US Biosecure Act: How this recently passed bill may benefit Indian pharma stocks

Synopsis: Shares​‍​‌‍​‍‌​‍​‌‍​‍‌ of Indian pharmaceutical companies increased dramatically by as much as 5% after the US Senate approved the Biosecure Act, which is expected to give Indian pharma majors an edge over certain chinese firms.

Indian​‍​‌‍​‍‌​‍​‌‍​‍‌ pharmaceutical stocks saw a significant increase due to a major decision in the United States. The US Senate has approved a new legislation named the Biosecure Act that forms part of the fiscal year 2026 National Defense Authorization Act, a nearly $1 trillion defence bill. The bill is now almost at the stage of being signed into law.

The main purpose of the Biosecure Act is to reduce China’s role in the US pharmaceutical and biotech sector. The act stipulates that certain Chinese biotechnology companies will not be allowed to receive US government funding. In simple terms, the US is planning to produce less and consume less of China in medicines and drug-related areas.

Many multinational pharma firms with manufacturing bases in China are expected to gradually shift some operations away from China to be in compliance with this law. India, among other countries, is considered a better alternative since Indian pharma companies are already exporting medicines and services to the US in large volumes.

That expectation alone was enough to push Indian pharma stocks to move higher. The Nifty Pharma index went up by more than 1 percent, and a number of pharma stocks gained. Wockhardt shares were up approximately 5 percent, while Laurus Labs, Divi’s Laboratories, Biocon, Ajanta Pharma, Cipla, Aurobindo Pharma, and Dr. Reddy’s were also the stocks that were trading with gains.

Analyst Comments

The market analysts state that Indian contract manufacturing organisations (CDMOs) could be the ones who will benefit the most. These companies are the ones making medicines and active ingredients for global drug giants.

Brokerages are optimistic that companies such as Divi’s Laboratories may experience a surge in their businesses if the international pharma majors decide to relocate their orders to India over a period of time.

Additionally, Macquarie​‍​‌‍​‍‌​‍​‌‍​‍‌ thinks that the Indian Contract Manufacturing (CDMO) market, which is valued at approximately worth $7 billion today, has the potential to be reach $20 billion by 2030. In contrast, the brokerage also mentions that the increase in business due to the Biosecure Act will not result in a profit increment right away.

The newly minted ventures will be away for some time before they get underway, hence the actual effect on company revenues and earnings will probably be felt after a year or ​‍​‌‍​‍‌​‍​‌‍​‍‌two. 

Nevertheless, the experts also remind us that we shouldn’t expect this advantage right away. It takes a considerable period of time to move a plant and the entire supply chain. In a nutshell, pharma stocks went higher on the back of what investors think the US policy change will affect Indian pharma companies positively in the long term. They also acknowledge that the impact will be ​‍​‌‍​‍‌​‍​‌‍​‍‌gradual.

Divi’s Laboratories is deeply involved in APIs and contract manufacturing and is frequently referred to by brokerage houses as a big winner in the long run. Syngene International is a contract research and manufacturing organisation for global pharma companies and thus is the most suitable one to receive a boost due to the outsourcing trend.

Laurus Labs, being an API and formulation company with a stronghold in the US and other well-regulated markets, is likely to become a beneficiary of the global drug makers’ decision to spread their production base away from ​‍​‌‍​‍‌​‍​‌‍​‍‌China.

Written by Satyajeet Mukherjee

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