Speciality Chemical Makers Pivot to Pharma, Riding CDMO Momentum
Speciality chemical manufacturers are increasingly thriving by supplying the pharmaceutical sector, particularly CDMOs and API makers. This shift provides clearer growth visibility, less competition, and stronger margins compared to the broader chemicals sector, which struggles with global pressures. Driven by India's expanding CDMO ecosystem, geopolitical shifts, and the potential US Biosecure Act, pharma-linked firms are demonstrating robust sales and profit growth, positioning them for sustained success in a more resilient market segment despite lower volumes in CDMO sub-segments.
The article highlights a significant trend in the chemicals industry where speciality chemical manufacturers are increasingly focusing on the pharmaceutical sector, specifically supplying contract development and manufacturing organizations (CDMOs) and active pharmaceutical ingredient (API) makers. This strategic pivot is proving highly lucrative, offering clearer growth visibility, reduced competition, and robust margins—a sharp contrast to the broader chemicals sector grappling with global uncertainties.Experts attribute this success to the inherent nature of pharma-linked intermediates. These often require complex synthesis, rigorous regulatory oversight, and long qualification cycles, which foster strong customer stickiness and enable greater pricing power. Consequently, CDMO-linked businesses enjoy structurally stronger margins, potentially reaching 25-30% EBITDA, due to lower price sensitivity within innovator pharma supply chains. Mint’s analysis confirms this, showing pharma-linked speciality chemical and CDMO-adjacent companies posting 7% year-on-year sales growth and a 46% net profit jump in Q2FY26, significantly outpacing non-pharma cohorts.This growth is propelled by India's rapidly expanding CDMO ecosystem, geopolitical shifts, global supply-chain diversification away from China, and increasing pricing pressures on big pharma. India, currently holding just 2-3% of the global $145-billion CDMO market, anticipates 15-20% annual growth through 2035, further bolstered by legislative actions like the revived US Biosecure Act, which could reroute business from China. Conversely, the wider chemicals sector faces headwinds from US tariffs, oversupply from Chinese agrochemical plants, and weak European industrial demand, collectively eroding price competitiveness and squeezing margins. Despite overall volume remaining small in the CDMO sub-segment, the industry's shift is clear, with companies like Jubilant Ingrevia expanding their pharma and CDMO pipelines, signaling a move towards a more resilient path amidst global market pressures.
