After the global economic recession, there has been an increase in influence of active pharmaceutical ingredient (API) players from emerging economies such as India and China. The recession had restricted the growth of innovative sector in developed economies such as the US and Europe, as the innovative sector requires huge investments. This has helped fuel the growth of generics market in Asian countries such as India and China.
Tremendous cost of energy and labour in the European countries are the major reasons compelling the European manufacturers to shift their base to India and China. Italy, which was the leader in API market, is losing its share to India and China as they offer advantages such as availability of skilled labour, low-cost manufacturing, low environmental cost, huge incentives by the government, and relative laxity in the regulatory approvals of APIs. All these factors have helped these emerging countries to make their global presence felt in the API market.
China is a big producer of chemical APIs, capable of producing about 1,600 varieties of APIs. China ranks first worldwide in output of several bulk APIs including penicillins, vitamins and antipyretic analgesics, and holds a significant share of the featured APIs like statins, prils, sartans in the world. China produced 2.709 million tonnes of chemical APIs in 2013, according to the China Chemical Pharmaceutical Industry Report, 2013-2016.
China’s chemical drug preparation industry and API industry recorded revenue of 573.1 billion renminbi ($91.5 billion) and 382 billion renminbi respectively in 2013, the report adds.
Even as China is one of the world's biggest producers of APIs, China is a large market for foreign API manufacturers who want to sell their APIs there. There are about 1,500 domestic Chinese API manufacturers. Some have received internationally recognized good manufacturing practice (GMP) certifications and/or are registered with regulatory agencies such as the U.S. FDA.
The API market in Asia is worth $32.5 billion, and it is growing faster than any other API market in the world. From 2008 to 2012, Asia's share of the global API market rose from 24.2 to 28.3 percent. The Asian API market is growing at 8.5 per cent annually, and is likely to reach $54.9 billion by 2018.
China's API market is growing at an even faster pace than other Asian countries. In 2012, there were 1,500 API manufacturers in China. About 250 have registered their products with internationally recognized agencies like Japan's Pharmaceuticals and Medical Devices Agency (PMDA) and the US Food and Drug Administration (FDA).
More and more Chinese API manufacturers now have internationally recognized GMP certifications. However, many Chinese API production facilities still have serious quality problems. Investigations by independent audit firms have uncovered misrepresentation or fraud at hundreds of API manufacturing facilities in China. Product quality and safety are major concerns. Many locally manufactured APIs are made from unregulated bulk chemicals, some of which are not pharmaceutical grade.
As a result, the China Food and Drug Administration (CFDA) has passed a series of new laws for the registration of API facilities and the regulation of high-risk excipients. The CFDA further plans to set up a comprehensive Drug Master File (DMF) system for APIs within the next year or two.
An increasing number of Western API companies are setting up their own production facilities in China. In addition to setting up their own API manufacturing facilities in China, many Western pharmaceutical companies are also forming partnerships with Chinese API manufacturers.
In September 2012, Pfizer launched a $300 million joint venture with Chinese API manufacturer Zhejiang Hisun Pharmaceuticals. Under the terms of the agreement, Pfizer owns 49 per cent of the JV, which will develop, manufacture and commercialize branded generics for cardiovascular disease, infectious disease and oncology.
Western pharmaceutical companies with production facilities in China will find many sales opportunities for certified, high quality APIs. In contrast to most local production, manufacturing processes at foreign facilities are often GMP compliant. Although Chinese API manufacturers still have a price advantage, foreign API manufacturers will generally have a quality advantage when selling to Western and Chinese finished drug manufacturers.
Although China is the world’s leading chemical APIs supply region, the concentration of China’s chemical APIs industry is rather low due to numerous categories of APIs and limited overall strength of domestic enterprises, which occupy an important place only in single or a few categories of pharmaceuticals market. In addition, under the pressure of both environmental protection and industrial upgrading, many large APIs companies in the country are transforming into drug preparation companies through means such as R&D and acquisitions.
North China Pharmaceutical Group Corp (NCPC) and Northeast Pharmaceutical Group Co are major suppliers of antibiotic and VC APIs in China, with supply of VS reaching around 20,000 tons each. In 2013, the two companies’ total revenue from APIs and their revenue from drug preparation business reached 5.695 billion renminbi and 3.871 billion renminbi, respectively.
Zhejiang Medicine Co and Zhejiang NHU Co are the leading manufacturers of VE products around the globe, with raw materials (vital ingredients for the production of VE are limited raw materials: isophytol and trimethylhydroquinone) for VE being produced by themselves. However, the two companies' development is constrained due to a weak global demand for VE, of which Zhejiang Medicine reported revenue of 4.915 billion renminbi from pharmaceutical business (APIs+ preparation), down 6.3 per cent year on year.
Zhejiang Hisun Pharmaceutical Co and Zhejiang Huahai Pharmaceuticals Co are the key suppliers of featured APIs in China, of which the former specializes in antineoplastic and cardiovascular products, and the latter is a major global supplier of prils and sartans APIs. In 2013, the two companies’ total revenues from APIs and drug preparation business were 3.226 billion renminbi and 2.272 billion renminbi, rising by 19.5 per cent and 14.7 per cent from the previous year, respectively.
Zhejiang Xianju Pharmaceutical Co and Tianjin Tianyao Pharmaceuticals Co are the leading suppliers of hormone APIs, of which the former has been aggressively expanding into downstream drug preparation business. In the context of stricter environmental standards and rising costs of raw materials, developing the downstream will undoubtedly ensure competitiveness of the company. In 2013, Xianju Pharmaceutical posted total revenue of 2.233 billion renminbi from APIs and preparation business, up 16.2 per cent against the prior year. Also in 2013, the company acquired three EDQM certificates for its APIs.
Recently ScinoPharm Taiwan Ltd., specializing in the development and manufacture of active pharmaceutical ingredients, and TaiGen Biotechnology signed a manufacturing contract for the clinical supply of the API of Burixafor, a new chemical entity discovered and developed by TaiGen. The API will be manufactured in ScinoPharm's plant in Changshu, China.
Burixafor is a novel stem cell mobilizer that can efficiently mobilize bone marrow stem cells and tissue precursor cells to the peripheral blood.
It can be used in hematopoietic stem cell transplantation, chemotherapy sensitization and other ischemic diseases. The results of the ongoing Phase II clinical trial in the United States are very impressive. The drug has received a Clinical Trial Application from China's FDA for the initiation of a Phase II clinical trial in chemotherapy sensitization under the 1.1 category.
According to the pharmaceutical consultancy company JSB, with only stem cell transplant and chemotherapy sensitizer as the indicator, Burixafor's annual sales are estimated at US$1.1 billion.
ScinoPharm currently has accepted over 80 new drug API process research and development plans, of which five new drugs have been launched in the market. In addition, six products have entered Phase III clinical trials.
Overall the global market for active pharmaceutical ingredients has been growing steadily in recent years. However, the recent economic recession slowed down the growth of the industry as investments made by the major players went down significantly. Furthermore with a large number of blockbuster drugs going off patent by the year 2014, there is expected to be a major impact on the global API industry. Revenues of the API markets are likely to be affected as generic drugs take up the market.
The United States remains one of the biggest players in the market, followed closely by China and India. Synthetic pharmaceuticals also continue to dominate the API industry as biotech APIs move up slowly. Major companies such as Teva, Dr Reddy's and Boehringer Ingelheim continue to invest heavily in the API industry and remain the leading players in the global API market.