Interlink Insight

Vol. 10 Issue-1 Jan - Mar 2012

HPAPI - an attractive opportunity

Sachin Adawade

Indian API market has clocked up a healthy growth rate for the past few years which is expected to continue. This article maps the overview of Indian as well as Global API & HPAPI industry along with current and future scenario. Furthermore, it charts out growth arenas for Indian players, who don't want to miss out on HPAPI opportunities .

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he importance of active pharmaceutical ingredient manufacturers in the pharmaceutical industry is evolving in response to new demands from customers and growing pressures from global competitors. Marketers are looking beyond their usual group of suppliers. In order to tap this opportunity companies need to build up their capabilities as they will face numerous challenges in terms of barriers to entry, regulatory requirements, sizeable investments and expertise associated withAPIs & HPAPIs development. UnderstandingAPIs & HPAPIs ? APIs: Active Pharmaceutical Ingredients (APIs) or bulk drugs are the principal ingredients for finished pharmaceutical products. ? HPAPIs: HPAPIs are the High Potency Active Pharmaceutical Ingredients. Highly effective at much smaller dosages and more efficient in the cure of some diseases, HPAPIs can be synthetic or biotech based on synthesis route. On the basis of availability of patent, the HPAPIs can be Generic or Branded. This is a niche & rapid growing segment of the API market. Regulated Markets like US & Europe, have high entry barriers in terms of IPR and regulatory requirements including facility approvals and Documentation. These markets offer better margins, stability & sustainable growth. Less Regulated Markets offer low entry barriers in terms of regulatory requirements and IPRs. E.g. Countries in Latin America, South EastAsia, Middle East,Africa etc. API Market Global Vs IndianAPI Market The global market for APIs was worth $ 91bn in 2009 of which Indian API had a share of 8.5% Exhibit : 1
Actual
140.0

Interlink Insight

Vol. 10 Issue-1 Jan - Mar 2012

and valued at US $ 7.1bn. The Market had grown at rate of 7.14% over 2008 and is projected to grow at a CAGR of 5.9% over next 5 years and will reach US $ 133.1bn by 2015. The Indian market has shown a healthy growth rate of 11.56% and is projected to maintain the growth rate at 11% over next 5 years to reach a value of US $ 13.4 bn by 2015. The share of Indian market is expected to reach 11.2% of global market from the current share of 8.5%. (Exhibit :1) North America and Europe are largest markets accounting for 60% of the global API Market. Asia Pacific is the 3rd largest and fastest growing market, whereas Japan is a mature market. South and Central American markets have huge potential; the growth will be driven by Brazil. Mexico is a mature market and will witness slower growth. Global API Market Drivers & Restraints Market Drivers Increasing influence of API participants from Emerging markets Increasing emphasis on High-potencyAPIs Emerging technologies such as continuous processing & separation technology Continuing spate of patent expiries Market Restraints Decline in overall R&D productivity is affecting the pharmaceutical industry The economic recession is expected to affect profitability Fragmented nature of the market is expected to limit growth prospects Stringent regulatory requirements are likely to delay the approvals Currently there are about 3000 API factories which produce 400+ types of APIs, meeting over 90% of domestic demand. Indian API Market with revenue of US $ 7.14bn in 2009 ranks third after China and Italy in the world in
Projected
117.7 10.9 125.2 12.1 133.1 Indian 13.4 Mkt 11.2%

Rest of World Vs Indian API Market

Latest Estimate
104 8.8 110.6 9.8

120.0
100.0 80.0 60.0 40.0 20.0 0.0

84 6.4

91 7.1

8.5 %

97.9 8.0

77.6

83.9

89.9

95.2

100.8

106.8

113.1 Indian API Market

119.7

Figures in US $ Billion 2008 2009 2010 2011 2012 2013

Rest of the World API Market

2014

2015

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Interlink Insight

Vol. 10 Issue-1 Jan - Mar 2012

Exhibit : 2

Indian API Market

API Sales

API Sales
Domestic US $ 6.15 Bn

Exports, US $ 3.67 Bn

Domestic, Consolidated US $ 3.47 CAGR 11 % Bn

Exports US $ 7.24 Bn

2009
US $ 7.14 Billion

Figures in US $ Billion

US $ 13.4 Billion

2015

API output. Exports contribute 51.4% compared to 48.6% contribution from domestic sales. Domestic market is projected to grow at 10 % over next 5 years and reach $ 6.15Bn by 2015 whereas exports market is projected to grow at 12% and reach $ 7.24Bn by 2015. (Exhibit : 2) LeadingAPI Players in India DRL, Ranbaxy, Biocon, Aurobindo, Orchid, Divi's Labs, Hetero Drugs, Dishman, Mylan, Surya are the Top 10 players and hold around 35% of the market share. Next 20 players account for about 21% of the total market. India Advantage over their global counterparts: Indian companies can manufacture bulk drugs in-house at 40% to 50% of ethical cost Large number of regulatory approved facilities by USFDA, TGA, EMEA, UK-MHRA and other regulatory agencies in Europe Well equipped infrastructure, meeting international standard design, development and
14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 2006 2007 2008 2009 2010 5.9 6.3

