CDMOs Bet Big On Asia Expansion. Can Trump Reverse The Tide?
By Louis Garguilo, Chief Editor, Outsourced Pharma
Facility investments by CDMOs continue to be magnetized to Asia.
Recent examples emanate from: Samsung Bio; ACG; Lonza; BioDuro; Aragen and a number of others.
Can the tide turn? Will, for example, a President Trump-intensified focus on increasing manufacturing in the U.S. change this calculus?
Without getting into a tariff tiff here, there does seem a concerted and re-enthused interest in building and operating in the U.S. Supply-chain consolidation is practically a mantra for the industry today. COVID certainly helped advance that.
In the IT-related industries (e.g., AI infrastructure) and other areas (e.g., automobile manufacturing) we are seeing plans for the U.S., quite massive build out in the first case, and reshoring in the second.
The momentum is less notable in our biopharma industry.
Prime Real Estate In Asia
Let’s consider recent examples of what we’ve witnessed in past months.
While obviously these predate Trump’s reascending to the presidency in January, these investments by global-service CDMOs in facilities outside the U.S. clearly predetermine where large amounts of bioprocessing and manufacturing will be undertaken in the coming years.
The first such announcement I’ll point to started 2025 on a familiar path when it came out of the JP Morgan Healthcare Conference.
Via an attention-grabbing announcement, Samsung Biologics made its capacity build-out roadmap clear by marking a new phase of growth with the opening of its “Bio Campus II” in Incheon.
The first facility (Plant 5), will be operational in April, and says the South-Korean behemoth, “brings up total capacity to 784,000 liters.” In case you’re wondering, the investment is estimated at $6 billion U.S. dollars.
The company is considering the construction of a sixth plant to “proactively respond to the increasing demand for biologics.” That would increase production capacity to 964,000 liters. (They couldn’t have gotten to a cool million? They need to think big!)
The point is these increases are in Incheon. Not Indiana.
Further south in Asia, pharmaceutical and nutraceutical manufacturer ACG launched a new capsule manufacturing facility in Rayong, Thailand.
That facility – Thailand’s largest of its kind – will produce “20 billion empty hard gelatin capsules annually.”
ACG says this facility will serve Asian markets (and add to ACG's global capacity). The company assures us the plant is strategically located to serve growing demand in Asia, including Thailand, Indonesia, Vietnam, South Korea, Malaysia, and the Philippines.
ACG adds it also hopes to expand its reach to China, pending regulatory approvals.
Speaking of China, in December Lonza announced capacity expansions at its sites in Suzhou, as well as in Rewari, India.
This capacity will include new capsule manufacturing lines at Lonza Capsules & Health Ingredients (CHI) facilities in those two locations.
Lonza says the investments “highlight the long-term strategic commitment to the business and the APAC region.”
Also in December, California-based BioDuro announced the opening of “a fully-automated solid-phase peptide synthesis scale-up laboratory at its Shanghai Zhangjiang High-tech Park campus.”
This new facility further enhances the company's peptide synthesis capabilities “to meet increasing demand from its global partners for efficient and scalable peptide manufacturing.”
BioDuro says this will complement the CRDMO’s peptide-discovery synthesis center at its Beijing campus, where the focus is on early-stage research and development.
Where are investment dollars in these and other expansions coming from? Increasingly, private equity wants a piece of this prime Asian real estate.
Days before the U.S. president and components of his “America First” administration were installed, Aragen (headquartered in India and where it does its manufacturing), secured a $100 million investment from private equity group Quadria Capital.
The funds will be utilized for expansion of infrastructure and global operations, and help the company meet a growing demand for outsourced drug manufacturing services from clients in the U.S. and Europe.
One-Sided Viewpoint?
Am I guilty of cherry picking announcements?
Perhaps to a degree. But if so, I've been presented with a lot of low-hanging fruit.
Should we counter-balance the above with a list of investments during the same period in the U.S.?
We could, but I assure you that rooster is less comprehensive; more importantly, I don’t think it would dim the point here.
Yes, the U.S. has a nostrum of CDMOs that are also growing domestically. However, these companies need to present rigorous economical and technological arguments for gaining the projects of sponsors in the U.S. and abroad.
They absolutely still need to compete with Asia-based options.
Now, can a new presidential administration thoroughly focused on expanding (drug) manufacturing in the U.S. tip the scales – be that through the aforementioned (threat or reality of) tariffs, lower taxes, hefty reductions in building and other regulations, and other contributing measures?
I think it can certainly help.
Still, the attraction is strong elsewhere. Really strong.
Bad News Not So Bad?
Even WuXi Apptec and WuXi Biologics, despite direct (BIOSECURE Act) targets on their backs, keep on keeping on.
A recent financial report from WuXi Biologics suggested customers continue to place work at the China-based powerhouse.
That is not to say some operational adjustments haven’t been in order.
For example, WuXi Biologics sold off it vaccine facility in Ireland to Merck for $500 million, in a move, as described by the Wall Street Journal, “that could strengthen the company’s cash flow and margins as it navigates global uncertainties.”
Earlier this year, I assigned a Wuxi Apptec divestiture to the effects of the BIOSECURE Act and the U.S.-vs.-China trade and political environment.
Despite these actions, it still appears measures to slow down offshore outsourcing have not been overly persuasive.The global market chooses to outsource where it likes.
Which leads me to a dose of irony (and humility).
We are about to hold our first Outsourced Pharma Live of the year (February 26th). It’s titled: The BIOSECURE Act: Where Does Your Outsourcing Go Now?
In the late autumn of last year, we thought this would be the best topic to start off 2025's digital events. I can tell you we were not thinking our first suggestion to that question might be your outsourcing won't be going anywhere different from where it has been situated the past years.