Active Pharmaceutical Ingredients (API) sector APIs represent biologically-active substances and primary components for drug manufacturing. It is the founding block of strategic architecture in the pharmaceutical value chain. More importantly, APIs provide the therapeutic effect of medicine and therefore, are the central innovation.
More often, it is the critical intellectual property that drives the industry. API manufacturing is not only about expertise in the field of chemistry but also regulatory prowess to circumvent the maze of patents that inventors and others file to ring-fence and evergreen their invention.
Global Active Pharmaceutical Ingredients (API) Industry
Global Active Pharmaceutical Ingredients (API) Industry
Global: API production in the world is primarily centred in developing nations. This skew is due to their capability to scale production as per customisation needs and low-cost manufacturing. The rising volume of API production from Asia has led to issues related to quality assurance and compliance with standards. It has led to more stringent compliance requirements from regulatory bodies in the US, Japan, and the EU – increasing the challenge for API manufacturing.
The newest generation of APIs are very complex such as peptides, oligonucleotides, and sterile APIs, because of which the R&D and certification processes become longer and more complex. The global API market, estimated at US$177.5 Billion in 2020, is projected to reach a revised size of US$265.3 billion by 2026, growing at a CAGR of 6.7 % over the analysis period.
The API market is slated to gain from the following:
- Increasing focus on generic and branded drugs as a result of rising prevalence of non-communicable and chronic medical conditions due to lifestyle changes and rapid urbanisation.
- The transition away from conventional manufacturing techniques, rising investment in drug discovery, and strong adherence to product quality.
- Rising adoption of biologics in disease management, increasing regulatory approvals, patent expiration of major drugs, growing trend of outsourcing and an increase in the geriatric population.
- The COVID-19 pandemic and the resulting disruptions in supply chain are driving various governments to boycott sourcing of APIs from China – which will expectedly result in capacity augmentation.
Active Pharmaceutical Ingredients (API) Industry in India
Active Pharmaceutical Ingredients (API) Industry in India.
India: API is a crucial part of the Indian pharma industry, contributing to around 35% of the market. It made considerable
progress from the 1980s when the pharma industry was heavily reliant on API exports from Europe. As costs increased in the Western World, India’s reliance on China for its APIs grew with each passing year.
According to an analysis done by the consultant PwC, as of 2020, 50% of India’s critical API requirements were met via imports which primarily originated from China. Understanding the risk of the pharmaceutical sector, the government has sharpened its focus on augmenting this space through favourable policies.
As a result, India’s API space is now a sought-after investment destination for global bulge-bracket investors and private equity managers, consequent of the pandemic reshaping the sector’s fortunes and boosting valuations. The API sector has seen a threefold increase in investments in 2021 compared with a year ago.
Additionally, India’s Union cabinet has cleared two production linked incentives worth US $4bn to promote domestic manufacturing of APIs and other essential Key Starting Materials resulting in total incremental sales of INR 2.94 tn and exports of INR 1.96 tn between 2021 and 2026. This is expected to bolster API production in India towards an Atmanirbhar Bharat.
From 2016-2020, the Indian API market grew at a CAGR of 9% and is expected to expand and grow at a CAGR of 9.6%* till 2026, on the back of increased domestic demand and an increased focus on newer geographies.
