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The specialty excipients market in the United States, Western Europe, and China is valued at nearly $800 million. The authors discuss the opportunities and challenges in these markets by examining the product mix, supply base, and preferred production methods.
MARKETS FOR SPECIALTY EXCIPIENTS used in oral solid-dosage form (OSDF) pharmaceuticals in the United States, Western Europe, and China are very different with key challenges for suppliers. Each market has different drivers and is at a different point in its life cycle. The US and West European markets are mature, and China's market is emerging. As a result, the product mixes, supply bases, and preferred OSDF production methods in these regions differ. A common factor, however, is that these respective dynamics are creating opportunities for excipient suppliers.
Market dynamics vary by region
The 2005 market for specialty excipients used in OSDF pharmaceuticals in the United States, Western Europe, and China is nearly $800 million on a value basis and is roughly 225,000 metric tons on a volume basis. The consumption of specialty excipients used in OSDF pharmaceuticals in the United States and Western Europe are forecast to exhibit an average annual volume growth of 2.3% and 2.6%, respectively, based on growth estimates from 2005–2010. China, in comparison, is forecast to grow at an average annual volume rate of roughly 8%, well outpacing growth in the established US and Western European markets (see Figure 1) (1).
Figure 1: Specialty excipient consumption growth in the United States, Western Europe, and China.
In the United States and Western Europe, key drivers for pharmaceutical excipients reflect those typical of mature markets. These factors include:
In these mature markets, drug companies are increasingly turning to excipient suppliers for innovation and technology developments, and the status of excipients and excipient suppliers has been raised.
Recognizing that opportunity and potential has given new life and investment into excipients, which are not viewed as simply specialty binders and fillers but as functional and performance ingredients. Further, specialty excipients are a key factor to improve the pharmacokinetics and aesthetics of pharmaceuticals.
In contrast, the specialty excipients market for OSDF pharmaceuticals in China is in a more evolutionary stage of its life cycle compared with those in the United States and Western Europe, which means the drivers for specialty excipients are very different. China's pharmaceutical market is growing at double-digit rates.
Two of the largest factors affecting consumption of specialty excipients for OSDFs are the introduction of new excipient regulations and the transition of traditional Chinese medicine for liquids and other forms to OSDFs.
China's specialty excipients market
Traditional Chinese medicine, sourced from plants, herbs, and animals, is an $11-billion market with thousands of manufacturers. These products are usually very hydroscopic, bitter tasting, and dark in appearance. There is a key driver, therefore, to deliver these medicines in OSDFs to improve delivery, taste, and appearance, which is driving consumption of specialty excipients and coatings, primarily sugar coatings.
Excipients currently used in China must conform to the standards outlined in monographs in the Chinese Pharmacopoeia and National Pharmaceutical standards. In June 2005, the State Food and Drug Administration (SFDA) issued a draft of the Pharmaceutical Excipient Registration which, when finalized at the end of 2006, will provide more specific regulations for pharmaceutical excipients. A market step-change, however, may occur if good manufacturing practices (GMPs) certification is required for excipient manufacturers. The SFDA issued a discussion draft on GMP certification for excipients in November 2004, which has yet to be finalized (1). If implemented, GMP excipient requirements would likely follow those for the United States and Europe to facilitate the export of Chinese-manufactured excipients to these regions. Such a situation in turn would likely increase price competition in the mature US and European markets.
GMP requirements would raise the bar for Chinese excipient manufacturers
Driven by cost issues, there is significant resistance from Chinese excipients manufacturers to compulsory GMP certification. Only a few excipients manufacturers in China are GMP certified. These include Huzhou Zhanwang Pharmaceutical (Huzhou City, Zhejiang Province, China) and Guangxi Nanning Chemical Pharmaceutical Company (Nanning Economic & Technological Development Area, Guangxi Province, China) that manufacture APIs as well as excipients. Huzhou Zhanwang is a leading manufacturer of cellulosics, and Guangxi Nanning manufactures polyols. Should GMPs for excipients be implemented, it is likely that China's excipients industry will undergo consolidation because many suppliers are small and have outdated production technology and equipment.
Wet granulation is the dominant production method for OSDF pharmaceuticals in China, accounting for more than 90% of tablet production, compared with the United States where it is the least-preferred method. Of the three production methods of direct compression, wet granulation, and dry granulation, direct compression is the least labor- and time-intensive. Direct compression is the preferred method of OSDF production in the United States. Pharmaceutical firms in China, however, have been slow to switch to direct compression, driven by China's abundant and low-cost labor resources. The flowability and compressible performance of locally produced excipients in China are generally poor and currently are not suitable for direct-compression production. In addition, imported excipients that are suited to direct compression are much more expensive (see Table 1).
