The API Industry is entering a new growth phase. From new regulations to patent expiry and Para IV focus, the API industry is experiencing unprecedented growth due to the escalation in market dynamics of competition and consolidation. API companies will need to focus on manufacturing efficiencies and building partnerships with customers in order to succeed, says Harsha Chigurupati, Executive Director, Granules India in an email interaction with Nandita Vijay. Excerpts:
How do you think the developing countries including India are gearing up for the new regulations?
The new regulations will increase the workload for companies but we believe it will allow quality-conscious suppliers to distinguish themselves. Companies that have prioritized quality and made it part of their corporate culture will have no problem complying with the new regulations.
How do you see the Indian API landscape catapulting to the next phase of growth? What according to you are the current trends in the API space, globally and in India?
The API Industry is entering a new growth phase. For the past several years, Indian API manufacturers have focused on Para IV filings and trying to be the first to market with a generic copy .However, the benefits of the patent cliff have been realized and Indian companies will need to adjust their strategies in order to prosper.
API companies will need to focus on manufacturing efficiencies and building partnerships with customers in order to succeed. In the past, companies could jump from product to product as they went off-patent but since there are so few drugs in the pipeline; manufacturers will need to maximize profits with their existing products. We believe this will be accomplished through operational excellence programmes that focus on improving yields. Since there will be a bigger focus on manufacturing, we will not see manufacturers adding more products to their portfolios. In order to gain the efficiencies and to maximize profits, they will focus on select products.
Now that India is behind China and beaten Italy in the API production, what do you think needs to be done to overtake China in this space?
India has overtaken Italy in API manufacturing because Indian companies offer high-quality products along with strong customer support at a cost-competitive price. Instead of focusing on being a larger API hub than China, Indian companies should focus on profitability and sustainability. While there are excellent Chinese companies manufacturing, a majority of them focus on the non and semi-regulated markets where pricing is the most important criteria.
If Indian companies try to compete with Chinese companies for market share, then companies will face margin pressure and will have more spot business. Instead of competing with Chinese companies, Indian companies need to work on differentiators. Indian pharma has grown due to its focus on quality-conscious customers. These customers focus on a variety of factors in addition to price and are better partners to grow with. By focusing on these customers, Indian companies can focus their effort on delivering more innovative products which will ultimately ensure sustainable sales. Companies can also focus on forward integrating to finished dosages which will let them avoid price wars with their Chinese counterparts.
The government has still not considered the reduction of excise duty of 12 per cent to six percent. How much is this impacting the company in the current phase of the rising costs?
While this has an impact, there are many things the government can do to help Indian API manufacturers. Granules believes the government should provide tax relief for R&D work done outside the company. The current tax structure penalizes companies by only giving relief to in-house activities. If the government extended this to third-party partnerships, Indian companies could work with more experts which will give them an advantage as they grow R&D capabilities.
Could you give us an overview of Granules in the API space?
Granules is a focused API manufacturer that specializes in large-volume manufacturing. We produce APIs such as Metformin, Paracetamol, Ibuprofen and Guaifenesin. We are among the largest manufacturers in the world for the regulated markets and use many of our APIs for captive consumption in our Pharmaceutical Formulation Intermediates (PFIs) and Finished Dosages. We primarily focus on the North American and European markets but also cater to quality-conscious customers in more than 50 other countries.