Favorable Outlook for Generic APIs - Pharmaceutical Technology

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Favorable Outlook for Generic APIs
A spate of drugs are scheduled to come off patent, offering vast potential and competition.

Pharmaceutical Technology

Demand for generic APIs surges

The growth in generics drugs is reflected in the growth for APIs to the generic drug industry. In 2005, generic APIs accounted for 43.5% (or $13.5 billion) of the total merchant API market (including both APIs and advanced intermediates), according to the Chemical Pharmaceutical Generic Association (CPA, Milan, Italy). Branded or innovative APIs accounted for 56.5% or $17.5 billion (1).

Strategies of generic drug manufacturers in active pharmaceutical ingredients and formulation.
Global demand for APIs as a whole (both branded or innovative and generic APIs) is expected to increase at an average annual rate of 8.2% over the next several years, according to CPA. The merchant market for APIs is expected to reach $46 billion by 2010, with demand for generic APIs growing faster than demand for APIs for branded or innovative drugs. Demand for generic APIs is projected to increase at an annual average rate of 10.9% to reach $22.7 billion by 2010. In contrast, demand for APIs for branded or innovative drugs is forecast to increase at an annual average rate of 5.9% to reach $23.3 billion by 2010. This differential in growth rates will shift the balance of API power to near parity by 2010 with generic APIs at 49.4% and branded or innovative APIs at 50.6%, according to CPA (1).

In the US, demand for merchant generic APIs was $3.2 billion in 2005. By 2010, this level is projected to increase to $4.7 billion, according to CPA (1).

Generic formulators position in APIs

The combination of strong growth for generics, combined with increased competition, is leading several major generic drug makers to consolidate and to establish low-cost API production sites offshore.

Mylan Laboratories. In the most recent move, Mylan Laboratories (Canonsburg, PA) announced in May 2007 that it was acquiring the generics business of Merck KGaA (Darmstadt, Germany) for EUR 4.9 billion ($6.7 billion), in a deal that is expected to close in the second half of 2007. The combined company will have 2006 pro forma sales of approximately $4.2 billion. This move follows Mylan's 2007 purchase of a controlling interest in Matrix Laboratories (Hyderabad, India). With the acquisition of Matrix, Mylan is able to backward integrate its finished-dosage form capabilities with Matrix's API manufacturing and drug-development activities.

Matrix is the world's second largest API player based on number of drug master files, according to the company, with over 165 APIs in the market or under development based on 2006 estimates. Matrix has 10 API and pharmaceutical intermediate manufacturing facilities and one finished-dosage manufacturing facility, of which seven are approved by the US Food and Drug Administration (Rockville, MD), according to Mylan.

Actavis Actavis. (Hafnarfjordur, Iceland) considered, but withdrew, from the race to acquire Merck KGaA's generic business. At press time, Actavis was considering an offer to take the firm private by Novator (Reykjavik, Iceland), an investment firm led by Bjorgolfur Thor Bjorgolfsson, chairman of Actavis.

During 2006–2007, Actavis made several moves to augment its generics business, including strengthening its offshore manufacturing capabilities. It acquired Abrika Pharmaceuticals Inc. (Fort Lauderdale, FL), a specialty generic pharmaceuticals company; expanded its presence in Russia with the purchase of a majority stake in the pharmaceutical manufacturer ZiO Zdorovje (Podolsk, Russia); acquired a manufacturing plant from Grandix Pharmaceuticals, a manufacturing and marketing company based in Chennai, India; and acquired the API division of Sanmar Specialty Chemical in Chennai. Actavis also opened a new API development unit in India, which allows the company to backward integrate its business. Actavis hopes to develop 10–15 products per year at its new API development center.


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