The Indian Active Pharmaceutical Ingredients and intermediates (APIs) companies are well set to overcome competition and establish strong presence in the global API market worth US$ 110 billion. The investment in research & development (R&D), expansion of capacities, cost affordability and easy availability of talent pool will play a major role in the positive development of Indian API segment. Further, the expiration of patent and low manufacturing cost will attract more and more multinational companies towards Indian API players. Despite stiff competition from China, Indian players will move forward with quality products.
Over the last few years, the activities in the international pharma segment remained volatile and challenging on accounting of lower success from R&D activities. This lead to stiff competition among innovator companies and generic players. Stringent regulatory norms and austerity measures to reduce healthcare cost in developed countries put additional burden on bottom line. Indian companies have put up better show and are able to give tough time to major international players and entered into new geographies and new therapies. The creation of an advanced biotechnology programme and the expansion of a truly global Novel Drug Discovery and Development pipeline have added another dimension to the new developments.
The expiration of patent is projected around US$ 14-16 billion by 2017 and several important markets are likely to increase the penetration of generic products to cut down healthcare expenses. This will generate additional opportunities for Indian API players.
Successful filing of DMF
The Indian pharmaceutical companies have filed 257 Drug Master File (DMF) with USFDA during the first nine months of 2013 and likely to maintain the trend with investment in research and development.. Indian pharmaceutical companies filed 417 DMFs with the US FDA during the year 2012 as against 404 DMFs in the previous year. The DMF filings during the year 2010 and 2009 were at 311 and 271 respectively. This shows that the API segment is spreading its presence in market with higher filings.
Lupin, the fourth largest pharmaceutical company with consolidated net sales of Rs 9,450 crore plus during 2012-13, has filed highest number 15 DMFs with US FDA during the nine months ended September 2013, followed by Aurobindo Pharma and Emcure Pharmaceuticals 12 DMFs each. Sun Pharmaceutical Industries also filed 10 DMFs.
The Indian APIs manufacturers have improved there capabilities through continuous process innovations and their international subsidiaries and CRAMS. These companies are providing comprehensive CRAMS offerings, technology development and collaborative research with pharmaceutical industry.
R&D focus
To overcome competition, Indian players are investing huge amounts in R&D during the last five years. Expenditure on R&D by 30 leading Indian pharmaceutical companies have gone up significantly by 19.7 per cent during the year ended March 2013 over the previous year. With higher spending on R&D they are set to tap the upcoming opportunities from loss of patent exclusivity in the coming years.
The R&D expenditure, on standalone basis, of Pharmabiz 30 pharmaceutical companies increased to Rs 5,360 crore during 2012-13 from Rs 4,478 crore in the previous year. This worked out to 7.8 per cent of their standalone net sales during 2012-13 as compared to 7.2 per cent in the previous year. The consolidated R&D expenditure, including domestic and foreign subsidiaries, is much higher than standalone R&D expenditure.
Lupin's consolidated R&D expenditure reached at Rs 770 crore (Standalone R&D expenditure is not available). Dr Reddy's Laboratories remained highest standalone spender on R&D activities at Rs 690 crore during 2012-13 and was followed by Cadila Healthcare (Rs 493 crore), Ranbaxy Laboratories (Rs 449 crore) and Cipla (Rs 425 crore). Out of 30 companies, 16 companies registered R&D expenditure of above Rs 100 crore during 2012-13.
Current performance
Though the API segment is passing through difficult phase due to currency fluctuations, inflation, price erosion in the key international markets and increase in input costs, The the increased captive consumption of APIs due to substantial growth in the international formulations business is likely to push demand for quality products. The overcapacity for bulk products is adversely impacting the margins of API players. Several players reduced focus on APIs and shifted to other profitable business of formulations during last few years.
Several players have improved there API segment performance during the quarter or half year ended September 2013. Lupin's API sales contributed 11 per cent to its second quarter ended September 2013 and moved up by 20 per cent to Rs 286 crore from Rs 239 crore in the corresponding period of last year. Its revenue expenditure on R&D for the first half ended September 2013 stood at 8.2 per cent of net sales at Rs 413 crore as compared to Rs 272 crore in the similar half of last year.
Ipca Laboratories has registered APIs sales growth of 21.1 per cent to Rs 408 crore during the first half ended September 2013 from Rs 337 crore in the similar period of last year. Its API export went up to Rs 322 crore from Rs 267 crore. Dr Reddy's Laboratories received a minor setback in pharmaceutical services and active ingredients business on the back of lower number of 'launch molecules' to its customers during the quarter ended September 2013 and its sales declined by 19 per cent to 640 crore. It filed eight DMFs globally and its cumulative number of DMF filings reached at 590. Its R&D expenditure increased to Rs 300 crore.
