Goldman Sachs India CRO/CDMO Survey: Structural Opportunities Persist, Capital Spending Diverges

Overview

This report draws on Goldman Sachs’ third annual CRO/CDMO research tour, held in June 2026 in Bangalore and Hyderabad, summarizing key takeaways from discussions with management at roughly ten listed CRO/CDMO firms. The central conclusion is that India’s CRDMO sector’s structural growth opportunities remain fully intact, underpinned by expectations of supply‑chain restructuring spurred by the Biosecure Act and rising outsourcing rates. However, firms differ in their assessments of the timing of these opportunities. Meanwhile, overall capital expenditure (Capex) is increasing, but companies’ investment philosophies and intensities vary significantly. Strategic focus is shifting from traditional small molecules to complex modalities such as peptides, ADCs (antibody–drug conjugates), and oligonucleotides, with particularly sharp分歧 over peptide strategies. Institutions emphasize that future competitive moats will rest on “capabilities”—complex chemistry, process innovation, and regulatory compliance—rather than sheer “capacity.”

Core views

Industry Opportunities and the Impact of the Biosecure Act: The market broadly views India’s CDMO opportunities as structurally attractive. Syngene sees the Biosecure Act as a genuine near‑term tailwind, as U.S. clients reassess suppliers amid supply‑chain concentration risks; Piramal regards it as a medium‑term tailwind, with a phased transition; while Anthem, Sai Life, and Vimta view it more as a multi‑year—or even multi‑decade—theme, noting that customer migrations typically require 2–3 years of qualification and 6–12 years of scale‑up. Divergence in Capital‑Expenditure Strategies: Most firms are investing ahead of demand, but approaches differ markedly. Aggressive players like Laurus Labs have raised their two‑year capital‑spending cap from INR 20 billion to INR 30 billion, covering fermentation, peptides, and other areas; Aurobindo (TheraNym) is also making large‑scale investments in biologics CMO capacity. Prudent firms like Neuland explicitly avoid “reckless bets” that could jeopardize near‑term stability, preferring to acquire new capabilities through M&A or phased rollouts. Blue Jet and Piramal adopt staged ramp‑up strategies. Transition to Complex Modalities and Disagreements Over Peptide Strategy: There is broad consensus that the industry must move toward higher‑complexity modalities (peptides, ADCs, oligonucleotides, fermentation) to avoid price competition in small molecules. Yet within the peptide space, Neuland explicitly avoids near‑term GLP‑1 generics (e.g., semaglutide), deeming them uneconomical, and instead focuses on early‑stage clinical projects for innovative drugs; Laurus views peptides as an opportunity for capability building; Piramal, constrained by capital and wary of commoditization risks, adopts a more cautious, capability‑oriented rather than capacity‑oriented approach. In ADCs and oligonucleotides, Piramal, Cohance, and Laurus all have positions, with Cohance leading in oligonucleotide platforms. Competitive Barriers and the Financing Environment: Management stresses that competitive advantage stems from complex chemistry, biocatalysis, process innovation, safety systems, and regulatory track records, not price or capacity. Companies such as Anthem, Sai Life, and Neuland have validated a “biotech‑first” engagement model, serving early‑stage biotechs and gaining access to major client supply chains as those companies are acquired by Big Pharma. On the financing front, biotech funding has picked up since October/November 2025, but capital is increasingly directed toward proof‑of‑concept (PoC) projects, especially in GLP‑1/obesity‑related areas. The Role of AI: Most firms (Anthem, Syngene, Cohance) view AI as a productivity enhancer and process‑accelerating tool that can expand the pipeline of drug targets, rather than an immediate threat to business models. Syngene even suggests that engagement models may shift from FTE‑based arrangements to outcome‑or capability‑oriented frameworks. Vimta remains reserved, believing the industry has yet to focus on the early discovery phase where AI’s impact would be most profound.

Analysis framework

This report employs a typical top‑down/bottom‑up research methodology. First, a macro lens (Biosecure Act, global biotech‑financing trends) establishes the sector’s beta and structural drivers. Second, field research (conference takeaways) gathers firm‑specific micro insights, highlighting differences in capital allocation (Capex intensity), technology‑route selection (peptide/ADC strategy), and customer composition (biotech vs. Big Pharma). This cross‑company comparison aims to identify sources of alpha—those firms with stronger execution and better strategic positioning during the industry’s转型期. The report particularly emphasizes the distinction between “capability‑led” and “capacity‑led” approaches, a critical framework for evaluating long‑term valuation premiums in CRO/CDMO enterprises.

Methodology notes

• Industry/Industrial Analysis FrameworkSupply-demand framework

  Capacity Investment ahead of demand

  In growth‑oriented manufacturing, firms often need to build capacity in advance of anticipated demand surges. The report compares companies’ Capex intensity and pacing to assess their confidence in future demand and potential overcapacity risks.

• Competition and Strategy FrameworkMoat / competitive advantage

  Capability-led vs Capacity-led

  The report distinguishes two competitive strategies: “capacity‑led,” relying on scale expansion, and “capability‑led,” grounded in complex processes and technological patents. The latter typically commands higher barriers to entry and pricing power, forming a core dimension for evaluating the long‑term competitiveness of CRO/CDMO firms.

• Event博弈 and Behavioral Finance

  Policy‑driven Supply‑Chain Restructuring (Biosecure Act impact)

  Geopolitical or regulatory policies (such as the U.S. Biosecure Act) compel downstream customers to reassess supply‑chain security, triggering structural order shifts to alternative markets (e.g., India). The report analyzes differing company assessments of the pace at which this policy dividend will materialize.