manufacturing, R&D level batches to commercial batches along with automated testing equipments and systems Knowledgeable, competent technical staff capable of understanding the key factors of any regulated markets, handling regulatory inspections and client queries. Large, well-educated, English-speaking labour force. IT hub supportive to data management and computational system functions. HPAPI Market Global HPAPI Market Facts The Global HPAPI market was valued at US $ 7.5Bn in 2009 and has grown at a CAGR of 6.3% over last 4 years. It is projected to grow at 8.4% CAGR, 2.5% higher CAGR over global API market and reach US $ 11.9bn by 2015. (Exhibit : 3) North America is a largest market with 45.6% share followed by Europe with 35%. Asia Pacific has 9.3% share. Oncology (59%) is the

Exhibit : 3
Actual

Global HPAPI Market

Latest Estimate 8.0 8.6 9.4 Projected 10.2 11.0 11.9

6.7

7.5

Figures in US $ Billion

2011

2012

2013

2014

2015

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Interlink Insight

Vol. 10 Issue-1 Jan - Mar 2012

9000.0 8000.0 7000.0

Exhibit : 4
Actual
PROSTAGLANDINS ONCOLOGICALS STEROIDS HORMONES

Indian HPAPIs formulations Market

Projected

SEGMENTS
1817.4 PROSTAGLANDINS

CAGR
58.30%

6000.0
5000.0 4000.0 3000.0 2000.0 1000.0 0.0

Figures are in INR crore

289.4 165.8 73.0
154.3 218.0 1205.5 1118.4

1148.1 725.3 458.2

311.5 371.4 1940.4 2180.8 442.7

527.6

ONCOLOGICALS

19.20%

2451.0

STEROIDS

12.39%

82.9

258.2 1345.1

261.4 1536.1

1726.5

HORMONES
2125.9 2474.8 2880.9

16.41%

1082.0 994.6

1367.1

1568.8

1826.2

TOTAL

14.9 %

2008

2009

2010

2011

2012

2013

2014

2015

largest and fastest growing segment at 12.5%. Hormones (19%) are the 2nd largest segment followed by Glaucoma (7%). Remaining segments put together account for 15% share. The use of biotech HPAPIs is gradually increasing as the R&D work on biological molecules for many therapies is gaining pace. Synthetic HPAPIs have 85% market share whereas Biologic HPAPIs have 15%. Since a large number of HPAPI compounds are under patent, 81% of the HPAPIs are branded globally. However, Generic HPAPIs market is growing at a fast rate. Indian HPAPI Market Facts Indian HPAPI formulations market was valued at Rs. 3655.7 crores in 2011. The HPAPI market is estimated at 10% of HPAPI formulations market and is valued at Rs. 365 crores. The market is projected to grow at 14.9% and reach Rs. 608 crores by 2015.(Exhibit :4)
Indian APIs and HPAPIs industry is showing Indian HPAPI Market is projected to show a Growing pricing pressure on Global Pharma & Prostaglandins in HPAPIs, is a small segment

Top 10 players are holding around 35% market

share indicating fragmentation and competition

In a nutshell

Overall Indian Environment is very conducive for HPAPI players from infrastructure, manpower and regulatory front. The fast penetration of novel APIs and the gradual expiry of their patents will create significant market opportunities for developers of APIs. The decision to enter APIs market should only be made on the basis of a clearly defined longterm strategy. Indian APIs players should have deep pockets in order to finance the unanticipated, and should proactively shift their focus from independent R&D to strategic partnerships to save costs & enrich their drug pipelines. Greater collaboration will be mutually beneficial to both Western and Indian companies . With the advantage over global counterparts, Indian players will surely make a mark in local as well as global HPAPIs markets!
GBI Research Report on API Market Bulk Drug Manufacturers Association report CPA Report (Chemical Pharmaceutical Generic Association) ORG IMS 2010-11 Interlink Knowledge Cell insights

healthy growth over the global markets

References

double digit growth over next 5 years

patent expiry will be a major growth driver

in India but is the fastest growing one.

Mr. Sachin Adawade, with MBA in Pharma Marketing, is an Associate Consultant at Interlink. He has a depth of experience in practice areas of Brand strategy, Entry strategy, Growth strategy, Business Valuation and Market Research.

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