Active Pharmaceutical Ingredients (API) Market: Analyst Perspective

Posted On Jan, 03, 2017

Active Pharmaceutical Ingredients (API) are individual components or mixture of components that are used as a part of a finished pharmaceutical drug or medical product and are responsible for pharmacological activity of that drug. APIs are produced by processes such as chemical synthesis, biotechnological synthesis, and extraction from natural sources. 

Superior quality APIs are crucial for the production of efficient pharmaceutical drugs. APIs can be grouped into five segments, on the basis of type of synthesis, type of manufacturers, product type, applications, and regions.

Global API market, by type, 2015 (USD Billion)

                                                      Active Pharmaceutical Ingredients (API) Market

Advanced molecular technologies are paving a way for innovative APIs

Molecular techniques are implemented for manufacturing APIs for biotherapeutics such as monoclonal antibodies, recombinant proteins, and vaccines. Demand for these biological APIs is increasing owing to increased efficacy, sensitivity, and low side effects. 

Monoclonal antibodies and recombinant molecules can provide specific therapy and diagnosis by targeted immunosuppression. Similarly, vaccines produced by recombinant DNA technology have been used against diseases such as influenza, hepatitis A, and B. Erythropoietin, interferon, Tissue Plasminogen Activator (tPA), and insulin-like growth factor 1 are some of the commonly used recombinant proteins as therapeutics.

Rising trend of outsourcing APIs

APIs are manufactured either in-house or outsourced by other companies who are not able to manufacture APIs in bulk. It is practically not feasible to produce all the APIs required for drug production, hence, the big players in the industry opt for outsourcing.

Outsourcing APIs eliminates high manufacturing costs, infrastructure, and the need of expensive equipment. Currently, majority of the API manufacturers are located in Asia, especially in China and India, owing to the presence of required human capital, flexible regulatory framework, and increasing economic stability in these regions.

Patent expirations coupled with rising prevalence of chronic diseases will drive the growth of generic API segment

Expiration of patents of branded drug molecules is the key factor attributing to the lucrative growth of generic API drugs. Expiration of patents have a negative impact on the pharmaceutical companies, reducing their revenues tremendously. Hence, it has been generally observed that pharmaceutical companies prefer generic APIs over the innovative APIs. 

Oncology is one of the most important therapeutic application of APIs, owing to the rising incidence of cancer across the globe. Cancer treatment is cytotoxic in nature and causes immense harm to the normal cells in the body. Therefore, targeted therapy is gaining popularity as it aims only at cancerous cells. Minimum effect of the drug on noncancerous cells and effectiveness in treatment possessed by these anti-cancerous drugs are the factors contributing to the market growth. This can be credited with the rising demand of API in the future.

Asia Pacific- immense growth opportunity for generic drug industry

North America was identified as the largest market for APIs. This is primarily due to the established branded drug industry in the U.S. Moreover, growing R&D initiatives aid in availing the capital for new molecule development. 

On the other hand, Asia Pacific is estimated to showcase immense growth opportunities for the generic API market. Presence of established generic players, implementation of technological advancements in manufacturing of API and growing demand for outsourcing API are the key factors enhancing growth in this region.

Key market players

The key players of the market have a wide portfolio of APIs with specialized focus on chemical synthesis and fermentation of biotherapeutics. The notable players in this market include AbbVie, Inc.; Cipla, Inc.; Merck & Co., Inc.; Aurobindo Pharma, etc. Some of the strategies applied by the companies include mergers and acquisitions, collaborations, product launches, and regional expansions.

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