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 and
Therapy Forecast 3
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

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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

USA; 698
China; 359
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
Source: Newport Horizon Premium™
Germany; 201
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 • Cons
– Not self-sufficient in all – Abundance of locally
products manufactured API
• Fermentation – Many local facilities FDA
• Steroids approved
• Prostaglandins – Extensive importing from
• Polypeptides China
– Demand for Intermediates – Local API manufacturers
– Costs rising in China and enjoy cost advantage
India – Restrictive duty on API
– Opportunities in high- imports
quality API for export dose

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Indian Corporate Groups Pursuing
Regulated API Markets

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Are there many opportunities to source
API from India?
• Pros • Cons
– Many companies with – Increased FDA inspections
regulatory filings could lead to unfavorable
– Many companies that are results
• Example: Ranbaxy
FDA approved
– Lower cost of API – cGMP standards not
always met
– Rich talent pool (125,000
chemical engineers each
year alone)
– No Language Barrier

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 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 Source: Newport

600 800
Horizon Premium™
 Markets for API: China
~400 Chinese Import Registrations filed since
September 2003
France All Others • Companies with most CIRs
4% 7% – Kyowa Hakko Kogyo
Japan
UK 26% – Novartis (Sandoz, Lek)
4% – Ajinomoto
– DSM Fine Chemicals
– Pfizer
Netherlands
– Chong Kun Dang
4%
– Ranbaxy
– Dr Reddys
Italy – BASF
5%

• Products with most CIRs

– Clavulanate Potassium
Germany
– Amoxicillin
8% India
– Clarithromycin
13%
– Diltiazem Hcl
South
– Cysteine
Korea
9% Switzerland USA – Pioglitazone
9% 11%
Source: Newport Horizon

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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 • Cons
– Rising costs in China – China has manpower,
– Demand for difficult to intellect and raw materials
manufacture APIs to manufacture most
• “nibs”
products locally
– Heavy focus on cost
– Demand for high-quality
API from dedicated – Importing from low-cost
facilities countries
• Newer cephalosporins – High-value of Euro

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Chinese Corporate Groups Pursuing
Regulated API Markets

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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
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Russian Landscape for API Manufacture

•Some API manufactured locally, but for local market

•Overwhelming majority of API imported INTO Russia
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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™
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Are there many opportunities to sell API
into Russia?
• Pros • Cons
– Almost all API is imported – A lot of the API is coming
• Little local production from India, China
• Little local expertise outside – Many local dose
of supplements companies buy from
• Local products w/ offshore distributors
inconsistent quality • Suspect quality
– Large number of local dose – Red tape
companies

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Brazilian Landscape for API Manufacture

•Some API manufactured for local market

•Very little exported
•Overwhelming majority of API imported INTO Brazil
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Availability of API: Brazil

Source: Newport Horizon Premium™

Are there many opportunities to sell API
into Brazil
• Pros • Cons
– Most of API is imported – Currently most API imports
– Low import taxes from India and China
– Dose companies becoming – Still heavy focus on cost
more quality minded rather than quality
– Regulatory environment – Euro to Real
becoming tougher
– Dose exports into
neighboring countries
– Opportunities in
• High-quality hormones
• Controlled substances

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Are there many opportunities to source
API from Brazil
• Pros • Cons
– Universities and private – Lack technical
enterprise work together documentation or expertise
– Recent push for new drug
– Lack of scale
development
– 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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