China Rises as Pharma R&D Powerhouse While India Pushes Innovation

Global pharmaceutical research and development is undergoing a structural realignment. China has emerged as a dominant source of external drug innovation for large pharma, while India is working to strengthen its own innovation capabilities.

More than $43 billion in licensing commitments were made by large pharmaceutical companies to Chinese partners in the first five months of 2026. AstraZeneca anchored the wave with an $18.5 billion deal, Bristol Myers Squibb announced a $15.2 billion partnership, and Pfizer closed a $10.5 billion deal covering 12 cancer drugs with Innovent Biologics. AstraZeneca also separately announced a $15 billion investment in China through 2030.

The Bristol Myers Squibb agreement, signed with Jiangsu Hengrui Medicine, China's largest pharmaceutical company by market capitalisation, covers 13 early-stage drug programmes across oncology, haematology, and immunology. None of the drugs has entered human clinical trials. Under the deal, Hengrui will run early-stage clinical trials for four drugs discovered by Bristol Myers Squibb. The deal was announced on the same day that President Trump flew to Beijing for his first state visit to China in his second term.

China-sourced licensing has risen from roughly 5% of large pharma licensing activity four years ago to 38% in 2025 and has now crossed the majority threshold. Total deal value involving Chinese pharma and biotech firms reached $51.9 billion in 2024, a 90% jump from 2023, and climbed to $135.7 billion in 2025, according to China's National Medical Products Administration. Cross-border out-licensing by Chinese biotech firms hit $60 billion in the first quarter of 2026, up 73% year over year. The average upfront value for a China-sourced licensing deal rose from $52 million in 2022 to $172 million in early 2026.

China now accounts for 23% of drug candidates globally, second only to the United States, and its clinical trial volume has surpassed that of the U.S. In 2024, researchers in China developed more than 1,250 new drugs, more than the European Union and slightly less than the United States, which developed 1,440; China accounted for 30% of the world's new innovative drugs. Chinese biotechs have built particular strength in antibody-drug conjugates, multi-specific antibodies, and cell and gene therapies. China's entrenched control of the pharmaceutical supply chain, with about 70–95% of inputs for essential pharmaceutical products such as ibuprofen manufactured in China, and a workforce largely trained in the U.S. and EU have contributed to this growth, according to a study published in Nature.

In contrast, India's pharmaceutical industry is increasing its use of artificial intelligence in drug discovery, though investment remains far below global peers. The global market for AI in pharma and biotech is estimated at $8.54 billion in 2026 and projected to reach $154 billion by 2034, while India's market is estimated at $0.17 billion, about 2% of the global total. China committed more than RMB 10 billion (about $1.4 billion) to AI-pharma initiatives in 2026 alone; India has no comparable government programme. India attracted about $320 million in AI-pharma funding in 2024, with most capital directed towards generics.

Indian companies are deploying AI across different parts of their businesses. Sun Pharma has focused on manufacturing quality and supply chain optimisation. Cipla has integrated AI into smart inhalers and diagnostics. Biocon is investing in protein modelling and genomics-based cancer therapies through its Syngene subsidiary. Glenmark is using AI for tumour profiling. Lupin operates an R&D centre near Pune with more than 1,400 scientists working on AI-assisted discovery and manufacturing. Dr. Reddy's-owned Aurigene plans to invest nearly $100 million in infrastructure covering biologics and AI-driven drug discovery. Globally, more than $2 billion was invested in AI drug discovery startups in 2025, alongside 168 new strategic partnerships. Indian companies have not yet announced partnerships of a similar scale with major AI firms.

India's domestic pharmaceutical market is expected to expand from about $55 billion in 2025 to $120–130 billion by 2030, according to an ASSOCHAM outlook, and an EY-Parthenon and OPPI report projects it could reach $450 billion by 2047. Half of the world's leading life sciences companies have established Global Capability Centres in India, which are increasingly supporting strategic R&D. A Deloitte survey found 40% of Indian respondents reported significant or full AI adoption, versus a global average of 28%.

Industry groups are also pushing for stronger intellectual property infrastructure. India ranks among the top global pharmaceutical producers by volume, yet its share of patent filings and licensing revenues remains disproportionately small, according to an IP awareness session held by the Karnataka Drugs and Pharmaceutical Manufacturers Association and Altacit Global. The publication 'Karnataka on India's IP Map' documents the state's trajectory as an emerging hub of pharmaceutical innovation. India's CRDMO sector is also expanding, with a Boston Consulting Group and Innovative Pharmaceutical Services Organisation report projecting the market could reach $22–25 billion by 2035, and McKinsey estimating India could account for 8–10% of global CDMO outsourcing by 2033. The shift is driven by global supply chain realignment and the China Plus One strategy, with Indian partners increasingly embedded across the value chain.

India's pharmaceutical industry built globally competitive capabilities in APIs, formulations, generics, and biosimilars after liberalisation, and the next major pivot must be towards innovation, according to Satish Reddy, chairman of Dr Reddy's Laboratories. Dr Reddy's began its drug discovery programme around 1992 and raised about $48 million through a global depositary receipt issue on the Luxembourg Stock Exchange to fund it. The company secured its first 180-day exclusivity with fluoxetine 40 mg. Its Bachupally plant for the U.S. market began work around 1996, with the first commercial sale in 2001.