Indian CDMO: Why FY26 Split the Winners From the Slides

For two years, every Indian CDMO pitch read off the same card: China Plus One, the Biosecure Act, GLP-1 peptides, India cost advantage, global outsourcing. The story was never wrong. The mistake was assuming a structural opportunity would show up as a smooth quarterly revenue line.

FY26 settled that argument. In the same twelve months, Laurus Labs grew revenue 23% and its CDMO division 36%, Neuland Laboratories crossed ₹2,000 crore in revenue for the first time on the back of a 135% jump in Q4, and Sai Life Sciences grew 29%. Over the exact same period, Syngene grew just 3% with profit down around 20%, the merged Suven plus Cohance entity saw revenue fall about 13%, and Piramal Pharma called FY26 a "transitional" year after an impairment and persistent destocking.
Same sector. Same tailwinds. Wildly different outcomes.
That divergence is the entire lesson. CDMO has stopped being a sector you can buy as a basket. It is a stock-picker's game, and FY26 handed out the scorecard. What follows is an attempt to read that scorecard honestly, including the one policy shift that very few narratives have priced correctly.

First, the floor: what a CDMO actually does

A Contract Development and Manufacturing Organisation takes on part of a drug's development or manufacturing so the innovator does not have to build everything in-house. That can mean developing the manufacturing process, producing the active pharmaceutical ingredient (API), intermediates or finished formulations, scaling a molecule from lab batches to commercial volumes, and supplying it after approval.
The innovator discovers the drug. The CDMO makes it reliably, at scale, to a regulator's satisfaction. That is what makes the business valuable, and also what makes it lumpy, capital-hungry and slow to convert a contract into recognised revenue. Hold that last point. It explains almost every disappointment of the past year.

The market size is a trap, not an answer

Pick your headline and you can justify almost anything. For 2025, credible research houses placed the global CDMO market anywhere from roughly $170 billion to $260 billion, with forecasts running toward $330 billion to $580 billion by 2030 to 2035 and a compound growth rate somewhere between 7% and 10%.

That spread is not sloppiness. It is definitional. Some estimates fold in contract research. Some count only manufacturing. Some include API, finished dosage, biologics, sterile injectables and packaging, others only small molecules. So the first discipline is simple: never quote one CDMO market size without asking what sits inside it.

India's range is even wider, from around $8 billion at the narrow end to north of $23 billion at the broad end, depending on scope, with most forecasts pointing to double-digit growth that outpaces the global average. The durable conclusion is not the decimal. It is the shape of it: India is still underpenetrated, its slice of the global market remains in the high single digits, and it is growing faster than the world. A Boston Consulting Group estimate pegged India's share at only around $3 billion to $3.5 billion of a $140 billion-plus global market in 2024. There is a lot of runway, and a lot of base effect flattering the percentages.

One number is harder to argue with. In 2025, disclosed CDMO capital investment landed at roughly $18.5 billion in the United States and about $3.3 billion in India, the second-largest figure globally. The capital is voting, but it is voting far more loudly for domestic American capacity than for India. That gap matters, and the tariff section below explains why.

The four tailwinds are real, and three of them are slow

The bull case rests on four forces. They are genuine. They are also, for the most part, multi-year, not multi-quarter.
Outsourcing penetration is still rising as large pharma works to reduce fixed-asset intensity and concentrate capital on discovery, trials and commercialisation. Small and mid-sized biotech, which now drives a large share of innovation, simply cannot build biologics plants that cost hundreds of millions and take years, so it outsources by necessity. Molecules are getting more complex, shifting from commodity small-molecule APIs toward peptides, GLP-1 drugs, monoclonal antibodies, antibody-drug conjugates (ADCs), oligonucleotides, sterile injectables and high-potency APIs, and complexity is where pricing power and entry barriers live. And China Plus One, reinforced by the Biosecure Act, is pushing global pharma to diversify supply chains away from China.

The catch sits inside the second force. Biotech-led demand is tied to the biotech funding cycle. When US biotech funding slows, early and mid-stage CDMO work slows with it, which is exactly what hurt FY26. So the cleanest upstream indicator for this sector was never a policy slide. It was the funding tap. More on that shortly, because it has turned.

The policy picture almost nobody is pricing correctly

This is where most 2026 commentary is still a year out of date. There are now two US policies pulling in opposite directions, and the lazy "Biosecure means India wins" line collapses the moment you separate them.

