Identifying And Exploiting API Opportunities
Across Emerging Markets
API SOURCING STRATEGIES 2008
BERLIN, GERMANY
DAVID HARDING
NOVEMBER 24, 2008
API INTELLIGENCE AT THOMSON
REUTERS
• Newport Strategies founded in 1990 and acquired
by Thomson Scientific in 2004
• Industry pioneer in research and analysis of the
impact of global API development on competition in
generic products
– Strategic competitive intelligence
– Tools for API sourcing and business development
• Newport Horizon and Newport Vision used by over
200 companies across the globe
Backdrop
• Pharma Market: Growth Expectations for 2009
– “Will hold steady at 2008 levels”*
– US: 1-2%, EU5: 3-4%
– Japan: 4-5%
– BRIC: 14-15%
• Brand Pharma
– Innovation slump
– Blockbusters losing patent protection
• Generics
– Increasing competition, especially from India
– Low cost API coming from India, China
– Margin pressures in U.S., UK, Germany
– Drop in small molecule opportunities post-2011
*2009 IMS Global Pharmaceutical
3
and Therapy Forecast
Agenda
• A quick look at some figures in regulated markets
• Reviewing the changing dynamics of the API
market
• Benchmarking API opportunities from and into
emerging generic markets
• Pros and Cons of working in emerging markets
4
Number of API Manufacturing Plants Inspected by
US FDA: 2001 – 2007
140
120
100
80
60
40
20
0
2001
2002
2003
2004
2005
2006
2007
Source: Newport Horizon Premium™
Number of API Manufacturing Plants Inspected by
US FDA: 2001 – 2007
Source: Newport Horizon Premium™
Availability of High-Quality API: A Global
perspective
Source: Newport Horizon Premium™
Number of US DMFs filed by country: 1998 – 2007
Spain; 117
England; 106
Israel; 183
Switzerland; 189
India; 1270
Japan; 197
Germany; 226
Italy; 268
China; 359
USA; 698
Source: Newport Horizon Premium™
US DMF Filings by API Manufacturers: 1998 – 2007
Source: Newport Horizon Premium™
Number of European COS filed by country: 1998 –
2007
Israel; 71
England; 71
USA; 326
Japan; 77
Switzerland; 103
France; 113
India; 312
China; 131
Italy; 138
Germany; 201
Source: Newport Horizon Premium™
COS Filings by API Manufacturers: 1998 – 2007
Source: Newport Horizon Premium™
Indian Landscape for API Manufacture
•Abundant amount of API manufactured for local market
•Abundant amount of API Exported; plenty imported
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Availability of API: India
Source: Newport Horizon Premium™
Markets for API: India
~1300 Indian Import Registrations filed since
Feb 2003
• Companies with most IIRs
–
Schering-Plough
–
Teva
–
DSM
–
BASF
–
Sanofi-Aventis
–
Novartis (Sandoz, Lek)
–
Pfizer
–
Bayer
–
North China Pharmaceutical Group
– Kyowa Hakko Kogyo
• Products with most IIRs
–
Clavulanate Potassium
–
Erythomycin Thiocyanate
–
Levonorgestrel
–
Vancomycin Hcl
–
Cyclosporine
Source: Newport Horizon
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Are there many opportunities to sell API
into India?
• Pros
– Not self-sufficient in all
products
• Fermentation
• Steroids
• Prostaglandins
• Polypeptides
– Demand for Intermediates
– Costs rising in China and
India
– Opportunities in highquality API for export dose
• Cons
– Abundance of locally
manufactured API
– Many local facilities FDA
approved
– Extensive importing from
China
– Local API manufacturers
enjoy cost advantage
– Restrictive duty on API
imports
15
No. of Corporate Groups
Indian Corporate Groups Pursuing
Regulated API Markets
150
100
80
56
50
18
23
17
29
0
Established
Less Established
Potential Future
Corporate Group API Rating
2004
2008 (as of October)
16
Are there many opportunities to source
API from India?
