Act passed a House of Representatives vote on 9 September, the FTSE Emerging Pharmaceuticals and Biotechnology Index recorded an impressive 9.49% return over the whole month. At the same time, the FTSE All-World Pharmaceuticals and Biotechnology index, which covers both developed and emerging markets, fell 4.4% during September. In comparison, the S&P 500 and MSCI ACWI indices returned 2.14% and 2.36%, respectively.
| As of Sept’24 End | Total returns % | Annualised total returns % | |||||
|---|---|---|---|---|---|---|---|
| USD (Gross) | 1 MO | 3 MO | YTD | 1 YR | 3 YRS | 5 YRS | 10 YRS |
| FTSE Emerging Pharmaceuticals and Biotechnology Index | 9.49 | 23.85 | 14.29 | 16.56 | -9.11 | 6.14 | 0.64 |
| FTSE All-World Pharmaceuticals and Biotechnology Index | -4.4 | 4.72 | 17.38 | 22.18 | 9.66 | 12.47 | 8.03 |
| S&P 500 Index | 2.14 | 5.89 | 22.08 | 36.35 | 11.91 | 15.98 | 13.38 |
| MSCI ACWI | 2.36 | 6.72 | 19.08 | 32.35 | 8.6 | 12.72 | 9.94 |
Source: FTSE Russell, S&P (http://us.spindices.com/) and MSCI www.msci.com. Data as of Sept 2024. Past performance is no guarantee of future results. Please see the end of this presentation for important legal disclosures.
September’s performance added to earlier gains by the FTSE Emerging Pharmaceuticals and Biotechnology Index, which rose 23.85% over the third quarter, outpacing the 4.72% gain from the FTSE All-World Pharmaceuticals and Biotechnology index. Time will tell if this marks the beginning of the reversal of a trend: the FTSE All-World Pharmaceuticals and Biotechnology index has significantly outperformed its emerging market equivalent by some margin over the 12 years to September 2024.
performance
Source: FTSE Russell, data as of Sept 30, 2024. Past performance is no guarantee of future results. Please see the end of this presentation for important legal disclosures.
In summary, the new US BioSecure Act could signify a major shift in the global Biotech and Pharma supply chains, making non-China emerging markets key players. The FTSE Emerging Pharmaceuticals and Biotechnology Index offers investors a tool to measure and potentially track this trend.
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