The global excipients market shows moderate growth, increased consolidation, and expansion activity in emerging markets and select product areas.
Excipients play an important role in pharmaceutical formulations by adding functionality or by facilitating the processing of a drug product. Despite this essential role in drug development and commercialization, as with other suppliers to the pharmaceutical industry, such as producers of raw materials, intermediates, or APIs, excipient manufacturers have to respond to the changing fundamentals influencing pharmaceutical supply and demand. In reviewing the recent activity of excipient manufacturers, several trends emerge: increased consolidation based on product-line enhancement or geographic expansion, select investment in emerging markets, and targeted growth in select product areas.
Patricia Van Arnum
Crunching the numbers
The global excipients market is expected to grow at a moderate pace through 2016 in line with overall pharmaceutical industry growth. The global pharmaceutical market is expected to reach $1 trillion by 2014 and nearly $1.1 trillion by 2015, according to the IMS Institute for Healthcare Informatics. The market is projected to increase at a compound annual growth rate (CAGR) of 3–6% during the next five years, slowing from the 6.2% annual growth rate that occurred during the past five years. For purposes of this analysis, the pharmaceutical market includes all types of biopharmaceuticals, including biologics, over-the-counter drugs, and traditional medicines distributed and administered through regulated delivery systems, such as pharmacies, hospitals, clinics, physician offices, and mail order. Spending figures are reported as ex-manufacturer estimates that do not reflect off-invoice discounts and rebates (1).
The global excipients market was valued at $4.6 billion in 2010 and is expected to reach $4.9 billion in 2011, according to a recent report by the market-research firm Business Communications Company (BCC). The global excipients market is expected to increase to $6.7 billion by 2016, representing a five-year CAGR of 6.5%. In terms of volume, 11.1 billion pounds of excipients are projected to be consumed in 2011. This level is expected to increase to 14 billion pounds by 2016, representing a CAGR in volume of 4.6%. BCC cites several factors influencing the global excipients market: concerns in the global pharmaceutical supply chain, application of quality by design in drug formulation and manufacturing, and overall concern for drug safety.
IMAGE: NICHOLAS EVELEIGH / GETTY IMAGES
BCC segments the market for excipients into three major areas: organic excipients, inorganic excipients, and US Pharmacopeia (USP) water. Organic excipients represent the bulk of the global excipients market, accounting for approximately 93% by value in 2010. The market for organic excipients was valued at $4.3 billion 2010. It is expected to reach $4.5 billion in 2011 and $6.3 billion in 2016, representing a five-year CAGR of 6.6%. The market for inorganic excipients was $248 million in 2010. It is expected to reach $268 million in 2011 and $350 million by 2016, representing a five-year CAGR of 5.5%, according to BCC. USP water is the smallest segment in the global excipients market. In 2010, the market for USP water accounted for only $88 million. It is projected to increase to $92 million in 2011 and to $114 million by 2016, representing a five-year CAGR of 4.4%.
Company deals and expansions
Like the pharmaceutical industry as a whole and within specific sectors of the pharmaceutical ingredient supply chain, the excipient market has seen a fair amount of mergers and acquisitions (M&A) in 2010 and 2011. In some instances, this M&A activity has been part of larger acquisitions among specialty-chemical and fine-chemical companies and other buyers. The deals also have included targeted product-line acquisitions as well as specific acquisitions by Western excipient manufacturers to increase their manufacturing, technical-service capabilities, and product offerings in emerging markets. Additionally, excipient manufacturers have partnered through alliances or other agreements to expand their product reach. Along with this deal-making, some excipient manufacturers also are expanding production capacity for select products.
Lubrizol. One of the largest and most recent deals occurred in September 2011, when the conglomerate Berkshire Hathaway completed its $9.7-billion acquisition of the specialty-chemical company Lubrizol, which included the company's excipients business. Lubrizol's excipient business includes excipients used in solid, semisolid, and liquid dosage forms for oral and topical formulations. For oral solid dosage forms, key products are Carbopol polymers and Noveon polycarbophil, high molecular-weight polymers of acrylic acid, which are chemically crosslinked with polyalkenyl alcohols or divinyl glycol. These polymers are used in several commercial tablet forms, including swallowable (peroral), chewable, buccal, and sublingual tablets (2). With the closing of the deal, Lubrizol became a wholly owned subsidiary of Berkshire Hathaway, and Lubrizol's international headquarters will remain in Wickliffe, Ohio, according to a Sept. 16, 2011, Berkshire Hathaway press release.
