Five CDMO Stocks to Add to Your Investment Watchlist
In the dynamic pharmaceutical industry, Contract Development and Manufacturing Organizations (CDMOs) serve as the essential backbone for drug production, enabling pharma companies to outsource development and manufacturing processes efficiently. This strategic shift allows firms to avoid the high costs of building their own facilities, focusing instead on innovation and marketing. India has transformed from being known as the "pharmacy of the world" for generics to becoming a premier global CDMO hub, driven by several key advantages.
Why India is a Leading CDMO Destination
Cost-Efficiency and Skilled Workforce: India offers substantial cost savings, typically 30-50% lower than Western countries, while maintaining high technical standards. The country boasts one of the largest numbers of US FDA-approved manufacturing plants outside the United States, ensuring quality and compliance.
China Plus One Strategy: Global pharmaceutical giants are diversifying their supply chains to reduce dependence on China. India has emerged as a primary beneficiary, offering a stable, English-speaking, and legally compliant alternative for drug development and production.
Government Support: The Indian government's Production Linked Incentive (PLI) schemes are injecting funds into the sector, particularly to boost the manufacturing of Active Pharmaceutical Ingredients (APIs), which are critical raw materials for drugs.
As the CDMO industry thrives, here are five stocks that investors can consider adding to their watchlist. This overview is for informational purposes only and not a stock recommendation.
Syngene International
Syngene International is a global Contract Research, Development, and Manufacturing Organization (CRDMO) providing integrated scientific services to pharmaceutical, biotechnology, and other sectors worldwide. Its clientele includes top multinational corporations. In Q3 FY26, operational revenue declined 3% year-on-year to ₹917.1 crore, with operating EBITDA at ₹209.0 crore and a margin of 23%. Net profits were ₹15.0 crore, down from ₹131.1 crore year-on-year, impacted by a single commercial-stage product issue. However, underlying business performance showed progress.
The company invested around $9 million in capital expenditure during the quarter, focusing on research services and capability builds. Key developments include an extended partnership with Bristol Myers Squibb through 2035, expansion of advanced chemistry capabilities in Hyderabad, and completion of validation at its Bayview Biologics facility in the US. Syngene's diversified model and strong client relationships provide resilience and growth potential.
Piramal Pharma
Piramal Pharma is a major CDMO player with 17 global facilities and a distribution network in over 100 countries. Its segments include Piramal Pharma Solutions (CDMO), Piramal Critical Care (hospital generics), and India Consumer Healthcare. Q3 FY26 revenues were ₹2,139.9 crore, down from ₹2,204.2 crore year-on-year, with recent quarters reporting losses due to inventory destocking and slower order inflows.
Management notes a pickup in RFPs and early recovery signs since October 2025, driven by improved biopharma funding and M&A activities. The company is investing $90 million to expand facilities in Lexington and Riverview. In the complex hospital generics business, it acquired the Kenalog brand to enhance its portfolio. The consumer business continues to perform robustly in its markets.
Laurus Labs
Laurus Labs holds a leadership position in API and finished dosage form manufacturing across therapeutic areas like anti-retroviral and oncology. It offers end-to-end CDMO services with 15 globally approved facilities. Q3 revenues grew 26% year-on-year to ₹1,778 crore, with EBITDA at ₹485.0 crore, up 70%, and net profits at ₹253.1 crore versus ₹90.6 crore year-on-year.
The company has invested significantly in peptide development and manufacturing infrastructure, operationalized ADC and gene therapy labs in Hyderabad, and is constructing a new GMP facility. A joint investment in Krka Pharma supports FDA facility construction, with Phase 1 completion expected by mid-2027. CDMO revenue is growing rapidly and is projected to contribute around half of total revenue in the medium term, offering higher margins.
Divi's Labs
Divi's Labs is a top global API manufacturer, supplying to over 100 countries with three facilities in India, including the world's largest API plant in Visakhapatnam. In Q2 FY26, consolidated total income rose 17% to ₹2,860.0 crore, with profit after tax at ₹689.0 crore, up from ₹510.0 crore year-on-year. Exports accounted for 90% of sales, with Europe and the US comprising 73%.
The company maintains consistent volumes in generics despite pricing pressures, supported by backward integration. Its Unit 3 facility in Kakinada enhances supply chain efficiency. In custom synthesis, Divi's Labs sees high engagement with global innovators, with multiple projects advancing. The peptide segment shows strong momentum, with a new centre of excellence inaugurated. The company is executing three major capex programs backed by long-term commitments.
Akums Drugs and Pharmaceuticals
Akums Drugs and Pharmaceuticals is India's largest CDMO, with over 4,100 formulations across 60+ dosage forms in therapeutic areas like cardio-diabetes and neurology. Q2 FY26 revenues dipped to ₹1,017.5 crore from ₹1,033.1 crore year-on-year, with net profits falling to ₹42.7 crore from ₹66.7 crore, due to API price declines.
Future prospects include a joint venture with the Zambian government, holding 51% stake, to establish a manufacturing plant in Lusaka by 2028. The company completed a European GMP audit for Plant 2, with approval expected soon, and has shipped its first commercial batch to Switzerland. Export initiatives show promise, but investors should monitor API pricing pressures.
Should You Consider CDMO Stocks?
The CDMO sector presents structural growth opportunities as pharma companies increasingly outsource, but challenges include pricing pressure from intense competition and rising compliance costs. Investors should approach selectively, focusing on companies with strong execution, diversified clients, and differentiated capabilities. Always evaluate fundamentals, corporate governance, and valuations before making investment decisions.
Disclaimer: This article is for information purposes only and not a stock recommendation. It is syndicated from Equitymaster.com.
