India has emerged as one of the leading quality manufacturers of Active Pharmaceutical Ingredients (API) and is poised to achieve significant growth in the coming years. API exports to regulated market is expected to rise to about 51 per cent by FY2019. The country has remained as a leader in Drug Master Files (DMFs) applications with the US FDA during last few years. The Indian pharma industry remains as a preferred pharmaceuticals manufacturing location due to main focus on generic, APIs, R&D activities and contract research. Besides highly regulated market, Indian companies have also spread wings in non-regulated markets by exploring business opportunities in high growth countries within Africa, Latin America and South East Asia regions.
The global API market was at US$121.4 billion in 2014 and is expected to grow at 6.4 per cent CAGR to reach US$ 198.8 billion by 2022. Asia Pacific is projected to be the fastest growing regional market. This fast growth is attributed to patent expirations of drugs, and favourable investments in research and development.
Considering the growth in formulations in international and domestic market, Indian companies are taking steps to strengthen their API manufacturing. Backward integration remains the key to meet the increasing demand for cost- effective APIs. In addition to captive consumption, Indian companies are also marketing APIs both in the domestic and international markets. The bottomline of many players was under pressure due to price controls and economic stress in major emerging markets.
The leading Indian API players are focusing on R&D programs on new products development related to lifestyle related diseases like diabetics, cardiovascular, anticoagulant, cholesterol etc. These products would be developed along with their DMFs in a time-horizon of two to four years. Several companies are focusing on R&D on API that are off patents and will be working on non-infringing route of synthesis.
The macroeconomic conditions and higher gestation period due to newer regulatory processes had caused a subdued growth in last couple of years. However several companies are in advance stage to get such approvals for the last years' expansions.
A few of the API manufacturers suffered major set backs on account of quality problems with US FDA. Sun Pharma, Dr Reddy's Laboratories (DRL), Lupin, Wockhardt, Alkem Laboratories, Jubilant Life Sciences, Ipca Laboratories, Smruthi Organics etc received warning letters from US FDA and their revenues in US declined significantly during the last couple of years. Further, this resulted in delayed launches of key products. According to a CRISIL study, since January 2010, there have been 65 regulatory actions – such as issuance of warning letters and import alerts -- on domestic pharmaceutical plants. Almost 46 per cent of these were high-intensity, meaning ‘import alerts’ were issued straightaway, without being preceded by a warning letter. Two out of three FDA actions initiated worldwide in 2015 were on Indian drug makers, and in 2016 so far, every third has been.
The performance of major API manufacturing companies was under pressure during 2015-16 due to economic problems, warning letters and competition. The stiff competition from low cost countries, particularly China and overcapacity issues put pressure on working. Further, declining R&D returns also impacted performance adversely. However, cost- effective products offered by Indian companies in the world market strengthened the overall working.
Sun Pharmaceutical is producing over 300 APIs across 14 locations and is adding around 20 APIs annually. Its revenue from APIs increased by 42 per cent to Rs 1,402 crore which worked out to five per cent of its total revenue in 2015-16. The company has set up 14 API manufacturing facilities. It received approval for 298 DMFs/CEP and it filed cumulative 422 DMF/CEP so far. Its Panoli and Ahmednagar API plants have US FDA and European approvals. These plants have dedicated units for peptides, anti-cancer, steroids and sex hormones among others. Its Australia, Hungary and the US facilities undertake controlled substances manufacturing.
Aurobindo Pharma has registered API sales growth of 6.6 per cent to Rs 2,884 crore during 2015-16 basically due to higher sales of high value non-betalactam APIs. The company added new block to manufacture oncology API to meet rising demand. A few APIs have been identified and development work is on-going. The company has set up five API facilities. The company has filed 2,727 DMFs so far including 205 with US FDA. Its 158 patent applications were pending with various authorities and 18 have been granted patents. Chemical manufacturing processes of four active ingredients were validated for in-time filing of NCE-1 ANDAs in the US.
DRL, the second largest Indian pharma major with net sales of Rs 15,400 crore plus, has suffered due to US FDA action against its three facilities. It had received US FDA warning letter for its two API sites at Srikakulam and Miryalguda during November 2015. Its revenues from Pharmaceutical Services and Active Ingredients (PSAI) declined by 12 per cent to Rs 2,240 crore. It had filed 50 DMFs globally during 2015-16, of which eight were in the US. The cumulative number of DMF filings reached 768 at the end of March 20116. DRL is taking corrective and remedial actions.
Lupin's global API business generated revenues worth Rs 1,207 crore and contributed around nine per cent to its total global revenues. It launched several first-to-market products in India in the anti-diabetic and gastro-intestinal therapy segments. The company is the only globally pre-qualified WHO entity for the manufacturer of APIs and formulation for TB products. The company is investing almost 12 per cent of its sales in R&D activities and has developed a strong product pipeline. It had filed 325 patent applications including 136 new inventions taking the cumulative total to 2,525 patents. Currently, its 1,700 scientists are engaged in R&d activities. Lupin filed 16 US DMF during 2015-16 and its cumulative total filed numbers have reached 172 DMFs.
