Pharma sector stocks are in focus after the US Department of Defense added several prominent Chinese companies across multiple sectors to its list of entities identified as “firms linked to Chinese military” recently. The latest additions include Alibaba, Baidu, BYD, WuXi AppTec, and RoboSense. Jefferies believes that Indian companies could be among the biggest beneficiaries of this regulatory action.As per the brokerage report, this development could create significant opportunities for Indian Contract Research, Development and Manufacturing Organisations (CRDMOs), particularly companies with strong capabilities in small molecules and peptides.
Jefferies has identified two key names that stand out – Sai Life Science and Divi’s Laboratories.
Jefferies’ preferred picks: Sai Life Sciences and Divi’s Labs
Jefferies in its report noted that the biggest beneficiaries of the evolving global supply chain landscape could be Indian CRDMO companies that already have established relationships with large pharmaceutical clients.
Jefferies stated, “Our top picks: Sai Life and Divi’s.”
The brokerage believes both companies are well positioned due to their expertise in small-molecule development, growing peptide capabilities and ongoing capacity expansion efforts.
According to the report, “We believe key beneficiaries would be Divi’s, Laurus and Sai Life.”
However, among the broader coverage universe, Sai Life Sciences and Divi’s Laboratories remain the brokerage’s preferred names because of their strong execution track records and increasing participation in global pharmaceutical outsourcing projects.
What has changed in the US?
Jefferies in its report noted, “WuXi AppTec has been added to the U.S. Department of Defense’s (DoD) Section 1260H List of Chinese military companies.”
This inclusion is significant because Section 1260H acts as a trigger under the BIOSECURE Act framework.
The brokerage house added that companies designated under this framework can be classified as “biotechnology companies of concern” (BCCs) and may face restrictions on accessing US federal contracts.
What is the BIOSECURE Act
Understanding the BIOSECURE Act, the legislation is designed to limit the use of certain biotechnology services and equipment by US government agencies and organisations that receive federal funding.
Jefferies noted, “The BIOSECURE Act permanently establishes restrictions prohibiting federal executive agencies from procuring biotechnology equipment or services from biotechnology companies of concern.”
Jefferies noted, “The earliest binding contracting restrictions will legally materialize between late 2027 and 2028.”
Why Indian CRDMOs could benefit
Over the past decade, India has steadily strengthened its position in pharmaceutical research and manufacturing.
Furthermore, several companies now provide end-to-end services. This ramges from drug discovery and development to commercial-scale manufacturing.
The brokerage stated, “India CRDMO direct beneficiary.”
According to Jefferies report, Indian CRDMO companies collectively generated approximately $3-3.5 billion in revenue during FY26, while WuXi AppTec alone reported sales of around $6.3 billion in calendar year 2025.
The report suggests that companies with strong small-molecule and peptide manufacturing capabilities may be particularly well placed to capture incremental business.
What investors need to watch
According to Jefferies, the implementation process involves multiple regulatory stages, government guidance and eventual updates to procurement rules before restrictions fully take effect.
Disclaimer: Investment in equity markets involves significant data-driven risks, and the brokerage views mentioned in this report do not constitute direct buy, sell, or hold recommendations. Readers should independently verify long-term regulatory developments, such as the implementation timelines of the US BIOSECURE Act, before making financial commitments. Please consult a SEBI-registered investment advisor to evaluate market opportunities aligned with your personal risk tolerance. This disclaimer has been generated using AI to support user well-being and responsible content consumption.