Biotech APIs buck downward trend of synthetics

7-Mar-2016

The global API market is expected to continue to grow over the next five years, but much of the rise will be in biotech-based ingredients rather than traditional synthetic chemicals. Companies with expanding economies that are spending more on improving their healthcare systems will increase their shares of the market, notably India, China and Central and South America.

The API market is feeling the squeeze as many traditional drugs go off patent and generics take over. Competition in the market remains strong as more developing nations build facilities but can they guarantee quality and supplies?

The total revenue generated by the global active pharmaceutical ingredients (API) market was estimated to be US$108.6bn in 2011. According to Global Business International (GBI) Research, this figure is expected to increase at a compound annual growth rate (CAGR) of 7.4% between 2011 and 2017, and will generate expected revenues of $167.1bn in 2017.

However, a breakdown of where this growth will come from reveals that revenues from biotech-based ingredients will outstrip those of the more traditional synthetic chemical APIs, says GBI. Synthetic API revenues contributed 82.7% of revenues for the global API market in 2011, dominating the market. However, a significant number of expected patent expiries mean that the synthetic pharmaceutical market is seeing revenues increase slowly, while competition from the biopharmaceutical market continues to grow. Revenues from the biotech API market have shown growth at a CAGR of 17.4% during 2005–2011, and this success is expected to continue in the future, reducing the dominance of the synthetic API market.

Looking at a geographical breakdown, the API market in the Americas was worth the lion’s share of $46bn in 2011, with North America accounting for over 88% of this total. It is, however, expected to grow at a modest CAGR of 4.4%.

Europe is the third largest regional market for APIs by revenue in the world, accounting for around 24.2% of the global API market revenue of $108.6bn in 2011. Total revenue generated by the European API market was $26.3bn in 2011 and is expected to grow at a CAGR of 6.5% to reach $38.3bn by 2017. This will be supported by healthy demand from generic and biotech API sectors. Germany and France were the market leaders, with Italy and the UK coming in third and fourth.

Most Eastern European countries possess good business infrastructure and offer excellent business opportunities for API manufacturing, which is expected to drive the API CMO market in the region during the forecast period. According to GBI, the overall CMO market in Eastern and Central Europe countries is expected to witness a healthy CAGR of 14.1% to 2017. This increase in CMO activity is expected to capture most of the API manufacturing activity towards 2017.

The South and Central America region has one of the fastest growing API markets in the world, with a growing demand for generic and biologic medications

Thanks to rapidly expanding economies and improvements in healthcare services, South and Central America (SCA) are also set to take a more substantial chunk in the future. The API market in SCA was valued at $5.4bn in 2011 and is expected to climb at a CAGR of nearly 13% to reach $11.1bn in 2017.

According to GBI, the SCA region has one of the fastest growing API markets in the world, with a growing demand for generic and biologic medications. Mexico is currently the largest market in the region, but thanks to an ageing population and a strengthening healthcare system, Brazil is expected to overtake Mexico by 2017.

SCA countries are becoming increasingly open to global drug producers and supporting the manufacture of medications at home through investments. Many governments in the region are aware of the huge potential of generics and are providing financial backing as well as promoting pharmaceutical growth through the employment of various programmes and schemes.

This region is also home to an expanding ageing population and is witnessing an increase in lifestyle diseases such as diabetes and obesity – further driving the demand for healthcare and pharmaceutical treatments.

Figure 1: Global Active Pharmaceutical Ingredients Market, Revenue Forecasts ($m), 2005–2017.<br>Source: GBI Research Pharmaceuticals Market Database on 25.7.2012

Figure 1: Global Active Pharmaceutical Ingredients Market, Revenue Forecasts ($m), 2005–2017.
Source: GBI Research Pharmaceuticals Market Database on 25.7.2012


Figure 2: Global API Market, Revenue Growth Share by Regions ($m), 2011–2017.<br>Source: GBI Research Pharmaceuticals Market Database on 26.7.2012

Figure 2: Global API Market, Revenue Growth Share by Regions ($m), 2011–2017.
Source: GBI Research Pharmaceuticals Market Database on 26.7.2012

It is harder to get accurate, confirmed figures from the Asian region but growth has been high in the past. According to the Chinese commercial concern LookChem, from 2002 to 2008, the average Chinese annual growth rate of APIs remained above 24%; in 2009, the total import and export value of APIs reached $24.271bn, with an increase of 2.89% year-on-year, which accounts for 49.42% of the total import and export value of Chinese pharmaceuticals. However, in the first three quarters in 2012, China’s foreign trade increased by only 1–2%, indicating more difficult trading ahead. Competition in the global pharmaceutical API industry is growing and with the slow global economy, the European and American markets have seen only limited increases. That coupled with slowing demand in the international pharmaceutical market means there is risk of a downturn in the export of Chinese APIs, says LookChem (part of Hangzhou Weiku Information & Technology).

In addition, the impact of recent product adulterations and the introduction of the Falsified Medicines Directive, means that many Western companies are looking for stricter control and guarantees for their raw material supply chain.

Even so, LookChem still believes that the position of Chinese APIs will not be replaced in the global market in the short term. It says that in China, there are more than 7,100 registered pharmaceutical production enterprises, with 4,000 more companies having obtained GMP certificates. There are also 1,600 more API manufacturers that have registered with the SFDA. The number of API products that have obtained GMP certificates has now exceeded 3,700.

LookChem estimates China’s share of the global API market at over 18%, while its generic APIs market share exceeds 35%.

India also looks set to boost its market. At CPhI India 2012, Rajeev Kher, additional secretary, ministry of commerce and industry made a strategic announcement that the drug controller general of India (DCGI) will act as the competent authority to issue quality certificates to the EU on falsified medicines. ‘Indian pharma exports are headed for a very healthy growth in generic and API exports and efforts are on to improve the foothold of traditional medicine exports,’ he said.

Indian pharma exports are headed for a very healthy growth in generic and API exports and efforts are on to improve the foothold of traditional medicine exports

Pharma exports by the end of 2014–15 are expected to reach $25bn. The Indian pharma industry is also making up ground in the field of biopharmaceuticals.

While some industries would be more than happy with such growth predictions, competition in the market and the risks involved in developing products that are more rapidly open to generic competion means the API sector is getting a lot more difficult.

Despite this, the report – The Global Use of Medicines: Outlook through 2016 – by the IMS Institute predicts that annual global spending on medicines will rise from $956bn in 2011 to nearly $1.2 trillion in 2016, representing a CAGR of 3–6%. Growth in annual global spending is forecast to more than double by 2016 to as much as $70bn, up from $30bn in 2012, driven by volume increases in the ‘pharmerging’ markets, which means growth in APIs will continue in the near future.

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