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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
3
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 and Therapy Forecast
4
• 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
Agenda
Number of API Manufacturing Plants Inspected by US FDA: 2001 – 2007
Source: Newport Horizon Premium™
0
20
40
60
80
100
120
140
2001 2002 2003 2004 2005 2006 2007
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
India; 1270
USA; 698China; 359
Italy; 268
Germany; 226
Japan; 197
Switzerland; 189
Israel; 183
Spain; 117 England; 106
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
USA; 326
India; 312
Germany; 201
Italy; 138
China; 131
France; 113
Switzerland; 103
Japan; 77
England; 71Israel; 71
Source: Newport Horizon Premium™
COS Filings by API Manufacturers: 1998 – 2007
Source: Newport Horizon Premium™
Indian Landscape for API Manufacture
12
•Abundant amount of API manufactured for local market
•Abundant amount of API Exported; plenty imported
Availability of API: India
Source: Newport Horizon Premium™
14
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
– CyclosporineSource: Newport Horizon
15
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 high-quality 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
Indian Corporate Groups Pursuing Regulated API Markets
16
17
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)
– No Language Barrier
• Cons– Increased FDA inspections
could lead to unfavorable results
• Example: Ranbaxy
– cGMP standards not always met
Chinese Landscape for API Manufacture
18
•Abundant amount of API manufactured for local market
•Abundant amount of API Exported; some imported
Availability of API: China
0 200 400 600 800
Established
Less Established
Potential Future
Local
Source: Newport Horizon Premium™
20
Markets for API: China~400 Chinese Import Registrations filed since September 2003
• Companies with most CIRs
– Kyowa Hakko Kogyo
– Novartis (Sandoz, Lek)
– Ajinomoto
– DSM Fine Chemicals
– Pfizer
– Chong Kun Dang
– Ranbaxy
– Dr Reddys
– BASF
• Products with most CIRs
– Clavulanate Potassium
– Amoxicillin
– Clarithromycin
– Diltiazem Hcl
– Cysteine
– Pioglitazone
Japan26%
India13%
USA11%
Switzerland9%
South Korea
9%
Germany8%
Italy5%
Netherlands4%
UK4%
France4%
All Others7%
Source: Newport Horizon
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
21
IMPACT OF THE OLYMPICS
• Will intermediate manufacturing start moving to India? Europe? U.S.?
• Will API outsourcing into China slow down?
23
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
Chinese Corporate Groups Pursuing Regulated API Markets
24
25
Are there many opportunities to source API from China?
• Pros– Lower cost base (than
India)
– Improving IP and anti-counterfeiting environment
– Good at intermediate manufacturing
• Cons– Still lacking at meeting
strict GMP standards
– Cost of materials increasing
– Language barrier
– “Buyer Beware”• Heparin scare
Russian Landscape for API Manufacture
26
•Some API manufactured locally, but for local market
•Overwhelming majority of API imported INTO Russia
Availability of API: Russia
Source: Newport Horizon Premium™
Top API imported to Russia (2007)1. Cefazolin Sodium
2. Amoxicillin Trigitrate
3. Sorbitol
4. Metamizole Sodium
5. Aminosalicylic Acid
6. Ampicillin
7. Ascorbic Acid
8. Acetylcalicylic Acid
9. Paclitaxel
10. Ceftriaxone Sodium
28
Source: PharmExpert™
11. Paracetamol
12. Tolperizone Hcl
13. Vinpocetine
14. Doxorubicin Hcl
15. Cefotaxime Sodium
16. Mannitol
17. Cefotaxime
18. Chlorpromazine Hcl
19. Docetaxel Anhydrous
20. Choline Alfoscerate
29
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
Brazilian Landscape for API Manufacture
30
•Some API manufactured for local market
•Very little exported
•Overwhelming majority of API imported INTO Brazil
Availability of API: Brazil
Source: Newport Horizon Premium™
32
Are there many opportunities to sell API into Brazil
• Pros– Most of API is imported
– Low import taxes
– Dose companies becoming more quality minded
– Regulatory environment becoming tougher
– Dose exports into neighboring countries
– Opportunities in• High-quality hormones
• Controlled substances
• Cons– Currently most API imports
from India and China
– Still heavy focus on cost rather than quality
– Euro to Real
33
Are there many opportunities to source API from Brazil
• Pros– Universities and private
enterprise work together
– Recent push for new drug development
• Cons– Lack technical
documentation or expertise
– Lack of scale
– Lack of specialization
– Lack of export policy
– Can’t compete on cost
34
• 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?
Conclusion
35
Thank you!
David Harding
Newport API Intelligence Specialist
Thomson Reuters Scientific
215 Commercial Street
Portland, Maine 04101
USA
+ 1 (207) 871-9700 x27