India’s CDMO sector faces 'reset' year as global pharma shifts focus to specialisation

India’s contract development and manufacturing (CDMO) industry—which has benefited from the global shift away from China—is entering what analysts describe as a “reset year” in 2026, according to the De Facto Biobeat 2026 Report. The sector’s strong performance through 2024–25, supported by geopolitical tailwinds and cost competitiveness, may stabilise as new trade measures and supply-chain strategies reshape outsourcing patterns.

Part one of the Biobeat Report 2026, released by research and analytics firm De Facto ahead of CPHI Frankfurt, the world’s largest CDMO gathering, notes that while the global outsourcing market remains stable, regional growth will be uneven. China and the United States are positioned for stronger medium-term expansion, while India’s growth is expected to slow slightly in 2026 after a robust performance last year.

The analysis, prepared by Brian Scanlan, Executive Advisor at Edgewater Capital and Managing Partner at Freedom Bioscience Partners, draws on data from venture capital flows, licensing, IPO activity, and M&A trends to provide a global outlook for 2026.

While India remains a preferred outsourcing base for Western drugmakers, emerging tariffs and reshoring initiatives in the United States could alter outsourcing flows. The report notes that “2026 could be a reset year for India” depending on how trade policies evolve and how US–China relations influence the sector.

Despite these headwinds, Indian CDMOs are expected to retain their pricing advantage over Western competitors. With rising price pressures in the US and Europe due to regulatory reforms and drug pricing controls, India’s manufacturing base and technical depth continue to make it an attractive destination.
India’s CDMO market is estimated at around $12–13 billion and has grown by double digits in recent years, according to ICRA and CRISIL. Growth has been driven by rising global demand for complex generics, biologics, and specialised formulation development.

The Biobeat 2026 Report projects mid-single-digit growth for the global CDMO sector this year, with India’s share led by investments in biologics, peptides, and sterile fill-finish capabilities. Expansion in aseptic manufacturing and high-potency compound handling, particularly in antibody-drug conjugates (ADCs) and bioconjugates, is expected to support Indian CDMOs that focus on specialised technologies rather than large-scale operations.

“My advice to CDMOs is to evaluate how their capabilities align with emerging industry needs by following drug substance and drug product trends from early preclinical through early clinical development,” said Scanlan. “CDMOs that differentiate through technology, equipment, and analytical expertise, particularly in RNAi, ADCs, PROTACs, and multi-specific antibodies, will be well positioned. Smaller CDMOs may even hold an edge through niche specialisation.”

The report suggests that smaller, technology-focused players could outperform high-volume producers as global pharma companies prioritise agility and expertise over capacity. This reflects a broader shift towards “specialisation over scale,” where innovation in process design, containment, and formulation takes precedence over production volume.

India is also emerging as a hub for predictive modelling and data science applications in formulation development. Artificial intelligence tools are increasingly being adopted beyond R&D to streamline manufacturing, improve process control, and enhance quality assurance. This shift is expected to spur mergers and acquisitions as CDMOs strengthen digital capabilities and operational efficiency.

As Western drugmakers face higher operational costs and capital constraints, India remains competitive for early-stage development and complex formulation outsourcing. Companies investing in AI integration and newer modalities such as RNA interference (RNAi), oral peptides, and ADCs are likely to capture a greater share of global outsourcing opportunities.

However, the report cautions that project decision-making among multinational clients has slowed, leading to delayed contract signings and longer funding cycles. This could temporarily affect revenue visibility for Indian CDMOs in the first half of 2026.

Investment activity in the CDMO sector has slowed globally, but India continues to attract investors looking for competitive valuations and medium-term opportunities. The next wave of investment is expected to favour firms that combine scientific capability with digital transformation.

The report cites analysis from Bain & Company noting that Indian CDMOs remain well positioned to attract Western outsourcing mandates as pharmaceutical firms adjust to pricing reforms in the US and EU.

While near-term growth may ease, the longer-term outlook for India’s CDMO industry remains steady, supported by continued demand for cost-efficient and compliant manufacturing. The shift from generic formulations to complex, high-value therapies is likely to redefine India’s role in global supply chains.

The report concludes that India’s next phase of growth will depend on its ability to balance cost leadership with innovation and digital adoption. CDMOs that integrate specialised manufacturing with AI-driven efficiency are expected to be better positioned as the global outsourcing industry recalibrates in 2026.