In recent years, India’s pharma companies have accelerated their push towards innovation—investing in biologics, novel drug delivery systems, biosimilars and specialty medicines. However, as global trade dynamics shift, several firms are simultaneously expanding offshore manufacturing capabilities to safeguard operations against potential tariff changes and supply chain disruptions, particularly in the US market.

This recalibration reflects a broader recognition: that sustained growth in a volatile global environment demands both resilience and reinvention. By spreading risk and tapping into emerging markets, Indian pharma players are positioning themselves not just as cost-competitive manufacturers, but as global solution providers driving accessibility and innovation.

As the conversation around innovation and self-reliance intensifies, the sector’s ability to strategically direct its investments—balancing immediate profitability with long-term vision—will be central to India’s emergence as a global hub for pharmaceutical excellence.

In the opinion of Bhavin Mukund Mehta, Whole-Time Director, Kilitch Drugs, and Vice Chairman, Pharmexcil, the pharma investment environment is evolving from volume-centred manufacturing to value-based innovation. He said, “We project that by 2026, there will be a greater emphasis on research and development (R&D) output, digital transformation and backward integration as means of ensuring reliable supply.

The combination of global regulatory requirements, sustainable practices and the increasing demand for home-grown innovation will be the key drivers behind funding for technology-empowered and science-based manufacturing methods. Notably, investors and companies are now favouring long-term resilience and differentiation over short-term cost gains, including growth areas such as health-tech. For instance, in 2025, the sector recorded 71 deals worth around USD 2.6 billion in Q1 alone, signalling active investor interest in pharma and healthcare Mergers and Acquisitions (M&A) and Private Equity (PE). Additionally, Foreign Direct Investment (FDI) into India’s pharmaceuticals and medical devices sector crossed INR 19,134 crore during FY 2024-25, reflecting global capital flows into the industry.”

Speaking further in this regard, Hari Kiran Chereddi, Managing Director, HRV Pharma, said, “We are in one of the most defining decades for the Indian pharmaceutical industry, one where capital, digital innovation and integration will converge as one. Investments will flow into models that are not only asset light, but regulatorily strong and those which can blend India’s manufacturing strength with global compliance and Artificial Intelligence (AI).”

Further, according to him, investors are shifting focus from pure scale to scaling smartly. Capex-heavy expansions are being re-examined by collaborative, data-driven ecosystems that optimise existing GMP capacities. AI, predictive compliance and digital supply chain orchestration are fast becoming the new currency of competitive advantage. The next phase of India’s growth will be powered not by physical infrastructure, but by intelligent infrastructure where technology, transparency and traceability converge.

Dr Vellaian Karuppiah, Chief Operating Officer (COO), ACME and Immacule Group, believes that by 2026, the pharma investment landscape will be defined by three clear shifts: from volume to value, from generics to innovation, and from single-site dependence to diversified, resilient networks.

“For Indian pharma in particular, the traditional growth engine of small molecule generics will remain important, but capital allocation is already tilting toward complex generics, biosimilars, specialty products and differentiated delivery systems. Multiple analyses show India moving from ‘pharmacy of the world’ toward a broader ‘pharma powerhouse’ role, with export-led growth, innovation-led segments, and deeper integration with global value chains,” he emphasised. 

By 2026, Dr Karuppia also expects higher research and development (R&D) intensity, wherein investments will increasingly go into novel and differentiated products, platform technologies (e.g., mRNA, gene and cell therapies in a calibrated way), and lifecycle management rather than pure para-IV plays.

“Capital will continue to flow into biologics manufacturing, fill–finish capacities, high-potent blocks and integrated Contract Research, Development, and Manufacturing Organisation (CRDMO) Contract Development and Manufacturing Organisation (CDMO) models, where partners can support end-to-end—from development to commercial supply. AI/Machine Learning (ML), real-time analytics and automation (Pharma 4.0) will see board-level backing, not as pilots, but as core levers for productivity, quality and regulatory intelligence. In India, surveys already show a large majority of pharma CXOs viewing AI/ML as a key driver of future growth,” he added.

Dr Karuppia also explained that with tariff uncertainty and geopolitical tensions, companies will increasingly de-risk by building dual/multi-sourcing, region-specific manufacturing, and near-shoring/on-shoring strategies for critical products.

“Overall, 2026 will not be about spending more for its own sake, but about deploying capital with sharper strategic intent to secure pipeline, technology and supply chain resilience simultaneously,” he opined.

According to Anil Khanna, Partner, Wisdomsmith Advisors LLP, the biopharma investment landscape is expected to be shaped by a strong focus on innovation, collaboration and operational resilience.