Table I: Preferred production methods for oral solid-dosage formulation pharmaceuticals
Long-term, there may be a transition to direct-compression production methods, which will increase the demand for higher quality excipients currently supplied by multinationals.
Specialty excipients product mix
Each specialty excipient market has a very different product mix. Kline and Company segments specialty excipients into specialty binders and fillers, disintegrants, and lubricants (1).
Specialty binders and fillers. Looking at the specialty binders and fillers market, China is almost the same size as the United States on a volume basis, and Western Europe is roughly 20% larger. Contrasting on a value basis, however, China is roughly one-third the size of the US market with a value of approximately $85 million in 2005. This difference in value is a result of the excipient-product mix—China's market is more heavily skewed to lower value products such as starch.
Starches. Starches (native and physically modified) are by far the leading excipients used in OSDF applications in China, accounting for 70% of the overall market on a volume basis but only 20% on a value basis in 2005. These values compare with a 40% volume share in the United States and a 15% volume share in Europe. Starch has a long history of use in China, and native starch derived from wheat, corn, and rice is the leading category (see Figure 2). The supply base for starches is dominated by such local firms in China as Tian Li (Qufu, Shandong Province), Sheng Tai (Changle County, Shangdong Province), and Langfang Starch (Langfang City, Hebei Province).
Figure 2: Specialty binders and fillers market for oral solid-dosage form pharmaceuticals in the United States, Western Europe, and China.
Cellulosics. Local Chinese firms also dominate the supply of cellulosics on a volume basis to China's pharmaceutical market. The top five cellulosic suppliers, all local Chinese firms, account for 66% of the total consumption volume of cellulosics used as excipients in China. In contrast, Dow Chemical Company (Midland, MI) leads on a value basis in the supply of cellulsoics to China's market.
Polyols and lactose.The supply base for polyols and lactose is more mixed. Roquette (Keokuk, IA) is the leading supplier of polyols in China on a value basis; Guangxi Nanning Chemical Pharmaceutical ranks first from a volume perspective. The lactose market in China is dominated by two multinational suppliers: Lactose New Zealand (Hawera, New Zealand) and DMV International (Veghel, Netherlands). Combined, these companies account for more than 50% of China's lactose-based excipient market.
Disintegrants.The global disintegrant market also varies in size and product mix from region to region. On a volume basis, China leads the United States and Western Europe. The leading disintegrant used in China is sodium starch glycolate, which is derived from potato or maize starches. Sodium starch glycolate accounts for more than 80% of China's total disintegrant market, driven by the popularity of wet granulation OSDF-pharmaceutical manufacturing techniques.
Over 80% of sodium starch glycolate used in China is derived from maize starch and is much less effective compared with sodium starch glycolate derived from potato starch. Sodium starch glycolate derived from potato starch is the dominant form in the United States and Europe (see Figure 3).
Figure 3: Disintegrant market for oral solid-dosage form applications in the United States, Western Europe, and China.
Overall, the supplier base for disintegrants has a fairly equal representation of local and multinational manufacturers. International Specialty Products (ISP, Wayne, NJ) and BASF (Ludwigshafen, Germany) dominate the supply of crospovidone in China as they do in the United States and Western Europe. Supply of sodium starch glycolate in China is dominated by such local producers as Huzhou Zhanwang, Shanhe (Huainan Economic Development Zone, Anhui Province), Tianli, Liaocheng E-hua (Liaocheng City, Shandong Province), and Yongri Chemical (Taichung City, Taiwan). Croscar-mellose sodium supply is dominated by such multinationals as FMC (Philadelphia, PA), JRS Pharma (Patterson, NY), and DMV International. DMV and JRS also market sodium starch glycolate.
Ready-to-use formulated coatings continue to grow rapidly at double-digit average annual rates in OSDF pharmaceutical applications in China. This growth is driven by several factors including:
There is still vast room for application of film coating although it has been well-established in China's market for many years. Sugar coating is still used by many small- and medium-sized companies, especially manufacturers of traditional Chinese medicines, which are extracted from herbs and plants. Traditionally, a sugar color-coating is applied to mask the taste and improve aesthetics of the OSDF.
In addition, the switch to formulated coatings is continuing. Currently, ready-to-use coatings account for 65% of China's film-coating market. The supplier base for formulated coatings is very fragmented and hugely competitive in China with roughly 40 firms competing for market share. This supply base is far more fragmented than in the United States and Europe where a handful of suppliers control the market. Many local firms have established a market presence by focusing on a few pharmaceutical companies and have been successful by establishing close customer relationships through sales and technical service.
