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API Market Loses Out To Formulations
API Market Loses Out To Formulations
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Lupin Pharma Europe : Leading European Generic Developer View product list & make enquiries
www.genericlicensing.com/lupin Once a favoured destination for sourcing low-cost, good quality ingredients for pharmaceutical formulations, India has now turned to manufacturing of finished products in a big way. Wanting to move up the value chain, leading drug makers like Ranbaxy, Sun Pharma, Aurobindo Pharma, Lupin and others have made this shift in the last few years. API is the active chemical or ingredient used in the manufacturing of a dosage form of a drug. Currently, API accounts for around 10 per cent of Indias Rs 65,000-crore pharmaceutical market. The rest comprises formulations. In 2007, when the total Indian pharmaceutical market was estimated to be Rs 35,000 crore, APIs accounted for almost 15-20 per cent. In the last few years, China has emerged as a major API producer with its landed price in India being much less than its production cost here. Indian drug makers now want to move up the value chain, analysts say. With massive economies of scale their forte, China provides APIs at a cost 1520 per cent lower. However, this is also an opportunity for the Indian companies who have good chemistry skills required for the development of formulations. Those can now source cheaper raw material from China and themselves move up the value chain with finished products, said Praful Bohra, senior research analyst, Nirmal Bang. Many of Indias leading drug companies manufacturing both formulations and APIs have drastically shifted focus from API over the past few years. According to a Ranbaxy official, at present the API mix in its total revenues is as low as four to five per cent. Similarly, Lupin, which had around 40 per cent of its total sales coming from APIs in 2004-2005, now gets only 10 to 11 per cent from the segment. Sun Pharmas API share has also fallen to seven per cent of its total revenue from 10 per cent four to five years ago. Long Term BlueChip Shares
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However, these companies maintain the production of APIs in absolute term has Submit Your Resume 2-10 years Exp. Salary 3-15 not dropped, but has decreased as a percentage of their total mix as the Lakhs. To Apply, Register on formulation business grows faster.
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Another major reason for the shift in focus is formulations is a high-margin business compared to APIs, which is a mere commodity business. APIs is a simple commodity business with very low margins. It is mainly for starters who can develop scalable capacities. We have skills and have an eye on the bottom line. We also produce APIs that are mostly new ingredients and useful in our internal business. Our external sales is coming from value-added formulations, says Lupin CFO Ramesh Swaminathan. Moreover, with a large number of patent expiries in developed markets like the US and Europe, Indian companies, with skills to develop and manufacture lowcost generic drugs, see a much more lucrative opportunity there than utilising their capacities for manufacturing APIs. Outside the US, India has the largest number of manufacturing facilities approved by the US Food and Drugs Administration.
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Recently, Sandoz, the generic drug division of the Swiss drug maker, Novartis, closed its API development unit near Mumbai. While Novartis India ViceChairman & Managing Director Ranjit Shahani said the decision was part of a project portfolio optimisation within Sandoz Global Development, analysts suggest it could be due to cost-benefit analysis of the company.
- Sensex ends flat, doubts grow whether gains can sustain - Drug makers to sustain premium valuations: HSBC
This could be because the company aims to focus on drug development and R&D in formulations. In that case, it makes sense for the company to even get API from others. This will save them a lot of energy and resources. Plus, the focus will remain on formulations, an analyst said.
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Tags : PHARMA FOCUS SHIFTS | Ranbaxy | Sun Pharma | Aurobindo Pharma | Lupin | Praful Bohra |
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