Berkshire Hathaway's acquisition of Lubrizol follows recent investment by Lubrizol in India and the United States. In November 2010, Lubrizol opened a new regional applications and business center in Mumbai to support its advanced materials business segment, which includes pharmaceutical ingredients and other consumer and industrial products. The center includes a development and applications laboratory, which includes development, formulation, and applications-testing capabilities in multiple personal-care and coatings applications as well as a pharmaceutical application development center.
In May 2010, Lubrizol Advanced Materials, a business segment of Lubrizol, announced an investment of approximately $40 million in its Calvert City, Kentucky, manufacturing facility. The facility specializes in the production of Carbopol polymers, which are used in pharmaceuticals and personal care and home care products.
Ashland. Another recent large deal was the $3.2-billion acquisition of International Specialty Products (ISP) by the specialty-chemical company Ashland. The deal was completed in late August 2011. ISP is being integrated into Ashland Aqualon Functional Ingredients commercial unit, which was renamed as Ashland Specialty Ingredients following the acquisition. The deal combines the companies' product portfolio in water-soluble polymers and functional ingredients, inclusive of pharmaceutical excipients.
Ashland Aqualon Functional Ingredients offers functional excipients for solid, semisolid, and liquid dosage forms with a range of cellulosic products: hydroxypropylcellulose, methylcellulose, hypromellose, hydroxyethylcellulose, ethylcellulose, and carboxymethylcellulose. Ashland formed the Ashland Aqualon Functional Ingredients business following its 2008 acquisition of the US-based specialty-chemical company Hercules. With the acquisition of ISP, Ashland gained additional excipients (e.g., crospovidone used as tablet disintegrants as well as povidone and copovidone used as binders). Ashland also acquired process technology for drug solubilization (e.g., spray drying and hot-melt extrusion) and related ingredient supply for drug solubilization (e.g., cyclodextrins and polymers for solid dispersions) as well as coating technology for immediate and delayed-release formulations.
BASF. In December 2010, BASF completed its acquisition of Cognis, a specialty chemical company to the food, home care, personal care, and pharmaceutical industries, including excipients. The equity purchase price was €700 million ($958 million). Including net financial debt and pension obligations, the enterprise value of the transaction was €3.1 billion ($4.2 billion). Completion of the structural integration of Cognis is targeted for the end of 2011, according to a Dec. 10, 2010, BASF press release.
From a strategic perspective, although BASF's acquisition of Cognis was centered on increasing its position in functional ingredients in nonpharmaceutical markets, such as food, personal care, and home care, the company gained additional product offerings in excipients. For example, some products of the former Cognis businesses include oleochemical-derived pharmaceutical-grade excipients, such as specialty esters, fatty alcohols, ethoxylates, hard fats, stearic acids, mono- and triglycerides, and castor-oil derivatives, which are used in topical, oral, and parenteral formulations. Other product offerings from the former Cognis businesses include chitosan, a natural cationic polymer (polysaccharide), which is used in dermatology, medical applications for wound healing, tissue engineering, and as a drug-delivery agent in pharmaceutical formulations, and D-alpha tocopheryl polyethylene glycol 1000 succinate (TPGS), a water-soluble derivative of vitamin E used to enhance the bioavailability of poorly soluble actives.
In a smaller, separate deal, in February 2011, BASF and Sigma-Aldrich signed a global distribution agreement for several of BASF's pharmaceutical excipients. Under the deal, Sigma-Aldrich will repackage the products into small pack sizes to make them available for academic-oriented R&D activities for use by universities and laboratories. The excipients portfolio offered comprises various grades of binders (i.e., Kollidons), coatings (i.e., Kollicoats), and solubilizers (i.e., Cremophors, Lutrols, and Solutol).
On the new product front, BASF introduced Kollicoat Smartseal 30 D, a water-based dispersion for taste-masking and moisture-barrier applications, in 2010. The product is highly impermeable to water vapor, which facilitates preserving the potency of sensitive active ingredients, according to a Nov. 15, 2010, BASF press release. The polymer is stable in saliva and soluble in gastric juice. These properties ensure effective protection from unpleasant taste in the patient's mouth and rapid release and onset of active ingredient action in the stomach, according to the BASF press release. Kollicoat Smartseal 30 D complements BASF's existing tablet coatings portfolio, which includes polymers and copolymers used to coat tablets, capsules, and pellets, and to control the release of drugs from solid dosage forms.
Evonik. The specialty- and fine-chemicals company Evonik reorganized, effective Sept. 1, 2011, and combined its businesses for custom API manufacturing (i.e., exclusive synthesis), pharmaceutical amino acids (i.e., its Rexim product line), and pharmaceutical polymers in a new healthcare business line. The pharmaceutical polymers business includes the company's Eudragit and Resomer product lines. The Eudragit line consists of acrylic copolymers for oral solid dosage forms, and the Resomer line includes bioresorbable poly(lactic-co-glycolic acid) copolymers, which are used in depot formulations. Evonik acquired the Resomer business from Boehringer Ingelheim in March 2011.