Colorcon (West Point, PA) is a leading global supplier of formulated coatings and has a strong presence in China, focusing on both multinational and local pharmaceutical companies. Key local suppliers include Tianjin ILE Pharmaceutical Material Science and Technology (Tianjin, China) and Wenzhou Xiaolun Coating Technology (Wenzhou, Zhejiang, China). Within the past two to three years, these firms have developed coating formulations for the traditional Chinese medicine segment where key challenges include cost pressures and the high API-loading levels. Shanghai Thin Film (Zhangjiang Hi-Tech Park, Shanghai, China) has a very good reputation as a coatings supplier to this challenging market.
Driven by the fierce competition, formulated-coating pricing is declining and is almost on a par with pharmaceutical companies formulating coatings captively. Therefore, overall coating cost is becoming less of a driver, making it more attractive for pharmaceutical companies to outsource coatings manufacture.
Specialty excipient supply base in China
More multinational excipient suppliers are planning to establish production facilities in China to compete more effectively for market share and claim a stake in China. Currently, multinational excipient suppliers are targeting multinational and select large, local pharmaceutical companies. Local excipient suppliers are targeting local pharmaceutical companies. This situation is expected to continue for the next three to five years, driven by the disparity between excipient product-quality and price between imported and locally produced excipients. In the long term, however, as the quality and reproducibility of locally produced excipients improves, the situation will change, as has been observed for such other markets such as specialty raw materials for personal care products.
Potential technology shifts in China
Historically excipients were used in the United States and Western Europe for the following:
They were also relatively cheap and supplied by many different firms that often leveraged pharmaceutical excipients from core food or other businesses. Furthermore, few partnerships existed between drug companies and excipient suppliers because excipients did not play a vital role in new pharmaceutical product development. Many of these characteristics can be applied to China's market today, but 10 years from now, the Chinese market for specialty excipients will perhaps be more like the US and West European markets are today.
Specialty excipients outlook for the United States and Western Europe
Currently in the United States and Western Europe, the potential value for excipients is now more highly appreciated by pharmaceutical firms. The status of excipients has been raised and excipient innovation is actively pursued. Key drivers for this step-change reflect important challenges that face the US and European pharmaceutical industry, which included:
Pharmaceutical companies are increasingly turning to excipient suppliers for innovation and technology development to achieve these goals. Recognition of the potential opportunity has injected new life into the excipients market. Several leading multinational excipient companies have business units dedicated to the market and have established research and development groups to investigate the potential for their excipient technology in the drug delivery arena. Further, many companies also may cosponsor university research projects to further expand their reach and capabilities in research and development. Excipient suppliers are working more closely with their customers on the codevelopment of excipient grades with properties suited to specific performance properties and drug-release profiles (see Figure 4).
Figure 4: Metamorphosis of specialty excipients in the United States and Western Europe.
Future demands on excipient technology, therefore, will continue to be driven by drug-industry developments. Areas of focus in the United States and Europe currently include:
The development of sustained-release technology continues to advance to meet the need for pharmaceuticals that can be administered on a daily or twice-daily basis, thus improving disease management and patient well being. During the past five years, rapid-disintegrating and quick-dissolve tablets have become popular that incorporate rapidly acting disintegrants activated by the patient's saliva. They are currently used in such products as allergy, analgesic, migraine, and select children's products, where convenience and ease of use couple with the psychological effect of instant release to create a highly marketable product form. Quick-release is now an established alternative for drug delivery.
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Controlled-release formation is currently in its infancy because of the complexities of slow release and the high level of sophistication required for systems development. Going forward, as the demands on controlled-delayed-targeted release become more comprehensive and sophisticated, excipients have the opportunity to become an integral part of the solution to problem design.
Gillian S. Morris is the industry manager of chemicals and materials, Kline & Company, Inc., USA, Overlook at Great Notch, 150 Clove Road, #410, Little Falls, NJ 07424-0410, tel. 630.761.9587, Gillian_Morris@klinegroup.com and Jeanne Huang is engagement manager, Kline Asia, Suite 1111-1112, Shui On Plaza, 333 Huai Hai Road (M), Shanghai, China, 200021, tel. +86 21 5382 6677, Jeanne.Huang@kline-asia.com
1. "The Global Specialty Excipient Market for Oral Solid-Dosage Form Pharmaceuticals 2005–2010" (Kline and Company, Little Falls, NJ, 2006).