• Pros
– Many companies with
regulatory filings
– Many companies that are
FDA approved
– Lower cost of API
– Rich talent pool (125,000
chemical engineers each
year alone)
• Cons
– Increased FDA inspections
could lead to unfavorable
results
• Example: Ranbaxy
– cGMP standards not
always met
– No Language Barrier
17
Chinese Landscape for API Manufacture
•Abundant amount of API manufactured for local market
•Abundant amount of API Exported; some imported
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Availability of API: China
Local
Potential Future
Less Established
Established
0
200
400
600
800
Source: Newport Horizon Premium™
Markets for API: China
~400 Chinese Import Registrations filed since
September 2003
France
4%
UK
4%
• Companies with most CIRs
All Others
7%
Japan
26%
Netherlands
4%
Italy
5%
–
Kyowa Hakko Kogyo
–
Novartis (Sandoz, Lek)
–
Ajinomoto
–
DSM Fine Chemicals
–
Pfizer
–
Chong Kun Dang
–
Ranbaxy
–
Dr Reddys
–
BASF
• Products with most CIRs
Germany
8%
India
13%
South
Korea
9% Switzerland
9%
USA
11%
Source: Newport Horizon
–
Clavulanate Potassium
–
Amoxicillin
–
Clarithromycin
–
Diltiazem Hcl
–
Cysteine
–
Pioglitazone
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Changing Dynamics of API Market:
China
• The days of cheaper API prices could come to an
end
Effects of the Olympic games
+ Implementation of more stringent EHS regulations
+ Waste water treatment standards
+ Increasing cost of labor, inflation and energy
= Higher API prices
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IMPACT OF THE OLYMPICS
• Will intermediate manufacturing start moving to
India? Europe? U.S.?
• Will API outsourcing into China slow down?
Are there many opportunities to sell API
into China?
• Pros
– Rising costs in China
– Demand for difficult to
manufacture APIs
• “nibs”
– Demand for high-quality
API from dedicated
facilities
• Newer cephalosporins
• Cons
– China has manpower,
intellect and raw materials
to manufacture most
products locally
– Heavy focus on cost
– Importing from low-cost
countries
– High-value of Euro
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No. of Corporate Groups
Chinese Corporate Groups Pursuing
Regulated API Markets
144
150
100
50
8
11
9
44
26
0
Established
Less Established
Potential Future
Corporate Group API Rating
2004
2008 (as of October)
24
Are there many opportunities to source
API from China?
• Pros
– Lower cost base (than
India)
– Improving IP and anticounterfeiting environment
– Good at intermediate
manufacturing
• Cons
– Still lacking at meeting
strict GMP standards
– Cost of materials
increasing
– Language barrier
– “Buyer Beware”
• Heparin scare
25
Russian Landscape for API Manufacture
•Some API manufactured locally, but for local market
•Overwhelming majority of API imported INTO Russia
26
Availability of API: Russia
Source: Newport Horizon Premium™
Top API imported to Russia (2007)
1.
Cefazolin Sodium
11. Paracetamol
2.
Amoxicillin Trigitrate
12. Tolperizone Hcl
3.
Sorbitol
13. Vinpocetine
4.
Metamizole Sodium
14. Doxorubicin Hcl
5.
Aminosalicylic Acid
15. Cefotaxime Sodium
6.
Ampicillin
16. Mannitol
7.
Ascorbic Acid
17. Cefotaxime
8.
Acetylcalicylic Acid
18. Chlorpromazine Hcl
9.
Paclitaxel
19. Docetaxel Anhydrous
10. Ceftriaxone Sodium
20. Choline Alfoscerate
Source: PharmExpert™
28
Are there many opportunities to sell API
into Russia?
• Pros
– Almost all API is imported
• Little local production
• Little local expertise outside
of supplements
• Local products w/
inconsistent quality
– Large number of local dose
companies
• Cons
– A lot of the API is coming
from India, China
– Many local dose
companies buy from
offshore distributors
• Suspect quality
– Red tape
29
Brazilian Landscape for API Manufacture
•Some API manufactured for local market
•Very little exported
•Overwhelming majority of API imported INTO Brazil
30
Availability of API: Brazil
Source: Newport Horizon Premium™
Are there many opportunities to sell API
into Brazil
• Pros
– Most of API is imported
• Cons
– Low import taxes
– Currently most API imports
from India and China
– Dose companies becoming
more quality minded
– Still heavy focus on cost
rather than quality
– Regulatory environment
becoming tougher
– Euro to Real
– Dose exports into
neighboring countries
– Opportunities in
• High-quality hormones
• Controlled substances
32
Are there many opportunities to source
API from Brazil
• Pros
• Cons
– Universities and private
enterprise work together
– Lack technical
documentation or expertise
– Recent push for new drug
development
– Lack of scale
– Lack of specialization
– Lack of export policy
– Can’t compete on cost
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Conclusion
• Opportunities exist for sourcing API from China and
India
• Opportunities exist for selling API into China, India
and Brazil
• Knowledge of API manufacturer is key
– Are they really manufacturing this API?
– Are they able to supply regulated markets with API?
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Thank you!
David Harding
Newport API Intelligence Specialist
Thomson Reuters Scientific
215 Commercial Street
Portland, Maine 04101
USA
+ 1 (207) 871-9700 x27
david.harding@thomsonreuters.com
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