Avantor Performance Chemicals. Avantor Performance Chemicals is proceeding with an expansion in India, following a key acquisition in 2010. Avantor Performance Chemicals was the new name given to the company after the acquisition of Mallinckrodt Baker from Avantor's former parent company, Covidien, to the private equity group, New Mountain Capital. Avantor is a producer of products and materials for the pharmaceutical industry, including excipients.
In May 2011, Avantor opened a new pharmaceutical formulation application laboratory in Sinnar Nashik, Maharashtra, India, with its partner RanQ Remedies. The new laboratory will be used to characterize excipients, perform functional testing, develop and characterize drug formulations, and support customer applications and product implementation. In terms of excipients, RanQ has a position in microcrystalline cellulose and sodium starch glycolate and also has expertise in developing premixed and other application-focused pharmaceutical excipients that result in a homogenous mix and coprocessed excipients.
In addition to the applications laboratory, Avantor completed construction of a pilot plant onsite at the RanQ facility. The pilot plant will be used to develop and scale up additional performance excipients to extend Avantor's J.T. Baker PanExcea product line. The PanExcea line includes performance excipients that combine fillers, binders, and disintegrants for increased functionality for immediate-release formulations and orally disintegrating tablet applications.
Other companies. Several other excipient companies are expanding. In 2011, DMV–Fonterra agreed to acquire the business and assets of Brahmar Cellulose Private Ltd. an Indian-based producer of pharmaceutical microcrystalline cellulose and sodium carboxylmethylcellulose. The acquisition, subject to customary closing conditions and regulatory approval, is scheduled to close in the fourth quarter of 2011.
In April 2011, FMC completed an expansion of its microcrystalline cellulose plant in Cork, Ireland. Production from the final phase of the expansion began in March 2011 and increased FMC's global capacity by 25% for pharmaceutical- and food-grade microcrystalline cellulose. FMC operates another microcrystalline cellulose plant in Newark, Delaware.
In March 2011, Grace Davison Discovery Sciences, part of W.R. Grace & Co., opened a new technical service knowledge center in Southern India for customers in the pharmaceutical and biotechnology industries. The new facility is located in the Genome Valley near Hyderabad. The knowledge center supports Grace's customers in the areas of excipients, pharmaceutical intermediates, laboratory separations, and bulk purification. The center also will provide product development and applications support and include such services as customer training, validation, testing for various products, and product demonstrations. The new center complements existing application laboratories in the United States, Europe, and China.
In October 2010, ABITEC and Mutchler Pharmaceutical Ingredients, announced a comarketing and distribution partnership for ABITEC's Captex, Capmul, Acconon, Sterotex, BBS-C, and Hydro-Kote lipid-based pharmaceutical-grade excipients. The partnership provides for expanded customer service, sales, technical formulation-development support, and supply capability.
Excipient producer also are expanding in related pharmaceutical applications. For example, Huber Engineered Materials (HEM), a division of J.M. Huber Corp., is expanding its Quincy, Illinois, manufacturing operations to increase capacity for calcium carbonate granulation production. The new addition is expected to become operational in the second quarter of 2012 and generate nearly 10,000 metric tons of calcium carbonate granulation annually to serve the dietary supplement and pharmaceutical markets. The calcium carbonate granulation to be manufactured in Quincy will mirror that of the granulation line at HEM's plant in Modesto, California. The company recently received its California drug-manufacturing license for the Modesto facility and will continue to produce APIs at Quincy. Huber also produces calcium carbonate powder.
Huber became a granulator of calcium carbonate and oyster-shell powders with its 2003 acquisition of Micro Powders and Braig and added to its portfolio with the addition of West Coast Ingredients in 2006. The company added to its particle-engineering capacity in 2007 with the addition of fluid-bed granulation and trituration capabilities.
Patricia Van Arnum is a senior editor at Pharmaceutical Technology, 485 Route One South, Bldg F, First Floor, Iselin, NJ 08830 tel. 732.346.3072, firstname.lastname@example.org.
1. P. Van Arnum, "Global Pharma Market Expected to Reach $1 Trillion," Pharm. Technol. Sourcing and Management, 7 (6), June 2011.
2. Lubrizol, "Pharmaceutical Polymers for Oral Solid Dosage Forms" Product Literature (Wickliffe, OH), 2011.