Globally, the active pharmaceutical ingredients (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.
The global API market, which was valued at US$119.7 billion in 2013, is likely to reach US$ 185.9 billion by 2020, expanding at a CAGR of 6.5 per cent during the forecast period from 2014 to 2020, according to a new market report published by Transparency Market Research.
According to the World Health Organization (WHO), in 2012, cancer was among the leading causes of morbidity and mortality worldwide, with approximately 14 million newly diagnosed cases and 8.2 million cancer-related deaths. Therefore, the oncology segment is expected to be fastest growing segment in the global API market. Moreover, most of the drugs in this segment contain High Potency Active Pharmaceutical Ingredients (HPAPIs) which itself is a rapidly growing segment in the global API market. The market growth of this segment will be particularly higher than other segments owing to loss of patent protection for blockbuster drugs such as Herceptin (Roche), Arimidex (AstraZeneca), Xeloda (Roche), Abraxane (Celgene), Temodar (Merck & Co.) and Vidaza (Celgene) between 2010 and 2014.
The market for formulated drugs based on highly potent active pharmaceutical ingredients (HPAPIs) is growing at a rapid pace, largely due to the development of highly targeted therapies based on antibody-drug conjugates, which can include cytotoxic small-molecule components. The manufacture of this expanding field of HPAPIs is challenging and requires specific know-how, facilities, equipment, and procedures designed to mitigate the risk associated with producing and handling potent compounds. Standards and technologies are continually changing, and HPAPI manufacturers must remain vigilant and prepared to adopt and implement the latest designs, equipment, training, and procedures to reduce the risks posed by HPAPIs.
The overall API market is expected to witness substantial growth during the forecast period from 2014 to 2020, wherein oncology and central nervous system drugs segments would play a vital role. These segments are expected to grow at the highest CAGR during the forecast period from 2014 to 2020. Cardiovascular drugs accounted for the largest market revenue share in 2013 due to the rising prevalence of cardiovascular diseases, sedentary lifestyle, and aging population. Bestselling products losing market exclusivity has been a common trend in all market segments, thus creating opportunities for generic products. This in turn increases the demand for APIs in particular therapeutics segments.
Currently, biological drugs are gaining importance in the treatment of chronic diseases such as cancer and diabetes. These drugs are costlier due to challenging set of manufacturing requirements and difficult replication as against chemical APIs. Advancements in the production technology have enabled production of biosimilars that are not exact copies of innovator drugs, but highly comparable in terms of safety and efficacy. Europe has been the front runner in approving biosimilars, and the WHO has also set guidelines on similar lines of those set by the European Union. Regulatory pathways in the biosimilars space in different nations are evolving and this implies a great market opportunity ahead for the biopharmaceutical companies. Approval of the first biosimilar in the U.S. for filgrastim (2015) indicates opening up of the highly regulated U.S. market, which would further push the overall API market growth.
The global market for APIs 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 end of 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 active pharmaceutical ingredient marke
Patent expiration of major drugs that increased generic drug sales, government initiatives, increasing aged population and regional penetration, local manufacturer expansion and high uptake of biologics are some of the factors that are driving the market growth. Whereas financial crisis, stringent regulatory policies, less investment in pharmaceutical industry and fragmented market are the factors that are hindering API market growth.
API companies will need to focus on manufacturing efficiencies and building partnerships with customers in order to succeed, according to a section of industry manufacturers across all markets of US, EU, Japan and the Asia-Pacific region.
Indian API companies like Aurobindo, Granules, Lupin, Divi Labs, Mankind Pharma, Shilpa Medicare, Hetero, Malladi, Dr. Reddy’s, Micro Labs, Bal Pharma, Biocon among others are realizing and exploiting the potential of the US and the European market with a slew of products.
The requirement for APIs is escalating noticeably. The pharma industry in India has considerable production prowess and is expected to play a major part in the international arena, said Anjan K Roy, managing director, RK Fine Chem.
In 2014-15, the export revenues that ensued from the pharmaceuticals is estimated at around US$12 billion and is seen to increase to around US$20 billion by 2020.