The first is the Biosecure Act, which restricts US federal agencies and contractors from working with designated "biotechnology companies of concern," most of them China-linked. Its companies-of-concern list was finalised in early 2026. For Indian CDMOs this is a tailwind, but a back-ended one: contracts do not switch overnight, and validation, audits, qualification and stability work stretch the real revenue impact toward 2028 and beyond. The early evidence is in enquiries, not invoices. Syngene reported roughly a 50% rise in enquiries since the Act first appeared, and BCG flagged an approximate 50% surge in requests for proposals across Indian CDMOs in 2024. Interest is real. Conversion is slow.

The second policy is the uncomfortable one, and it is now law rather than threat. On 2 April 2026, the US imposed Section 232 tariffs on patented pharmaceuticals and their associated ingredients, including APIs and key starting materials. The headline rate is a 100% ad valorem duty. It takes effect on 31 July 2026 for seventeen named companies and on 29 September 2026 for everyone else. Crucially, it survived the Supreme Court's February 2026 ruling that struck down the administration's broader tariffs, because Section 232 rests on separate legal authority.

Read the fine print and the picture for India sharpens into something genuinely two-sided.
Generic pharmaceuticals, biosimilars and designated orphan drugs are exempt for now, with a formal review of generics due within a year. That exemption protects the bulk of what India actually exports today, which is generic formulations and generic API.

The structure is tiered. The 100% default falls on countries not granted a preferential tier, which includes India. Companies with a Commerce-approved onshoring plan get 20%, rising back to 100% in April 2030. Companies that sign Most-Favoured-Nation pricing agreements get 0% until January 2029. The EU, Japan, South Korea and Switzerland sit at 15%, the UK at 10%.

So here is the tension the consensus is missing. The highest-value, highest-margin CDMO work, the part everyone is excited about, is innovator manufacturing for patented molecules. That is precisely the work the 100% tariff is designed to bite, unless the molecule's sponsor has secured an onshoring or MFN deal. The same policy environment that improves India's standing on generic and early-stage work simultaneously pushes the crown-jewel patented-innovator manufacturing toward US soil. The administration says these measures have already triggered roughly $400 billion in onshoring commitments. That capital is being reserved in America, which is exactly what the $18.5 billion versus $3.3 billion investment split was telling us.

The honest framing is therefore not "Biosecure means India wins." It is closer to this: Biosecure and China Plus One genuinely tilt demand toward India over a multi-year horizon, India's generic and API base is explicitly shielded, but the tariff regime makes the most attractive patented-innovator contracts more complicated and creates a real pull toward US capacity. Two true things at once. Most write-ups are still telling only the first half.

The FY26 scorecard, with the numbers attached

Forget the narrative for a moment and look at what actually printed. Treat all revenue, margin and valuation figures here as point-in-time and worth a fresh check against the latest exchange filings before acting, because they move.

Laurus Labs. Revenue of ₹6,813 crore, up 23%, with CDMO revenue at ₹2,080 crore, up 36%, and the small-molecule CDMO piece up 38%. Profit after tax surged 148% to ₹889 crore, EBITDA margin reached 26.8%, and return on capital employed jumped to 17.7% from 9.7%. Management is targeting CDMO at around half of revenue by the end of the decade and has committed roughly ₹3,000 crore of capex over two years. This is what a deliberate transition from a commoditised base toward CDMO-led earnings looks like when it works.

Neuland Laboratories. The clearest "right molecule" story of the year. Full-year revenue crossed ₹2,000 crore for the first time, around $215 million, and Q4 revenue jumped roughly 135% year on year with a Q4 EBITDA margin near 40%. The growth came from the right place: commercial-stage custom manufacturing molecules with higher complexity. But the lesson cuts both ways. Working capital days rose to about 137 from 107, free cash flow turned negative in the quarter on heavy capex, and the stock trades at a price-to-earnings multiple well above 100. A new commercial peptide facility is due to come online mid-2026. Brilliant quarter, lumpy business, demanding valuation.

Sai Life Sciences. Full-year revenue up 29% and profit roughly doubling, with full-year CDMO up 33%, even though Q4 CDMO slipped about 5% on a high base. Its discovery-to-commercial model and CRO segment, growing 24%, give it visibility that pure early-stage services players lack. Management is guiding to 15% to 20% revenue growth with 28% to 30% steady-state EBITDA margin, and reports no material tariff impact so far, though West Asia logistics costs are a near-term pressure.

