Navigating Geopolitical Shifts, M&A, and Supply Chain Resilience

PharmTech recently spoke with Saharsh Davuluri, Vice Chairman and Managing Director, Neuland Labs, to get his perspective on trends that shaped pharmaceutical development and manufacturing in 2025 and where things are headed in 2026. In this part 1 of our three-part interview, Davuluri examines the pivotal trends that shaped the global pharmaceutical industry in 2025. He identifies robust M&A activity as a primary development, highlighting how major deals—such as the Pfizer-Metsera and AbbVie GLP-1 agreements—are dissolving the traditional boundaries between therapeutic domains. Davuluri observes, "It does seem that the M&A trends point to what was typically considered to be certain domain areas for big pharma; I think they're all blending now."

The conversation also delves into the impact of the "Make-in-USA" movement, which has prompted a strategic re-evaluation of insourcing versus local outsourcing. These geopolitical shifts have led to a heightened focus on supply chain resilience and the local sourcing of raw materials. Davuluri points out that many customers are now moving away from Chinese suppliers to ensure a more secure, localized pipeline for API production.

Furthermore, the interview highlights a significant trend toward strategic inventory stocking as a means of de-risking the business. Davuluri notes that innovators are now holding up to six months of API stock and sometimes a full year of drug product inventory to prevent supply chain interruptions. He emphasizes the motivation behind these shifts, stating, "This is something that's being done in the interest of the patients, to make sure that there's no disruption because of these geopolitical issues."

Finally, Davuluri addresses the surge in Chinese pharmaceutical innovation, noting a record-breaking year for out-licensing deals that reached over $50 billion. As Western companies license these drugs, the industry faces new questions regarding where manufacturing will ultimately take place, especially for small molecules and peptides. Overall, Davuluri paints a picture of an industry in transition, balancing rapid innovation with the need for geopolitical stability.

Access part 2 and part 3 of this interview!

Transcript

Editor's note: This transcript is a lightly edited rendering of the original audio/video content. It may contain errors, informal language, or omissions as spoken in the original recording.

I think 2025 has been a very interesting year. I think starting with some of the insights that we heard about at the JP Morgan conference and then throughout the year, there have been quite a few interesting developments. Probably I would say number one is M&A. We've seen a lot of interesting deals happening.

The Pfizer–Metsera deal I think is really interesting. There's a lot of companies… AbbVie, a GLP-1 deal with a Danish company. It does seem that the M&A trends point to what was typically considered to be certain domain areas for big pharma, I think they're all blending now.

You no longer can say, AbbVie's no longer in this therapeutic area. I think that to me is one interesting development that needs to be taken note of. Obviously the, the make-in-USA conversations that are happening ever since president Trump came into office, I think that's definitely stirred the pot quite a bit in terms of what is big pharma strategy.

Are they gonna insource, are they gonna outsource from local companies? Obviously that's something that is an interesting development that, especially a company like Neuland, whose facilities are largely in India, I think it does have an impact. And, third I would say is, I think there is a substantially positive trend in the innovation that is happening in Chinese pharmaceutical companies.

I think the volume of Chinese out-licensing deals is on the rise. I believe last year was a record, almost $50 billion plus of out-licensing deals that the Chinese companies have done, mostly with Western pharmaceutical companies. That points to a question mark on where would these drugs get manufactured once licensed by the western pharmaceutical companies. So I guess these are some of the trends that I think directly impact a company like Neuland, which is in the CDMO space, largely interested in the space of small molecule and peptides.

We're seeing a lot of emphasis on local sourcing. There's definitely a higher level of insistence from our customers on trying to buy locally available raw materials, avoid maybe chemical manufacturers, suppliers out of China, just to ensure that there is a supply chain that is local and can make API.

There's also a lot of stocking happening, especially on the innovator side. Neuland works with a lot of big pharma companies who are making drugs which have been recently commercialized, APIs that are being made and we are seeing an increasing trend where our customers are telling us that they would not only like to see several months, sometimes six months, of API stock being held in their warehouses, but they're also looking at making drug product six months or one year worth of inventory. This is definitely a higher level of inventory buildup that we have seen companies talking about. I guess this is something, again, that's being done in the interest of the patients, to make sure that there's no disruption because of these geopolitical issues.

I think another trend emanating is for businesses also to diversify and de-risk. So we are seeing, and Neuland's not necessarily following the strategy, but we've seen a lot of companies, say in India, who have been talking about “Okay, we don't wanna be as reliant on the US business anymore. We are going to have a diversified business mix from other regions, say China. Japan, Latin America, etc.” So, these are some of the trends that seem to be emerging as a result of whatever little instability that we have started to see in the last year or so.