Active pharmaceutical ingredients made in India are set to make a big dent in the global drug business, thanks to the flourishing generic industry around the world. India's API is happening sector again, after what it appeared to be a lull for several years.

Twenty leading players in the in the sector has recorded an impressive 29% growth in the quarter ended March 31, 2006, according to a study by Cygnus Research, Hyderabad. APIs have also made a good show on the export front as well with an 8% growth compared to last year, demonstrating its potential as a sustainable business model.

Currently Indian API firms manufacture more than 400 different APIs and are among the top five API producers of the world. It caters to around 10,000 formulations meeting more than 90 % of the total API requirement of the domestic industry.

India's APIs have hardly left any location untouched in the world, though the regulated markets in the major 20 countries remain pillars contributing 60% of the total exports.

It is amazing to learn how Indian APIs find a firm foothold for itself even as China throws open a serious challenge producing almost entire range of APIs and intermediates that too at far lower costs.

Generic majors everywhere look for APIs that can count on two aspects-quality and low cost. It is exactly here APIs from India aim to take on the world.

The impeccable quality standards maintained by the Indian firms are illustrated through the number of manufacturing facilities certified by the world's leading regulatory authorities. Besides the largest US FDA approvals outside the US, India has 19 facilities recognized by TGA, Australia; 45 plants by MCA, South Africa and three certified by EDQM (Europe).

Also, Indian companies like Biocon, Bharat Biotech, Biological Evans, Serum Institute and Shantha Biotech have world-class facilities for biopharmaceutical contract manufacturing.

As mentioned, cost is the major concern compelling many firms in the highly regulated market to outsource to locations that supply cheaper alternatives. Here, Indian firms counter the Chinese challenge through developing cost-effective solutions without compromising quality.

``We believe in creating cost-effective technologies through continuous process improvement while maintaining strict quality control. And we pass on whatever the benefits in terms of cost to our customers,'' says Y Sudheer, vice president, marketing Neuland Laboratories.

This Hyderbad-based mid-cap API player has already penetrated the US and EU markets and established a trusted supplier of low cost, high quality products to the leading generic players.

Certainly, the global generic industry that thrives on the off-patent drugs, propel the API demands. And the soon-to-go-off-patent molecules give a boost to the sector through repeated assurance of promising line-up of a vast basket of products. While proving a boon, the increasing competition in the generic front is proving to be a bane for the APIs producers, as well. Increased competition and the resultant erosion of cost realizations is causing a serious strain on the API profit margins, say industry experts.

``Margins are getting deteriorated day after day. Only way to make business sustainable is through volumes. So, we have reached a point where we need to scale up production and diversify into more products,'' aver a senior executive with a south-based API firm.

There is no second opinion among the players, large or small, on scale-up of operations. However, the growth model adopted by various players in the segment is quite different. We have a number of API producers mostly from the mid cap category who bet on specific molecules. Virchow, Matrix, Neuland, Hetero, Shasun, Divi's are a few examples.

``These player are strong in a certain API. And they desire to excel as the global leader in the specific category and not to wander away on other molecules at least for some time,'' explains Shiraz Bugwadia of Avendus Advisors, Mumbai.

This strategy has proven rewarding too, just like other with more products, more volumes, he adds.

Regardless of the trajectory or strategy they choose, the made-in-India-APIs are increasingly gaining acceptance in quality, as well as in cost, across the globe. Despite rising cost pressures and competition heat, the sector invariably charts new avenues of growth.

The recent spurt of API production and export levels are ample instances for the resilience of Indian API industry that can brave every odd as a sustainable growth engines of the pharma industry, in the future.