The manufacturers of active pharmaceutical ingredients (API) in India are currently focusing on delivery of value based, low cost products in a short period of time to its global customers to win the market of raw materials.
At present, India has a significant presence in the global API manufacturing sector and almost one out of two APIs is sourced in India, according to market leaders. The emerging trends in the global API market shows that the Indian API business, estimated around US $2 billion (around Rs 8000 crore) currently, is expected to mark high growth in the near future.
Proficiency in executing complicated manufacturing procedures along with an appetite to join innovation programmes are key factors that differs Indian API players from its counterparts in rest of the world, points out industry sources.
According to a Cygnus Business Consulting and Research study published in 2007, the Indian bulk drug market consists of around 1333 players. The study shows that the top ten out of 1333 players contribute 44 per cent of the market, while 1,323 companies account for the remaining 56 per cent. Nearly 70 per cent of the bulk drugs manufactured is exported to more than 50 countries. The top 10 companies, which handle the major chunk of bulk drugs, are targeting the regulated markets.
The top companies focusing on the regulated market are warming up to play the game in the big arena. Projections are that a large number of drugs would go off patent in the coming years and the manufacturing services offered by Indian companies to overseas clients would increase largely in near future.
In the next five years, more than 70 major drugs are expected to go off patent in markets like US and Europe. Patent expiries of blockbusters like antipsychotic Risperdal, antidepressant Effexor (venlafaxine), Fosamax (alendronate) under bisphosphonates, proton pump inhibitors Prevacid (lansoprazole) and Pantozol (Pantoprazole), Nexium (esomeprazole) and angiotensin II receptor antagonist Cozaar (losartan) would determine growth of generic companies in the regulated markets.
Apart, from 2007 to 2011, around 52 major drugs are expected to go off patent in US, an average of ten a year. During this period, generics are expected to generate US $100 million revenues in US and Europe.
The Indian companies are evidently leading in filing marketing rights for drugs in regulated markets. According to the latest available reports, as of December 31, 2006, the Indian companies account for around 21 per cent of the total drug master files (DMF) filed with US FDA. In other words, out of 5551 DMFs filed with US FDA in 2006, Indian companies have filed as many as 1171 DMFs.
The report also show that leading companies like Dr Reddy's, Aurobindo, Cipla and Matrix have more number of filings out of the 1171 DMFs. Dr. Reddy's topped the list with 103 DMFs (9 per cent of the total filings by India), while Aurobindo occupied the second place with 99 DMFs (8.5 per cent) followed by Cipla (87 DMFs - 7.4 per cent) and Matrix (71 DMFs - 6 per cent).
Due to the increasing pressure of generic companies, pharma manufacturers in West are turning to Asian countries for low cost manufacturing. As a result, many more overseas companies are likely to rely on countries like India and China for their API manufacturing in order to cut cost of production, according to a recent Frost and Sullivan study conducted in US.
Also, a study by the Chemical Pharmaceutical Generic Association, CPA, Italy in 2006, pointed out that the Indian API is expected to grab US $4.8 billion global merchant API market by 2010 from over US $2 billion at present. While the overall growth of merchant API business would range from US $31-$46 billion with an estimated CAGR of 8.2 per cent, the Indian sector is expected to grow at a CAGR of 19.3 per cent.
The merchant API market, which is expected to touch US $46 billion in 2010, with a 49 per cent (US $22 billion) weightage to generic segment, is another opportunity for the Indian API manufacturers.
The big companies are already completing their homework to grab this opportunity. The major API manufacturers are also partnering with overseas majors for new molecule research. These companies offer quality products on par with the standards in most regulated markets of US, EU and Japan.
While the pharma majors were on a spree to tap business from overseas companies over the past several years, some of the Indian companies have strategically developed expertise in manufacturing APIs and formulations to offer the entire range of products in a basket to them.
Many of these companies have excelled in production of certain bulk drugs to satisfy the needs of global pharma market. For instance, according to a WHO report (2007) on antiretroviral (ARV) bulk drug sources, the major suppliers of APIs in the world includes the Hyderabad-based Aurobindo Pharma Ltd, Matrix Laboratories and Hetero Laboratories with comprehensive product baskets. These companies offer abacavir, didanosine, efavirenz, indinavir, lamivudine, lopinavir, nelfinavir, nevirapine, ritonavir, saquinavir, stavudine, zidovudine in one basket for the global clients.
Apart, some of the Indian companies have also placed themselves as top producers of bulk drugs in certain therapeutic areas. The Mumbai-based Lupin Ltd is the largest manufacturer of anti-Tuberculosis (anti-TB) drugs and APIs, including ethambutol, rifampicin, rifamycin and pyrazinamide, while USV Limited is the largest generic manufacturer of anti-diabetic metformin worldwide. USV currently occupies 30 per cent of the total metformin market, which is growing at a rate of 8-10 per cent per annum.
Incorporated in 1981, the Hyderabad-based Virchow Laboratories Ltd is the largest producer of Sulfamethoxazole, used to treat a broad range of infections in the world. The company claims that it satisfies more than 80 per cent of the worldwide Sulfamethoxazole requirement. The Chennai-based Malladi Drugs and Pharmaceuticals Ltd is the largest manufacturer of Ephedrine and Pseudoephedrine salts, in cough and cold API segment.
While the large players keenly follow the regulated markets for their growth, the small and medium bulk drug companies would get more opportunity in domestic and other developing markets across the globe.
The small and mid cap bulk drug companies should follow the strategy of achieving expertise in niche segments and products, if they are looking for growth in business, pointed out an industrial source.
"The companies need to focus on its core strengths and build up value for their services through creating a good business model, developing relations and partnerships with customers, exploring positioning and promotion options, leveraging regulatory strength and by consolidating total operations," according to Smitesh Shah, CEO and managing director, Calyx Chemicals & Pharmaceuticals Ltd.
Shah believes that service providers need a paradigm shift in certain areas to win the fast growing bulk drug business. They are:
■ From providing technical orientation / skills to knowledge orientation
■ From task orientation to project orientation
■ From production / workshop mindset to research/ innovation mindset
■ From cost arbitrage to innovation arbitrage
The API manufacturers could enter into value added drug discovery programmes, including research and clinical services. "Firms need to start finding a way to strike a balance between making high investments in innovation to help drive future growth and generating short term revenue growths to reduce the high risk drug development market," said, Satish Reddy, managing director and COO, Dr Reddys Laboratories, in a recent convention at Mumbai.
In sum, the Indian API manufacturers are in a hurry to explore the opportunities that will get them ahead in global API business. As per the CPA report on API in 2006, by 2010, India would overtake the Italian API players to become the second largest bulk drug manufacturers in the world.