Glenmark Pharmaceuticals is selling its API products to more than 80 countries including the US, various countries in the EU, South America and India. Its revenue from sale of API to regulated and semi-regulated markets globally declined marginally to Rs 101 crore during the September quarter from Rs 111 crore in the same quarter of last year. Recently, it appointed Philip Andrew Gioia as President North America and global API business.
For the first half ended September 2013, Aurobindo's consolidated net sales moved up by 34.3 per cent to Rs.3,597 crore from Rs.2,678 crore in the similar period of last year. Its net profit went up sharply to Rs.253.55 crore from Rs.93.44 crore, a growth of over 171 per cent. Its formulation sales went up 49.5 per cent to Rs.2,329 crore from Rs.1,558 crore and that of APIs increased by 12.9 per cent to Rs.1,365 crore from Rs.1,209 crore. The formulation sales in US jumped by 80 per cent to Rs.1,356 crore and that in Europe & RoW increased by 33.1 per cent to Rs.548 crore from Rs.412 crore in the similar first half of last year.
Following major players are dominating Indian API segment with huge investment in R&D and expansion. These players have improved overall performance and set to grab future API opportunities in the international market.
Dr. Reddy’s Laboratories is the second-largest generic API provider in the world, covering all major regions: the USA, Europe, Latin America and Asia. It offer more than 150 products, including in niches such as oncology and hormone therapy. The company is one of the highest drug master filers worldwide with cumulative filings of 590 upto September 2013. Its global sales and marketing team services customers in over 75 countries and its API business also provides its generics business the advantages of cost-competitiveness and faster access to markets stemming from vertical integration.
Lupin has registered APIs revenues of Rs 950 crore during the year ended March 2013 and built up strong relationships with major international players with providing high quality products. Its captive consumption of APIs worked out to 90 per cent. Its principal-to-principal business leverages its rich expertise in API research and formulation development. It remained the global leader in therapeutic segments such as cephalosporins, CVS and the anti-TB space. It maintained its leadership in anti-TB segment with products like rifampicin, pyrazinamide and ethambutol.
The company also consolidated its position as one of the leading suppliers of anti-TB products to the WHO's global drug facility. Seven of the company's finished formulations and three anti-TB APIs were pre-qualified by the WHO during FY 2013. It institutional anti-TB business grew by 40 per cent during 2012-13. It filed 15 US DMFs taking the cumulative total to 138 DMF filings as at the end of March 2013. It also filed 5 EDMFs, 3 COSs, 2 Australia DMFs and 1 Japan DMF during the year. It has developed specialised and complex APIs like prostaglandins and new class of anti-retro virals meant for the US, EU, Japan and other advanced markets.
It has entered in to new markets like Latin America, Russia and other East European countries. Similarly, it commercialised two APIs in Japan during 2012-13 and planning to file close to ten DMFs for the market in the next two years. With huge investment in R&D and product approval of Goa plant from Japanese authorities, Lupin expects to file 15 new products in second largest pharmaceutical Japanese market.
Glenmark Pharmaceutical has registered a strong growth of 28.5 per cent in API segment during the year ended March 2013 to Rs 397.64 crore from Rs 309.44 crore in the previous year. Its Ankleshwar API facility received approval from the regulatory agency of Japan (PMDA) and European cGMP certification. The company filed seven new USDMFs including several first DMFs targeting FTF and three DMFs to support Europe market. The business continued its leadership position for Amiodarone, Lercanidipine, Adapalene, Perindopril, combined with launches of new products during the year viz., Atovaquone in Canada through partner and Levocetirizine in Europe through partner.
The company is now setting up a new state-of-the-art manufacturing facility at Dahej, Gujarat. This facility will cater to the manufacturing of intermediates and APIs for regulated markets. The facility is likely to go on stream in current year.
Divi's Laboratories is engaged in manufacture of generic APIs, custom synthesis of active ingredients for its clients. Over 77 per cent of sales constitute supplies to regulated markets in Europe and USA and its total exports constituted around 90 per cent of gross sales during 2012-13. The company is now investing Rs 350 crore to set up a new Unit called DSN SEZ Unit at its Pharma SEZ at Visakhapatnam.
Divi's Laboratories is engaged in manufacture of generic APIs, custom synthesis of active ingredients for innovator companies. It continues to focus on selective product portfolio with a focus on export markets with the domain of its capabilities. Over 77 per cent of sales constitute supplies to regulated markets in Europe and USA. Divi's has a total of 37 drug master files (DMFs) with US FDA and 204 EDMFs and 16 Certificates of Suitability (CoS) with various European Union authorities. It has filed a total number of eight patents for generic products.
The company's product portfolio comprises of two broad segments viz., generic APIs & nutraceutical and custom synthesis of APIs intermediates as well as speciality ingredients for innovator pharma giants. Divi's has added nine products to its product portfolio of which three are generic APIs and intermediates and six are custom synthesis APIs and intermediates.
