The global active pharmaceutical ingredients (APIs ) market is projected to grow by around 7.3 per cent to an estimated market value of $139.2 billion by 2014 according to a report. Going forward an overall growth rate of around 7.3 per cent is projected for the global APIs market, which is higher than the growth rate expected in the overall drug market. The upcoming patent cliff is resulting in a surge in sales for generic APIs, which should comfortably outpace growth for innovator APIs over the next five years, the report says

While in 2008, China was the largest API-producing country in the world,by 2010, India is predicted to be the second-largest market, growing from 6.5 per cent of the global API market to around 10.5 per cent by 2010, the report add.

For many years China had been one of the main hubs for sourcing APIs and pharma intermediates for global drug companies . However, the fast growth of this Chinese industry experienced significant growth slowdown in the last one year or so.

However owing to the current financial crisis, achieving as much cost reduction as possible has become critical to all pharma and biotech companies as well as generic drug makers the world over. These factors, coupled with low cost labour and cheap raw materials still attract many of the global companies to China.

“The API market is a multibillion dollar one, although it is only a small part of the pharmaceuticals market as a whole,” says a spokesperson at the chemical major BASF. Growth in the API market will be different for each API, he adds.

The increase in generics will provide opportunities for manufacturers of generic APIs, but will also reduce the demand for innovative APIs, not only because of the older innovative agents coming off patent, but because of the decline in income available to invest in development of new innovative agents and the reduction in innovation that has been apparent for a number of years.

This is demonstrated by the sales figures. In 2008, sales of third-party generic APIs were around $17 billion, rising to an estimated $32.5 billion in 2014, says a Global Insights report. This compares with $19 billion, rising to only $21.2 billion, for third-party innovative APIs.

“Due to rising regulatory hurdles and bioavailability challenges, new API launches from originators have been stagnant in the recent years, although many disease areas need drug innovation with new modes of actions,” he says.

The innovative sector of the synthetic API market in Asia Pacific is set to witness significant slowdown due to the economic recession. Globally, countries including the US, Japan, and Australia are increasing their focus on the generic sector as opposed to the innovative sector to cut down the additional expenses incurred as part of healthcare expenditure.

Increasing usage of generic drugs, which are cheaper by 40-50 per cent of the cost of innovative drugs enable governments to reduce their healthcare expenditure significantly. This trend will result in the slow growth of innovative sector in the API market. Japan, the leading producer of innovative APIs in Asia Pacific, is also set to increase its generic production which will considerably reduce the growth of its innovative sector pulling down the overall growth of the innovative APIs in Asia Pacific. The innovative sector will grow at a CAGR close to 12 per cent from 2008 to 2020, says the report from Research and Market.

Though API producers in Europe and the US have the advantages of offering high levels of regulatory compliance and having advanced technological capabilities, the major disadvantage is higher costs. API producers from the Asia Pacific region are gaining similar advantages by acquiring facilities in Europe and the USA.

Though India and China have been the lower-cost locations, due to the the increasing labour costs, the costs in these markets are now rising. To remain competitive , API manufacturers are establishing manufacturing bases or setting up partnerships in alternative lower-cost locations, such as Eastern Europe and Latin America.

Many API companies choose to remain in Western Europe and the United States in order to remain close to customers. These companies promise a better level of customer service in a similar time zone, as well as high levels of regulatory compliance. API producers outside the region are aware of this as an advantage, and many have acquired facilities in Europe and the United States.

There is a move to improve efficiency through the use of continuous processing technologies such as simulated-moving bed chromatography (SMB). Other changes include the use of chemistry-related process technologies, such as hydrogenation and chiral chemistry.

Rather than just relying on being the lowest-cost source of APIs, some companies, including those in India and China, are providing “value-added” services, such as the production of highly potent APIs (HPAPIs), radio-labelled APIs, and antibody-drug conjugates (ADCs). At the same time certain other sectors of the pharmaceuticals market are growing more quickly. Forexample, the biotechnology segment is forecast to reach around 23 per cent of the pharmaceutical market by 2014, which could drive an increase in the production of biogenerics or biosimilars.

Though biologic drugs are high-priced but have greater efficacy and safety in certain therapeutic areas, such as oncology, the market for biogeneric biotechnology-based APIs is growing faster than innovative biotechnology-based APIs. This growth rate is set to accelerate as increasing numbers of biotechnology drugs are launched on the market. However, because of the costs involved in the development and production of biotechnology-based APIs, only a limited number of companies, particularly those already working in biologics is likely to move into this market.

According to an expert, biotechnology-based APIs will be attractive for companies, but the costs will be very high.

Biopharma companies are increasingly outsourcing their API development and production divisions. Though earlier large pharmaceutical companies were ‘one-stop shops’, discovering, developing, manufacturing, and marketing, now they are more likely to work as part of a network of partnerships and alliances, which is actually creating more opportunities for innovation,he opines.

According to another study, the growth in biotech APIs will increase rapidly in the coming years due to the increased focus on drugs based on biologicals. As the increasing competition in the overcrowded API market in Asia Pacific has forced the producers to look for other avenues that will enable revenue growth, the emerging biopharmaceuticals market offers promising growth to the producers due to several factors such as the growing need for biological drugs, assured protection of the drug because of the difficulty in copying the structure, and the increasing support from the governments to boost the growth of the biotechnology sector.