The big advantage for Indian API industry in the global arena is the cost- competitiveness. In India the expertise is high based on the chemical acumen of its scientific talent. With the contract manufacture and research services in India having taken off where companies like Anthem Biosciences and Syngene, a Biocon subsidiary and Jubilant in India as compared to the Western countries, noted Karnataka Drugs and Pharmaceutical Manufacturers Association.
“From a global perspective, the API capability of India cannot be ignored. We account for the highest number of USFDA facilities pegged at 171 and EMA approved units besides other global regulatory majors in Japan and Australia which enables it to take a big leap in terms of grabbing opportunity. Even if the country’s volume of production is lower compared to China, the global recognition on quality and variety of API products creates an opportunity to either partner with global players for marketing the APIs. It could also garner its revenues from being a preferred source of supply for global pharma big wigs,”noted GG Gurudatta, CEO, Estima Pharma.
Further the government’s 'Make in India' programme is also working to simplify existing policies, remove hurdles and regulatory clearances which would be seen to make Indian API industry a force to reckon with in the international arena. Currently large API production comes out of the US, EU, Japan and Australia besides Korea and Malaysia and Vietnam, noted Gurudatta.
The API industry would see a further boost in terms of developing a strong product pipeline with the arrival of poly pills. There are several Indian API players engaged in advanced research of the active ingredients used to produce a combined tablet for blood pressure and cardiovascular disease.
Further, there is also a big opportunity for Indian APIs to manufacture Angiotensin II receptor antagonists or sartans used in drugs for hypertension, diabetic nephropathy and congestive heart failure. Some of the APIs are osartan, candesartan, irbesartan, telmisartan, olmesartan, valsartan and eprosartan. India also has the expertise in dermatology and dental APIs. Therefore by 2020,the Indian API industry could compete with China head-on and be a preferred partner for global players in the space.
The industry is now in an enviable spot and is striking to corner the orders coming in from the patent expiry drugs valued at over $60 billion. The companies are also looking to garner a substantial share from the regulated markets of the US and EU which are facing increasing pricing pressures due to presence of low cost providers in developing markets, excess big pharma capacity, and backward integration by certain generic companies.
Beginning from 2013 , there are a slew of new regulations introduced : from the USFDA recent norms on Regulatory Classification of Pharmaceutical Co-Crystals to the EMA guidelines on exposure limits for production of varied medicinal products in shared facilities and the Central Drugs Standard Control Organisation (CDSCO) the guidance document for the issue of Written Confirmation (WC) certificate for active substances exported to the European Union (EU) for medicinal products for human use, in accordance with Article 46(2)(b) of EU Directives No. 2001/83/EC.
In fiscal 2013-14, the API sector constituted over Rs. 65,000 crore of the Rs. 130.000 crore Indian pharma industry. Some of the key players are Ranbaxy, Dr. Reddy’s, Granules, Hikal, Lupin, Cipla, Indoco Remedies, Glenmark Wockhardt, Lake Chemicals Pvt. Ltd., Shilpa Medicare, Torrent, Indoco Remedies, Orchid, Aurobindo Pharma, Strides Arcolab-Sequent ,Biocon, Aarti Industries, IndSwift Pharma, Micro Labs, Bal Pharma, RL Fine Chem, Apotex, Bairy Chemicals, Juggat Pharma and Resonance Labs.
API manufacturers are likely to benefit as market dynamics have undergone a major change. The patent expiry provides a significant opportunity for supply of APIs to manufacturers of generic drugs. There are also increased opportunities in outsourcing of bulk drugs by multinational pharmaceutical companies. These opportunities have led the Indian API industry to focus on core competencies and access to novel technologies, said the ICRA report.
“ The role of Indian API manufacturers in the global pharmaceutical supply chain is gradually evolving with increasing presence in synthesis and manufacture of late stage intermediates and APIs. Traditionally, innovators have frequently opted to perform final stages of API synthesis in-house or partner with specialised European suppliers while outsourcing early stage intermediates to Indian manufacturers. However, in recent times, the reputed track record of Indian companies in supplying quality products coupled with complex synthesis capabilities has enabled increasing participation in supply of late stage intermediates to innovator companies, ICRA report added.