Anthem Biosciences. The best economics in the listed pack, and a reminder that quality is not the same as a cheap entry. FY26 revenue of ₹2,124 crore, up 15%, profit of ₹592 crore, up 31%, return on capital employed above 30%, return on equity above 22%, and an effectively net-cash balance sheet. The lumpiness is visible even here: a subdued Q3 was followed by a Q4 where revenue jumped 26% and profit more than doubled. The stock trades around 75 times earnings, and there have been disclosed insider trading-code violations by designated employees worth keeping on the governance watchlist.

Syngene International. The cautionary tale. Revenue grew only 3% to ₹3,739 crore, EBITDA margin fell to 25% from 29%, and profit before exceptional items dropped around 20%. The cause was destocking at its largest biologics client colliding with the cost of bringing a new biologics facility online. The platform is intact and end-to-end, the leadership is being refreshed with a new Executive Chairperson and an incoming CEO from July 2026, and enquiry momentum is strong. None of that protected the P&L when one large customer slowed. Premium platform, weak earnings year.

Piramal Pharma. A muted, transitional FY26, dragged by destocking of one large on-patent commercial product, slow early-stage order inflows in the first half, and a ₹176 crore impairment. The hopeful detail is forward-looking: US biopharma funding rose roughly 75% year on year in the second half and about 30% across FY26, and order inflows and RFPs picked up from late 2025. Its hybrid model, with manufacturing sites across both North America and India, also positions it usefully against the tariff backdrop, and its differentiated capability sits in ADCs, high-potency APIs and onshore injectables.

Cohance Lifesciences (the merged Suven plus Cohance). The merger completed on 1 May 2025, with the combined entity carrying the Cohance name and an ADC plus oligonucleotide platform built through NJ Bio and Sapala. FY26 was rough: revenue fell about 13% to ₹2,268 crore, hit by destocking of two large CDMO molecules, an API disruption at Nacharam, and specialty-chemical phasing, with EBITDA margin around 21%. Under new chairman Umang Vohra, management has guided to a bottoming in the first quarter of FY27 and a return to growth in the second half, supported by a strengthened Phase III pipeline of around ten programmes and a stated ambition to reach $1 billion in revenue within five years. A specialised platform working through a genuinely difficult patch.
Blue Jet Healthcare. A different shape of business, with a resilient contrast-media franchise and optionality in peptide and GLP-1 intermediates, set against destocking in the PI and API vertical and visible client concentration. Its specific FY26 figures are worth pulling fresh from the latest filing before relying on them, but the structural point holds: niche moat, real GLP-1 optionality, concentration risk.

The lead indicator was the molecule, then the funding cycle

Lay the scorecard out and the pattern is unmistakable. The companies that grew, Laurus, Neuland and Sai, all did it on commercial-stage or late-stage molecules with genuine complexity. The companies that stumbled, Syngene, Piramal and Cohance, were all hit by destocking and timing at the early or commercial edge of the same value chain. The difference was never who had the best China Plus One slide. It was who was already supplying the right molecule, at the right stage, into the right customer.
The second signal is upstream of all of them. US biotech funding is the tap that feeds early and mid-stage CDMO demand, and it has turned. Piramal's disclosure of a roughly 75% year-on-year jump in US biopharma funding in the second half of FY26 is the cleanest forward tell in the entire set, and it lines up with the recovery in RFPs and order inflows that several names flagged from late 2025. If FY26 was the destocking trough for early-stage work, the funding turn is what could make FY27 look very different. That is a more reliable thing to track than any Biosecure headline.

