M&A trends to watch out in pharma

Aditya Patni, Partner; Achint Kaur and Siddharth Marwah, Counsels at Khaitan & Co decode and decipher factors spurring M&As in pharma and predict that intensified PE investment in the pharma sector is poised to fuel accelerated M&A activity

India’s pharmaceutical sector is on a growth trajectory. In 2023, while the deal volume declined, the deal value grew (1), due to strategic megadeals in the pharma sector.

Pharma services have witnessed extensive innovation from contract development and manufacturing organisation (CDMO), contract research organisation, pharma information technology (Pharma IT). The CDMO segment and Pharma IT have observed exponential growth, driven by Indian companies moving up the value chain building high-quality, low-cost manufacturing capability geared to deliver bulk volumes, and international pharma giants shifting away from China against global interest rate fluctuations and price pressures.

In the CDMO space, India is the world’s second-largest CDMO player, just behind China, for small molecules (2). There has been a distinctive surge in India’s prominence over the last few years, propelled by India’s fast-growing economy, low geo-political risks and disruptions, and companies keen on developing diversified supply avenues beyond China (which is facing sanctions), coupled with China’s inward-looking policy. India’s ability to manufacture medicines at 1/4th the cost and the existence of a greater number of US FDA-approved manufacturing plants in India outside the US (3), and the presence of a resilient, English-speaking, digitally enabled Indian workforce have reinforced this transition. India’s nine globally integrated CDMO facilities offer end-to-end manufacturing and development solutions. As a direct corollary, India today has an ever-expanding list of fast-growing CDMOs all of whom have robust order inflows from global MNCs. India’s technological proficiency has aided health tech innovation backed by ‘innovation hubs’ by international pharma companies like Novartis, Merck, and AstraZeneca’s, India’s global capability centers.

Superior quality omnichannel interactions through video chat and integrated platforms and teams are being developed to propel a seamless experience across digital channels accounting for customer-driven requirements. Large pharma companies like GSK  and Mankind Pharma etc. are rendering integrated services to promote economies of scale.

Digital transformation and generative artificial intelligence facilitating the use of new technologies have enabled greater performance with lesser headcount, increased quality, patient convenience, and customer experience by providing care at a single touchpoint. Digital health applications like e-diagnostics, e-pharmacy, telemedicine, wellness, and software as service-based hospitals are growing.

The pharma sector has experienced an increased focus on innovative medical devices with the strengthening of regulatory requirements and quality checks, coupled with stringent price and margin caps. Covid-19 promoted India to the centre stage of global vaccine export as the consumerisation of health providing an impetus for vaccines and prompt approvals.

Big pharma companies are engaging in divestitures to accumulate prolific dry powder from freed-up capital permitting investment in their core focus areas. E.g. Merck, GSK, and Novartis have spun off their consumer groups. Taking a cue from Pfizer’s acquisition of cancer drugmaker Seagen for $45.7 billion in 2023, there is compelling investor interest in medtech and biotech companies. With additional firepower, the pharma companies are looking to acquire innovative technologies specifically in precision medicine, cell and gene therapy, cancer and rare diseases, diabetes, auto-immune diseases, and weight loss which will hurl additional M&A activity.

While innovation and availability of medicines is essential, to ensure uniform access to vital life-saving drugs for all individuals irrespective of their socio-economic status, taking a cue from the judgement of the Supreme Court of India in the case of Novartis AG v. Union of India (4) (2013 (6) SCC 1), the Division Bench of Delhi High Court in the case of F. Hoffmann-LA Roche and Ors. Vs. Cipla (5). (ILR(2009)Supp. (2)Delhi 551) held that “public interest in greater public access to a life-saving drug will outweigh the public interest in granting an injunction to the patent holder.”

India’s other enabling processes like compulsory licences facilitate access and surge M&A deal activity in the pharma sector, by removing a patent if the drug meeting the public health requirement is exorbitantly overpriced, thereby enabling generic drug manufacturers to develop the patented drug at a minuscule fraction of the price.

The Draft Patents Amendment Rules 2023 prevents the evergreening of a patent which would not be granted unless the innovation causes a significant enhancement of efficiency in the product or the process, thereby providing opportunities for other players in the market.

Other policy initiatives aiding India’s MedTech and pharma sectors are the  National Medical Device Policy 2023 (6), Make in India, production-linked incentive (PLI) scheme for encouraging domestic manufacturing of critical key starting materials, drug intermediates, and active pharma ingredients in India (7) as well as for medical devices, the creation of bulk drug parks, the research and development policy, and innovation in pharma-medtech. Stringent drug safety norms by the Central Drugs Standard Control Organisation have maintained the quality parameters thereby encouraging investors. Additionally, the Department of Pharmaceuticals, Government of India, directive requires strict compliance with the Uniform Code for Marketing Practices 2024. The pharma sector ranks among the top 10 sectors for foreign direct investment (8). For medical devices, 100 per cent foreign investment is allowed under the automatic route. In greenfield pharma projects, 100 per cent foreign investment is permitted under the automatic route, while for brownfield pharma projects, foreign investment beyond 74 per cent up to 100 per cent requires government approval. The ‘Pradhan Mantri Bhartiya Janaushadhi Pariyojana’ (9)  promotes retail outlets to provide quality generic medicines at affordable prices. 

There is record-breaking undeployed dry powder available in private equity (PE) owned pharma assets requiring monetisation. Intensified PE investment in the pharma sector is poised to fuel accelerated M&A activity. All these trends consequently boost investor and consumer confidence, which is predicted to spur M&A activity in the pharma industry.


  1. https://www.bain.com/insights/healthcare-and-life-sciences-m-and-a-report-2024/
  2. https://www.bain.com/insights/healthcare-innovation-in-india/
  3. https://www.fortuneindia.com/long-reads/contract-manufacturing-pharmas-new-growth-pill/116286#:~:text=India’s%20ability%20to%20develop%20drugs,at%20%24224.6%20billion%20in%2020
  4. file:///C:\Users\Achint.kaur\Downloads\J_2013_6_SCC_1_2013_3_SCC_Civ_227_2013_SCC_OnLine_librarydel_khaitancocom_20240508_202818_ 1_ 231.pdf
  5. file:///C:\Users\Achint.kaur\Downloads\F_HoffmannLA_Roche_Ltd_and_Ors_vs_Cipla_Ltd_240420d090328COM901872.pdf
  1. https://pharmaceuticals. gov.in/ policy/national-medical-device-policy-2023
  2. https://pharmaceuticals.gov.in/sites/default/files/Gazettee%20notification%20of%20bulk%20drug%20schemes_0_0.pdf
  3. C://Users/Achint.kaur/Downloads/ey-oppi-report-reimagining-pharma-and-healthcare.pdf
  1. https://janaushadhi.gov.in/ pmjy.aspx
CDMOIndia’s pharmaceutical sectorKhaitan & CoPharma M&A trends
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