Over View Of API In 2018 Across Globe With Substantive Mention
The Global Active Pharmaceutical Ingredient (API) Market has seen a steady growth in volume and value mirroring the growth drivers for the overall pharmaceutical industry. However clearly this year has seen a significant impact of supply disruptions from the conventional supplier base i.e China and India impacting either API availability or economics. The lack of supply or higher prices of inputs have meant the escalation in API prices with a spillover to the finished drug in some cases too.
China has certain inherent strengths in chemistry, technologies and infrastructure capabilities which they really leveraged to gain higher market shares, which made the customer base dependent on these sources of supply.
Solvent prices are well linked to crude oil trends wherever the basic constituent is a crude derivative. So on increase in crude oil prices in such cases also places pressure on solvent and indirectly API cost of manufacture.
Price increases of API happened due to,
1. Increase in the KSM (key starting material) prices which are building blocks for the API (active ingredient). This is being driven by the supply uncertainties emerging out of China which is where a lot of the KSM manufacture base has been located, the situation there as we hear is due to the focus on environment which is leading to closure or relocation of manufacturing units. Even in India (another key base for KSMs) there had been instances of units being impacted by pollution concerns, leading to supply issues and thus impact on product pricing- though clearly to a lesser extent than China.
2. As KSM manufacture starts to pick up outside China, the locations increasingly priced their products as per their own economics and this too impacts KSM pricing and spills over to API pricing as well.
3. Crude oil price trends / Depreciation of Rupee have also impacted the solvents market, which is also an important part of the cost composition when it comes to manufacture of API or intermediates.
The above quantitative factors apart, formulation companies focused on regulated markets are also closely weighing the compliance position of their supply chain partners i.e API and advanced intermediate manufacturers. Given that- companies with a good compliance track record are the port of first call and in a better position to pass on the pricing pressures from the downstream to their customer bases
From what we understand it is largely need to curb pollution (air, soil, water) and improve the overall environment in certain zones that has been the driver of actions in China. Historically China has been the source of manufacture for many basic chemicals, intermediates and APIs- they have over period of time gained high levels of market shares given cost competitiveness. This resulted in manufacturing of categories of intermediates, APIs moving away from EU and other parts of the world largely to Asia dominated by China. As a result these companies in other parts of the world started moving to other products areas or possibly curtailed operations—leading to a further concentration in global offtake from China Now, when China started to take measures to curb pollution and this began to impact certain zones/manufacturers—this had a domino effect given that probably these manufacturers were the ones with max volume supplying to market and their loss of production impacted price and supply across the value chain of pharma and chemical industry.
What are the important developments in Contract Pharma / CDMO partnerships in today’s pharma landscape?
We believe it is a solid platform to build connectivity across stakeholders in the industry – from API CDMO to FD CDMO and eventually the big pharma companies, which are driving innovation and making the investments in new drug development. Clearly, the following trends we believe will continue to remain strongly relevant in the CDMO market, in no particular order.
* Quality Environment and track record,
* Regulatory Support
* Supply reliability
* Innovation
* Cost
* Service levels for customer
Business outlook for 2019
For the overall industry, Increasing healthcare needs / awareness have resulted in healthcare expenses to grow. Among the other factors, rising numbers of chronic diseases such as cardiovascular diseases, obesity, diabetes and others have given a boost to the need for APIs of that therapy area in the market. Also the need for reduction in healthcare expenses in the West underpins increased generic penetration and offtake.