He elaborated, “Companies leveraging AI to accelerate drug discovery and development will continue to attract substantial funding, driven by AI’s potential to significantly reduce timelines and costs. Advanced therapies—particularly cell and gene treatments—will also see sustained investment, with growing attention on scalable ‘off-the-shelf’ solutions that demand sophisticated manufacturing and logistics infrastructures.”

He further stated that strategic partnerships between biopharma firms and CDMOs will play a crucial role in bringing new products to market efficiently, while M&As are set to remain robust as companies seek access to cutting-edge technologies, strong pipelines and new therapeutic areas. At the same time, firms with strong data and analytics strategies will gain a competitive edge, prompting greater investment in modern data infrastructure. Finally, enhancing manufacturing and supply chain resilience will be a key priority, especially for novel and complex drugs that require advanced production.

Where the Capital Flows

At Kilitch, the company’s investment strategy aligns with its broader ambition to become a globally trusted partner in delivering affordable and quality healthcare. The construction of new greenfield plants in Pen and Khopoli, Maharashtra, serves as the cornerstone of its manufacturing expansion, aimed at enhancing production capacity, boosting export competitiveness, and facilitating entry into regulated markets.

In addition, a significant portion of Kilitch’s investments is directed toward automation, quality systems and R&D to develop more complex dosage forms. The company also continues to invest in strengthening its field force and brand equity to sustain leadership in productivity and market reach.

At HRV Pharma, the company’s capital strategy is anchored on the core pillars that define its vision for sustainable and technology-driven growth. The first pillar focuses on AI and digital platforms, with the development of the HRV Intelligence Engine—an advanced system designed to enhance predictive compliance and regulatory foresight across partner manufacturing plants. The second pillar, therapeutic depth, emphasises building a specialised portfolio in key therapeutic areas such as oncology, rare diseases and women’s health, while also expanding into veterinary medicine to address unmet medical needs across both human and animal health. Together, these priorities reflect HRV Pharma’s disciplined approach to achieving long-term, technology-enabled growth that balances profitability with purpose.

For ACME and Immacule Group, if Dr Karuppiah had to prioritise where every rupee or dollar is being fought over in today’s boardrooms, he would group it into five big buckets:
1) Innovation, R&D and complex products: Investment is Entities (EBNs) in select therapeutic areas, complex generics, biosimilars, inhalation products, depot injections, transdermal and drug–device combinations. Indian companies are also co-investing in global clinical development and regulatory pathways to move up the value chain from “cost-efficient manufacturing” to “innovation and Intellectual Property (IP) creation.”

2) Biologics, vaccines and specialty manufacturing capacity: Expansion of biologics, vaccines, high-potent, sterile injectables and oncology facilities is a clear priority, often through greenfield plants or brownfield debottlenecking. Many firms are also building CDMO/CRDMO capabilities, enabling them to monetise spare capacity, deepen partnerships with innovators and diversify revenue.

3) Digital, data and AI across the value chain: Companies are investing in manufacturing execution systems, advanced quality analytics, predictive maintenance, QMS digitalisation and e-batch records. On the commercial and medical side, spending is rising on real-world evidence, omnichannel engagement, and AI-driven portfolio and pricing analytics. An Earnst & Young - Organisation of Pharmaceutical Producers of India (EY-OPPI) study highlights that close to 80 percent of Indian pharma leaders already see AI/ML as a critical enabler for the next growth phase, which is reflected in budgets and hiring.

4) Supply chain resilience and geographic diversification: The recent US tariff moves and broader trade tensions are forcing companies to re-map their supply chains, including dual sourcing of APIs, localising key intermediates, and creating alternate manufacturing bases (e.g., in US/EU for sensitive portfolios and in other emerging markets for cost and access). Investment is also going into inventory visibility tools, advanced planning systems and cold chain infrastructure to reduce the risk of stock-outs and quality events.

5) Environmental, Social and Governance (ESG), quality and compliance upgrades: There is growing capital allocation for energy efficiency, water management, waste reduction, green chemistry and sustainable packaging, driven by both regulators and multinational partners. Parallel investments in data integrity, automation in Quality Control (QC) labs and global-standard quality systems are becoming essential to retain trust with regulators like the US Food and Drug Administration (FDA) and European Medicines Agency (EMA).

“In short, investment priorities today are a blend of future growth (pipeline, biologics, innovation) and risk management (supply chain, quality, compliance),” he stressed.

Khanna is of the view that within technology and digitalisation, companies are directing substantial resources toward AI and ML to streamline drug discovery, enhance clinical trial design, and rapidly identify promising drug candidates and biomarkers at far lower cost and time than traditional methods. Alongside this, there is a strong push toward digital health and patient engagement tools—ranging from wearables and telehealth platforms to mobile apps—to support remote monitoring, increase treatment adherence, and deliver a more patient-centric care experience.