Where the margin pool actually sits

Not all CDMO revenue deserves the same multiple, and the best opportunities are not in commodity API.
Peptides and GLP-1 are the standout structural theme of the decade. Semaglutide and tirzepatide have created enormous demand, and these are peptides, which means specialised synthesis, purification and scale-up. The end-market is huge, the peptide CDMO market is far smaller, and not every company that says "GLP-1" on a slide will win a commercial contract. The questions that matter are whether the company actually has peptide manufacturing capability, whether it is making intermediates, API or only doing development work, whether the molecule is commercial or still in trials, and whether margins are protected or about to be competed away. Neuland's year is the proof that getting this right pays, and the proof that India's peptide base, while small, is real.
Biologics and biosimilars are India's structural gap. The country is strong in small molecules and underweight in biologics, which demand higher capex, sterile systems, cell-culture expertise and deeper regulatory maturity. Higher barrier, higher reward, longer build. ADCs combine a monoclonal antibody, linker chemistry and a high-potency payload, and very few players can do all three, which is why ADC capability commands premium economics and why Cohance and Syngene have invested there. Oligonucleotides sit in a similar bucket of advanced chemistry and rare-disease demand. And high-potency APIs and sterile injectables earn their margins precisely because containment, sterility and compliance are hard to get right.

The hierarchy is worth committing to memory: commodity API sits at the bottom, then development work, then late-stage molecules, then commercial supply, with complex modalities at the top. The market repeatedly makes the error of valuing all of it the same.

A company map, in tiers

Tier one, the commercial-scale performers, where growth is already visible through commercial molecules: Laurus Labs, with its working CDMO transition and aggressive capacity build; Neuland Laboratories, on commercial custom-manufacturing and peptide momentum, with the caveat that the business is lumpy and the valuation is steep; and Sai Life Sciences, on a discovery-to-commercial model with late-stage visibility.
Tier two, high-quality platforms working through mid-cycle pressure: Anthem Biosciences, with the strongest return ratios and a near debt-free balance sheet, but a demanding multiple; and Syngene International, a respected end-to-end platform that FY26 showed is not immune to single-client destocking.
Tier three, niche moats and turnarounds dependent on execution and regulatory clarity: Cohance Lifesciences, with genuine ADC and oligonucleotide depth working through a difficult integration and destocking year; Piramal Pharma, with a diversified global footprint and a hybrid US plus India model recovering on the funding turn; and Blue Jet Healthcare, with a contrast-media moat and GLP-1 optionality offset by concentration risk.

What to actually track

The headline narrative is the least useful thing on the page. These are the real indicators. How many molecules are already commercial, because commercial supply is stickier and higher quality. The depth of the Phase III pipeline, because it is closer to launch than early-stage noise. Customer concentration, because one client's destocking can erase a quarter, as Syngene demonstrated. The regulatory track record, because in this business a Warning Letter is not a footnote, it delays approvals and damages trust. Capacity utilisation, because expensive capacity without confirmed demand destroys returns. The complexity of the work, because peptide, ADC and commercial-biologics revenue should not be valued like commodity API. The US biotech funding cycle, the upstream driver, now turning up. And the policy pair, Biosecure helping at the margin while the patented-drug tariff complicates the highest-value contracts.

The bear case, stated plainly

The opportunity is real, and so is the downside. Lumpiness is structural, not a one-off, so anyone expecting smooth quarterly compounding is in the wrong sector. Valuations in the winners already price flawless execution: when a name trades north of 100 times earnings, like Neuland, or around 75 times, like Anthem, even a single soft quarter can trigger a sharp de-rating. Biosecure is back-ended toward 2028 and beyond, so modelling instant revenue from it is front-running the timeline. The tariff regime can pull the most valuable patented-innovator manufacturing toward US onshoring, and that genuine pull is not fully reflected in many India-wins narratives. And India's capability gap in biologics, while closing, is not closed.

Final view

The Indian CDMO opportunity is genuine. Outsourcing is rising, molecules are getting more complex, biotech needs external partners, China Plus One is real, GLP-1 demand is enormous, and India brings cost, chemistry depth and a deep base of regulated facilities.
But FY26 proved the thing worth internalising. This is not a basket trade. The companies that won shared a profile: commercial-stage molecules, complex chemistry, clean regulatory history, high utilisation, disciplined capex, balance-sheet strength, and exposure to the right molecules rather than the right buzzwords. The companies that struggled were exposed to destocking, single-client concentration or regulatory overhang, and no sector tailwind rescued their numbers.
The wrong way to play CDMO is to buy everything with a China Plus One or GLP-1 slide. The right way is to follow the molecule, follow the stage, follow the customer, follow the regulatory record, follow the funding cycle, and watch the tariff clock that runs out at the end of September 2026.
The story survived FY26. The easy sector trade did not.


✍️ Educational purposes only, not a buy/sell recommendation