Cipla has built a strong API manufacturing capacity of 1000 mt per annum. A substantial portion of the APIs manufactured by the company are consumed internally with a significant increase in consumption due to the new launches and front ending in several markets globally. Cipla APIs cover a broad spectrum of therapeutic categories with 23 DMFs filed in 2015-16 and over 40 APIs are at various stages of development and set to be launched in the year 2018. It's APIs cover a broad spectrum of therapeutic categories. The gastroentnerology and antiretroviral segments continue to be major contributors to the business. Its revenue from external customers registered a year-on-year growth of seven per cent. Nearly 70 per cent of its APIs sales were from regulated markets. It commissioned additional API manufacturing capacity of 50 mt specifically for hydrogenation process.
Glenmark Pharmaceuticals API division has entered into several tie-ups with leading global generic companies by supporting partnerships through advanced process chemistry skills and innovative intellectual property. Its API business contributed to nine per cent of the net revenues of Rs 7,634 crore in 2015-16. Its APIs sales improved marginally to Rs 668 crore from Rs 606 crore in the previous year. It five API manufacturing facilities are located in Ankleshwar, Dahej Aurangabad, Kurkumbh and Mohol. It had filed 65 DMFs for the US market and its cumulative total worked out to over 190 DMFs.
IPCA Laboratories' sales of APIs and intermediates business declined to Rs 647 crore during 2015-16 from Rs 692 crore in the previous year. Nearly 78 per cent of the APIs business is coming from exports and it is in the process of commercializing several new APIs for the global market. Its green field API manufacturing facility had commenced operations during 2015-16 in Gujarat. Ipca is focusing on new and innovative process and product development for the manufacture of APIs with non-infringing processes.
Unichem Laboratories' API plant at Pithampur underwent a successful US FDA inspection, with no adverse observations during 2015-16. Further, it received Establishment Inspection Reports (EIR) for its API plant at Roha, resulting in re-certification.
The company undertook capacity expansion at Pithampur and Goa facilities amounting to Rs 1,400 crore. Further, it is undertaking an expansion of the recently acquired facility at Kolhapur, Maharashtra. Unichem cumulatively filed 46 DMFs in the US, and 24 CEPs and 214 eCTDs across Europe.
Strides Shasun, the merged entity after Shasun Pharmaceuticals, is the key supplier of Ibuprofen along with ranitidine and gabapentin globally. Its pharmaceutical services and Active ingredients (PSAI) sales remained flat during 2015-16 to Rs 1,059 crore as against Rs 1,063 crore in the previous year. The merger of Shasun Pharma provided the supply chain security for the formulations business through in house API integration of key products across businesses and also building an integrated product portfolio with captive API supplies. It has strong API manufacturing capability with two US FDA manufacturing facilities in India and one in UK. The company is focusing on API segment for its captive consumption. The company has an API portfolio of 43 commercialised DMFs with another 23 under development. It had filed five DMFs during 2015-16. The company is divesting its CRAMS API business of Shasun Pharma Solutions Ltd, UK for a consideration of Pound 25 million, after certain approvals.
Granules India has set up six API manufacturing facilities and is exporting its products to more than 75 countries. The company has set up an API R&D centre in Hyderabad to focus on the development of complex products with limited competitors. To de-bottleneck capacity constraint at API level, it has increased the paracetamol capacity at its Bonthapally plant by 3,000 mt per annum. The company had acquired Auctus Pharma during 2014 and had widened its API product offerings. Further, it had ventured into the CRAMS business and created 50:50 joint venture Granules-OmniChem. Currently, this joint venture is producing API intermediates and after approvals it will produce APIs for brand leaders and innovator companies in the world. The company is engaged in manufacturing of ibuprofen, paracetamol, metformin, guaifenesin and methocarbamol. Granules has commenced the construction of 7,000 tpa Metformin and 2, 000 tpa guaifenesin API block at Bonthapally plant. Further, it is setting up a green field multi-purpose API facility in Vizag.
Aarti Drugs , a Rs 1,100 crore plus major API player, has clocked 94 per cent of its sales during the year 2015-16 from API and its allied intermediate segment. Around 94 per cent of the total sales of the standalone company came from API and its allied intermediate and approximately three per cent from the speciality chemicals. Within the API segment, antibiotic therapeutic category contributes to around 50 per cent, anti-diarhoeals around 20 per cent, anti-inflammatory around 12 per cent, followed by anti-fungal, antidiabetic and cardioprotectant therapeutic categories. On a consolidated basis, formulation sales is around 10per cent of the total revenues.
Besides these major companies, Jubilant Life Sciences, Piramal Enterprises, Torrent Pharma, Alkem Laboratories, Natco Pharma, Orchid Pharma, Nectar Lifesciences, Divi's Laboratories, Alembic Pharma, Cadila Healthcare etc are playing an important role in the Indian API segment with investment in R&D and filing of DMFs in the international market. Further, there are several small and medium- scale APIs manufacturers supporting the growth of Indian API segment despite stif