“To enable these capabilities, firms are also investing heavily in cloud computing and advanced data analytics, building robust infrastructures that can manage large datasets, generate real-time insights, and support sophisticated applications such as ML models and real-world evidence generation,” he said.

In R&D, pharmaceutical companies are directing substantial investment toward advanced therapeutic modalities, including gene editing technologies such as Clustered Regularly Interspaced Short Palindromic Repeats (CRISPR), cutting-edge cell therapies like CAR-T, biologics and mRNA platforms— each offering the potential for highly personalised and transformative treatments for cancer, genetic disorders and other complex diseases. At the same time, organisations are prioritising therapeutic areas with unmet medical needs and strong growth prospects, particularly oncology, immunology, neurology—including emerging treatments for Alzheimer’s—and cardiometabolic conditions such as obesity and diabetes, where GLP-1 agonists are reshaping the treatment landscape.

To support faster and more inclusive development, the industry is also embracing decentralised clinical trials, backed by digital tools and remote monitoring technologies that improve trial efficiency, broaden patient participation and help reduce overall costs and timelines.

Navigating Global Geopolitics

Amid shifting geopolitical dynamics, pharmaceutical companies are grappling with mounting challenges tied to supply chain resilience, regulatory fragmentation, pricing pressures and Intellectual Property (IP) protection. The global pharmaceutical supply chain—already complex and interdependent—has become increasingly vulnerable to disruptions. Trade wars and tariffs, including the prospect of US duties on imported pharmaceuticals, threaten to raise operational costs and impact the affordability of generics that rely on thin margins.

“Political instability and regional conflicts, such as the Russia–Ukraine war and the Israel–Palestine crisis, continue to disrupt logistics networks, manufacturing hubs and raw material sourcing, leading to medicine shortages and higher insurance costs for global shipments. Economic sanctions, even when not directly targeting pharmaceuticals, complicate international banking flows, hinder raw material procurement and limit cross-border R&D partnerships. Additionally, resource nationalism is reshaping supply chains as countries with critical capabilities—particularly China and India for APIs—impose export restrictions to safeguard domestic needs, forcing other nations to secure alternative and often more costly supply sources,” said Khanna.

Speaking somewhat on similar lines, Chereddi also said, “Geopolitical shifts–as manifested in ongoing US tariff reforms, tightening EU regulatory standards and reinforcing regional manufacturing mandates–continue to push Indian firms to reconsider their risk geography. The response of HRV has been the diversification of sourcing and sales footprints across more than 55 countries, with US, Swiss, Turkish and UAE operations. Agility, regulatory readiness and real-time visibility override traditional cost arbitrage.”

Mehta feels that, as a result of geopolitical changes, trade realignments and regulatory uncertainties, global pharmaceutical supply chains have become more convoluted.

“The Indian pharmaceutical industry is facing a plethora of issues, which include dealing with volatility in the prices of raw materials, tariffs that keep changing and ensuring compliance with the law in many places at the same time. But on the other hand, the very difficulties are making the companies construct the ecosystems which are more resilient, varied and independent, though they are focusing more on local sourcing, having factories in different regions and forming alliances for shared risk,” he said.

As innovation migrates from pipelines to platforms, Indian firms will be leading the mid-market innovation layer, bridging R&D led Western firms and cost-driven Asian manufacturers. The rapid emergence of sustainable pharma logistics, AI-assisted drug development, and orphan drug manufacturing provides fertile ground for Indian players with regulatory maturity and global intent.

Mehta added, “The next stage of growth for Indian pharmaceutical companies is to shift from generics production to innovation-based partnerships and contract development. Kilitch considers Africa as one of the significant regions in its strategy, and so it is trying to increase its presence there by local production and expanding the market. Besides, the demand for good quality, affordable formulations and trustworthy supply partners is the reason for the increasing opportunities in the US, European and LATAM regulated markets. The transition will be led by those companies that possess both scientific knowledge and operational flexibility.”

Operating across diverse global markets requires pharmaceutical companies to navigate an increasingly fragmented regulatory landscape and shifting government policies. Each country’s regulatory authority—such as the US FDA, EMA, or Central Drugs Standard Control Organisation (CDSCO)-maintains its own approval pathways, data requirements and quality standards, resulting in divergent expectations that raise costs and delay product launches.

Khanna added, “This complexity is compounded by heightened scrutiny and stricter global guidelines, which demand substantial investments in manufacturing upgrades, quality systems and documentation to remain compliant. Adding to the challenge, policy shifts such as “Made in USA” initiatives or India’s drive for self-reliance in API production are prompting a push toward regionalised manufacturing networks. While strategically important, this transition is resource-intensive and places significant capital and operational pressures on multinational pharmaceutical companies.”