• Industry/Industrial Analysis FrameworkProduct life cycle

  Moving up the complexity curve

  As patents on traditional small‑molecule drugs expire and competition intensifies, CRO/CDMO firms are transitioning to high‑technology, high‑value-added modalities such as peptides and ADCs to extend profit cycles and avoid price wars.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Piramal Pharma (PIRM.BO)

  Beneficiary

  Strengths

  East‑west footprint, deep ADC integration capabilities, CHG business technology transfers driving growth

  Weaknesses

  Capital constraints limit peptide capacity expansion; some product lines face price erosion

  Comparison

  More focused on capability building and return on investment than pure capacity expanders

  Risks

  Customer/product concentration, clinical failures, plant ramp‑up delays

• Syngene International (SYNN.BO)

  Beneficiary

  Strengths

  Industry‑leading biologics yield, strong ties with Big Pharma (BMS, Zoetis), direct beneficiary of the Biosecure Act

  Weaknesses

  FY27 top‑line growth flat; declining Librela revenues weigh on margins

  Comparison

  Valuation sits at the low end of the large CRDMO cohort, reflecting a middling medium‑term outlook

  Risks

  Product/customer/geographic concentration risks, persistent weakness in biotech financing

• Neuland Labs (NEUL.BO)

  Beneficiary

  Strengths

  Avoids low‑margin GLP‑1 generics, focusing on high‑value innovative‑drug peptides; strong complex chemistry capabilities

  Weaknesses

  Management bandwidth limited; talent acquisition challenging

  Comparison

  Most cautious strategy, prioritizing long‑term stability and returns

  Risks

  Product/customer concentration, supplier consolidation, USFDA compliance

• Aurobindo Pharma (ARBN.BO)

  Beneficiary

  Strengths

  Significant cost advantages in Indian biologics CMO; large anchor contracts with MSD; robust generic business

  Weaknesses

  Shortage of specialized talent in genetic engineering; exposure to U.S. price erosion

  Comparison

  Large scale in biologics CMO, cost control superior to China and South Korea

  Risks

  U.S. price erosion exceeds expectations; injectables/complex pipelines pose execution risks; USFDA compliance

• Cohance Lifesciences (COHA.BO)

  Beneficiary

  Strengths

  Advanced oligonucleotide platform; strong ADC payload order backlog; high niche‑tech content

  Weaknesses

  Subsidiary integration adds fixed costs; execution slower than expected

  Comparison

  Differentiated优势 in oligonucleotide and ADC subsegments

  Risks

  Product/customer concentration, clinical failures, generic price erosion

• Laurus Labs (LAUL.BO)

  Affected/cautious

  Strengths

  Extensive collaborations with top Big Pharma; integrated CDMO capabilities (API + formulation)

  Weaknesses

  Overly aggressive capital expenditure; still heavy reliance on ARV in the portfolio; relatively small CDMO scale

  Comparison

  Discounted valuation relative to larger domestic CRDMOs, reflecting mixed business profile

  Risks

  CDMO/biologics ramp‑up faster than expected (upside risk); structural changes in the ARV business

Key data

• Laurus Labs Capex~INR 30 billionTwo‑year capital‑spending cap, increased from INR 20 billion
• Aurobindo (TheraNym) Capex~USD 1.5–1.75 millionInvestment in Unit 2’s biologics CMO alone; combined with Unit 1, this creates approximately 120 kL of mammalian cell culture capacity
• Divi's Labs Capex Growth+75% YoYFY26 capital expenditure increased year‑over‑year, prompting a rating upgrade to Buy
• Neuland Labs Peptide Module 1 Revenue Potential~INR 4–5 billionExpected revenue from the first peptide module, with total investment around INR 2.5 billion
• Syngene Biologics Yield8 g/LIndustry‑leading level (the industry standard is 4–5 g/L)
• Piramal Pharma FY27 CapexUSD 1–1.2 millionExcludes the Kenalog acquisition; funds primarily for completing the Lexington facility

Impact & implications

The report concludes that India’s CRO/CDMO sector stands at a pivotal juncture in its transition from traditional small molecules to complex modalities. For investors, stock‑selection logic should shift from单纯 capacity expansion to an emphasis on “technical capability” and “execution discipline.” While the Biosecure Act offers long‑term tailwinds, its near‑term earnings contribution depends on each firm’s customer mix and conversion speed. Capital‑expenditure aggressiveness must align with order visibility; overly aggressive expansion (e.g., Laurus) may strain short‑term margins, whereas a prudent approach (e.g., Neuland) could deliver more稳健 long‑term returns. AI adoption promises to boost overall industry efficiency, but it is unlikely to disrupt existing service models in the short term.

Risks

• Excessive concentration of customers, products, or geographies
• Persistent or deteriorating biotech‑financing conditions
• Delays in key plant capacity ramp‑ups
• Regulatory compliance issues (e.g., USFDA warning letters)
• Sharp price erosion across generic portfolios
• Order cancellations due to clinical trial failures

What to watch

• Further legislative developments related to the Biosecure Act and the actual implementation of U.S. customer supply‑chain adjustments
• Capacity utilization and margin dynamics across new modalities (peptides, ADCs, oligonucleotides)
• Sustainability of global biotech‑financing data, particularly capital flows into GLP‑1–related areas
• Participation of Indian CRO/CDMO firms in Big Pharma M&A activity and their success in securing new clients
• Practical applications of AI in drug discovery and process development, along with its impact on FTE‑based engagement models