US Biosecure Act spurs growth opportunities for Divi's Labs

Divi's Labs reported its Q1 results on August 3.

Contract drug manufacturing organisation (CDMO) company Divi's Laboratories said that it is witnessing a spike in opportunities coming its way in the anticipation of the US Biosecure Act getting passed.

If enacted, the US Biosecure Act will prohibit US life sciences companies from engaging in contracts with certain Chinese biotech companies to safeguard against the potential misuse of US genomic data by the Chinese government and military.

This has resulted in several US drugmakers shifting focus towards Indian CDMO companies to shift their supply base. With Divi's Labs being the second largest global CDMO player, it is well-positioned to cash in from this emerging opportunity.

The management stated in its earnings call that it has been witnessing an increase in opportunities coming its way, with several US drug innovators even seeing Divi's as their preferred supplier.

"With expectations of the US Biosecure act getting passed, we are seeing a spike in opportunities coming our way, especially for products in phase 2 and phase 3," the management said.

Currently, China's CDMO industry holds an 8 percent share in the global market share, significantly higher than India's 2.7 percent. However, several experts believe the US Biosecure Act presents a substantial opportunity for the Indian pharma industry to challenge China's dominance.

Some reports also indicate that Indian companies are already receiving increased inquiries from US firms, with over 60 percent of Indian pharma companies reporting a rise in new business interest.

Meanwhile, the recent flow of opportunities are predominantly coming for Divi's custom synthesis business.  Divi's custom synthesis business makes up for around half of its total revenues.

Divi's has also commercialised two new drugs in the custom synthesis segment in Q3 of the previous fiscal, which, according to BNP Paribas, would be the biggest earnings driver for the company in the near-term.

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