Geopolitical dynamics are also reshaping market access, pricing pressures and the protection of IP, directly influencing how pharmaceutical companies commercialise and safeguard their innovations.

M&As as Catalysts for Scale

M&As will remain a critical, but more selective and strategic growth lever for pharma. Over the last couple of years, global dealmaking has gone through a “reset” with a pivot from mega-deals to smaller, smarter, bolt-on acquisitions focused on pipeline, platforms and capabilities. Recent analyses suggest that while total deal value dipped, M&A continues to contribute a large share of bigpharma’s revenue growth, and is expected to strengthen as financing conditions ease.

“I expect most transactions to focus on acquiring innovative assets, biologics platforms, niche technologies (e.g., drug–device, advanced modalities) and digital or data capabilities, rather than pure size. For Indian companies, this could mean acquiring branded portfolios in emerging markets, specialty businesses in select therapies, or stakes in innovative biotech and tech-bio start-ups. In India and other emerging markets, there is still room for consolidation among mid-sized generics, API players and CDMOs, especially where scale is required to meet evolving quality, ESG and investment demands,” suggested Dr Karuppiah.

He further recommended partnerships and structured deals as an alternative to full buyouts.

“Given valuation expectations and geopolitical/regulatory uncertainties, I see increasing use of licensing, co-development, regional rights deals, carve-outs and minority investments as ‘M&A-like’ growth strategies without full integration risk. Investors and boards are more demanding about value capture, cultural integration and synergy realisation. M&A will be judged not by headline size, but by how effectively the acquired asset is integrated into the global supply chain, quality framework and commercial engine,” he said.

Mehta also claimed that M&As will continue to play a pivotal role in driving growth and transformation across the pharmaceutical sector as they not only enable companies to scale operations and expand geographic reach, but also foster knowledge sharing, innovation and access to new technologies.

He stated, “At Kilitch, we view collaborations, alliances and strategic partnerships as powerful complements to organic growth—helping us strengthen capabilities, diversify our portfolio and respond faster to evolving global healthcare needs. Overall, the future of M&As will be defined more by synergy and value creation than by size alone.”

Similar to Mehta, Chedderi also believes that strategic acquisitions and partnerships will continue to be key accelerators. “For HRV, inorganic growth is not about adding size—it’s about adding synergy and science. We see M&As as instruments to expand therapeutic capabilities, regulatory filings and market reach, all while staying true to our virtual, zero-debt model. India’s next pharma decade will belong to those who can invest intelligently, integrate globally and innovate responsibly,” he remarked.

Mergers and Acquisitions are expected to remain a crucial, though potentially more selective, growth driver for the pharmaceutical industry in 2026. Factors like patent cliffs, the need for external innovation, and significant cash reserves held by large pharmaceutical companies will continue to drive deals. However, M&A volume growth may be more modest in 2026 compared to 2025 due to shifts in priorities, and companies might favour strategic, targeted acquisitions over large-scale consolidation.

“The key drivers of M&A activity in 2026 are rooted in a combination of market pressures and strategic imperatives. As major patents on blockbuster drugs expire between 2023 and 2026, large pharmaceutical companies are facing significant revenue losses, prompting them to pursue acquisitions to replenish pipelines and secure new growth opportunities. This urgency is reinforced by the substantial cash reserves held by big pharma and large-cap biotech firms, giving them the financial strength to pursue high-value strategic deals,” said Khanna.

He also mentioned that the need for external innovation continues to intensify, with many companies opting to acquire cutting-edge technologies and promising assets rather than build them internally. As a result, biotech M&A activity has seen a strong resurgence, driven by the industry’s focus on accelerating innovation and strengthening long-term competitiveness. Further, he remarked that M&A trends in 2026 are expected to evolve as pharmaceutical companies adapt to shifting therapeutic priorities and a more uncertain policy environment.

“While oncology dominated deal-making in 2025, momentum is increasingly moving toward high-growth areas such as metabolic and cardiometabolic diseases. At the same time, big pharma is favouring selective, innovation-driven acquisitions over large-scale consolidation, continuing the move toward bespoke bolt-on deals that strengthen specific pipeline needs. However, political and regulatory uncertainty—particularly around US drug pricing reforms and heightened oversight—may influence capital allocation strategies, prompting some companies to prioritise domestic investments or opt for collaborations and licensing agreements instead of full acquisitions,” he asserted.

M&As will remain an essential driver of inorganic growth, but the winning companies will be those that treat it as a precise strategic instrument tightly linked to their innovation, portfolio and geographic priorities—rather than as a broad-brush expansion tool.