HPAPI provides an attractive opportunity

The importance of active pharmaceutical ingredient manufacturers in the pharmaceutical industry is evolving in response to new demands from customers and growing pressures from global competitors. Marketers are looking beyond their usual group of suppliers. In order to tap this opportunity companies need to build up their capabilities as they will face numerous challenges in terms of barriers to entry, regulatory requirements, sizeable investments and expertise associated with APIs & HPAPIs development.

Understanding APIs & HPAPIs
APIs: Active Pharmaceutical Ingredients (APIs) or bulk drugs are the principal ingredients for finished pharmaceutical products.

HPAPIs: HPAPIs are  High Potency Active Pharmaceutical Ingredients. Highly effective at much smaller dosages and more efficient in the cure of some diseases, HPAPIs can be synthetic or biotech based on synthesis route. On the basis of availability of patent, the HPAPIs can be Generic or Branded. This is a niche & rapid growing segment of the API market.  

Regulated markets like US & Europe have high entry barriers in terms of IPR and regulatory requirements including facility approvals and Documentation. These markets offer better margins, stability & sustainable growth.

Less Regulated Markets offer low entry barriers in terms of regulatory requirements and IPRs eg countries in Latin America, South East Asia, Middle East, Africa etc.

API Market Global vs Indian API market
The global market for APIs was worth $ 91 billion  in 2009 of which Indian API had a share of 8.5 per cent  and valued at US $ 7.1 billion . The market had grown at rate of 7.14 per cent over 2008 and is projected to grow at a CAGR of 5.9 per cent over next five  years and will reach US $ 133.1 billion  by 2015. The Indian market has shown a healthy growth rate of 11.56 per cent and is projected to maintain the growth rate at 11per cent  over next  five years to reach a value of US $ 13.4 billion by 2015. The share of Indian market is expected to reach 11.2per cent of global market from the current share of 8.5 per cent.

North America and Europe are largest markets accounting for 60 per cent  of the global API market. Asia Pacific is the third largest and fastest growing market, whereas Japan is a mature market.  South and Central American markets have huge potential; the growth will be driven by Brazil. Mexico is a mature market and will witness slower growth.

Global API market drivers & restraints Market drivers

• Increasing influence of API participants from emerging markets
• Increasing emphasis on High-potency APIs
• Emerging technologies such as continuous processing & separation technology
• Continuing spate of patent expiries

Market restraints

• Decline in overall R&D productivity is affecting the pharmaceutical industry
• The economic recession is expected to affect profitability
• Fragmented nature of the market is expected to limit growth prospects
• Stringent regulatory requirements are likely to delay the approvals

Currently there are about 3000 API factories which produce 400+ types of APIs, meeting over 90 per cent of domestic demand. Indian API market with revenue of US $ 7.14 billion in 2009 ranks third after China and Italy in the world in API output. Exports contribute 51.4 per cent compared to 48.6 per cent contribution from domestic sales. Domestic market is projected to grow at 10 per cent over next five  years and reach $ 6.15 billion by 2015 whereas exports market is projected to grow at 12 per cent and reach $ 7.24 billion by 2015.

Leading API players in India
DRL, Ranbaxy, Biocon, Aurobindo, Orchid, Divi's Labs, Hetero Drugs, Dishman, Mylan, Surya are the top 10 players and hold around 35 per cent of the market share. Next 20 players account for about 21 per cent of the total market.

India advantage over their global counterparts:

• Indian companies can manufacture bulk drugs in-house at 40  to 50 per cent of ethical cost
• Large number of regulatory approved facilities by USFDA, TGA, EMEA, UK-MHRA and other regulatory agencies in Europe
• Well equipped infrastructure, meeting international standard design, development and manufacturing, R&D level batches to commercial batches along with automated testing equipments and systems
• Knowledgeable, competent technical staff capable of understanding the key factors of any regulated markets, handling regulatory inspections and client queries.
• Large, well-educated, English-speaking labour force.
• IT hub supportive to data management and computational system functions.

HPAPI market Global HPAPI market Facts
The Global HPAPI market was valued at US $ 7.5 billion in 2009 and has grown at a CAGR of 6.3 per cent over the last four  years. It is projected to grow at 8.4 per cent CAGR, 2.5 per cent higher CAGR over global API market and reach US $ 11.9 billion by 2015.

North America is a largest market with 45.6 per cent share followed by Europe with 35 per cent. Asia Pacific has 9.3 per cent share. Oncology (59 per cent) is the largest and fastest growing segment at 12.5 per cent. Hormones (19 per cent) are the second  largest segment followed by Glaucoma (seven per cent). Remaining segments put together account for 15 per cent share. The use of biotech HPAPIs is gradually increasing as the R&D work on biological molecules for many therapies is gaining pace. Synthetic HPAPIs have 85 per cent market share whereas biologics HPAPIs have 15 per cent. Since a large number of HPAPI compounds are under patent, 81 per cent of the HPAPIs are branded globally. However, generic HPAPIs market is growing at a fast rate.

Indian HPAPI market facts
Indian HPAPI formulations market was valued at Rs. 3655.7 crores in 2011. The HPAPI market is estimated at 10 per cent of HPAPI formulations market and is valued at Rs. 365 crores. The market is projected to grow at 14.9 per cent and reach Rs. 608 crores by 2015.

In a nutshell

• Indian APIs and HPAPIs industry is showing healthy growth over the global markets.
• Indian HPAPI market is projected to show a double digit growth over next five years.
• Growing pricing pressure on global pharma &  patent expiry will be a major growth driver
• Prostaglandins in HPAPIs, is a small segment in India but is the fastest growing one.
• Top 10 players are holding around 35 per cent market share indicating fragmentation and competition

Overall Indian environment is very conducive for HPAPI players from infrastructure, manpower and regulatory front. The fast penetration of novel APIs and the gradual expiry of their patents will create significant market opportunities for developers of APIs. The decision to enter APIs market should only be made on the basis of a clearly defined long-term strategy. Indian APIs players should have deep pockets in order to finance the unanticipated and should proactively shift their focus from independent R&D to strategic partnerships to save costs and  enrich their drug pipelines. Greater collaboration will be mutually beneficial to both western and Indian companies.

With the advantage over global counterparts, Indian players will surely make a mark in local as well as global HPAPIs markets!