Ipca Laboratories pushed its APIs sales by 21 per cent to Rs 667 crore for the year ended March 2013 , of which exports worked out to Rs 522 crore as compared to Rs 406 crore in the previous year. Its API export to Europe increased to Rs 193 crore from Rs 152 crore that in America moved up to Rs 137 crore from Rs 111 crore in the previous year. Nearly 78 per cent of the APIs and intermediates business is from exports. The company is exporting APIs to over 94 countries across the globe.
Ipca has obtained certificate of suitability for 41 APIs from European Directorate for quality medicines as compared to 40 APIs in the previous year. As at the end of March 2013, the DMF filing reached at 48. The company expanded its Ratlam manufacturing facility to cater growing demand for APIs. Similarly, it is setting up a new green field R&D and API manufacturing facility at village Ranu, in District Vadodara.
Sun Pharmaceutical's API division sales increased by 23 per cent to Rs 755 crore from Rs 615 crore in the 2011-12 and contribution of API sales worked out to seven per cent of its total sales. Its API business continues to be largely used for vertical integration on key products. External sales of API, account for a fraction of the total API production. It filed 239 DMFs/CEPs and received 168 approval during 2012-13. It has a total eight API facilities, of which six are US FDA approved.
Its domestic manufacturing facilities have dedicated units for peptides, anti-cancer, steroids and sex hormones. Its API facility in Hungary has the capability to manufacture controlled substances. Sun Pharma is marketing its API products across more than 56 countries. Products are sold to large generic companies or innovator companies. Currently it is manufacturing 170 APIs. Most of these are used in-house to manufacturing formulations. It is scaling up over 25 API processes annually. At its Vadodara R&D centre, it develops complex APIs and dosage forms for India, the US, Europe and ROW markets. Its R&D expenditure touched Rs 704 crore during 2012-13.
Cipla has invested Rs 274 crore to set up an API R&D facility at Patalganga, Maharashtra and commenced commercial production of anti-cancer APIs at Bommasandra, Bengaluru and anti-ulcerant APIs at Kurkumbh in Maharashtra. It also completed the project on APIs of antiretrovirals at Kurkumbh.
Dishman Pharmaceuticals is engaged in developing intermediates/ APIs based to its customer's requirements and the company's 64 per cent of consolidated turnover is generated from CRAMS segment. Bulk drugs, intermediates and speciality chemicals contributed around 36 per cent of consolidated turnover in 2012-13.
The company has activated a new vertical viz. generic API during the year 2012-13. The company has developed 25 to 30 potential good generic APIS for which the company has enough data available to immediately file the DMFs in the regulated market. It has appointed a separate marketing team and has also filed about five DMFs in the regulated markets against specific firm orders/arrangement entered into with the pharma companies. The company expects to generate an annual turnover of Rs 250 crore over next three to four years.
Jubilant Life Sciences has a clear focus on production of APIs for cardiovascular system and central nervous system therapeutic areas besides few anti-infective and anti-ulcerants. The company is exporting its products to North America, South America, Europe, Japan, Korea, Commonwealth of Independent States (CIS) countries, the Middle East and Australia. The company has 27 APIs available through commercial scale plants, of which carbamazepine, oxcarbazepine, citalopram, lamotrigine, donepezil, pinaverium bromide, meclizine and azithromycin monohydrate are the most significant.
It filed seven DMFs in the US, four each in Europe and Canada, two each in Australia and Singapore, three in Russia and one in Taiwan during 2012-13. The company has filed total 65 DMFs in US during 2012-13, 29 CoS in Europe, 33 filings in Canada, six filings in Japan and 102 filings in ROW upto the end of March 2013. Its revenue from life science ingredients increased by 19 per cent to Rs 2,503 crore with contribution of over 48 per cent to the overall income from operations.
The sales of generic APIs improved 13.3 per cent to Rs 508.1 crore from Rs 448.6 crore in the 2012-13.
Ranbaxy Laboratories, a subsidiary of Daiichi Sankyo of Japan, is supplying APIs and intermediaries to leading innovator and generic pharmaceutical companies in more than 63 countries. The company is focusing more on profitable molecules, customers and countries. The company clocked API sales of Rs 731 crore in 2012 with a shift in margin profile from 2011 to 2012.
The company filed 76 DMFs comprising 33 APIs across various countries and 40 patents in India. It is focusing more on developing commercially viable, non-infringing, patentable and novel process know-how for APIs. It is offering greater emphasis on the development of difficult-to-make APIs and novel polymorphic forms of certain APIs to create greater value addition.
Besides these major players, there are several players like Aarti Drugs, Ajanta Pharma, Torrent Pharma, Cadila Healthcare, Parabolic Drugs, Shasun Pharmaceuticals, Hikal etc are set to tap future opportunities in domestic as well as global markets.