Identifying And Exploiting API Opportunities Across Emerging Markets API SOURCING STRATEGIES 2008...

Identifying And Exploiting API Opportunities Across Emerging Markets

API SOURCING STRATEGIES 2008

BERLIN, GERMANY

DAVID HARDING

NOVEMBER 24, 2008

API INTELLIGENCE AT THOMSON REUTERS

• Newport Strategies founded in 1990 and acquired by Thomson Scientific in 2004

• Industry pioneer in research and analysis of the impact of global API development on competition in generic products– Strategic competitive intelligence

– Tools for API sourcing and business development

• Newport Horizon and Newport Vision used by over 200 companies across the globe

3

Backdrop• Pharma Market: Growth Expectations for 2009

– “Will hold steady at 2008 levels”*

– US: 1-2%, EU5: 3-4%

– Japan: 4-5%

– BRIC: 14-15%

• Brand Pharma

– Innovation slump

– Blockbusters losing patent protection

• Generics

– Increasing competition, especially from India

– Low cost API coming from India, China

– Margin pressures in U.S., UK, Germany

– Drop in small molecule opportunities post-2011*2009 IMS Global Pharmaceutical and Therapy Forecast

4

• A quick look at some figures in regulated markets

• Reviewing the changing dynamics of the API market

• Benchmarking API opportunities from and into emerging generic markets

• Pros and Cons of working in emerging markets

Agenda

Number of API Manufacturing Plants Inspected by US FDA: 2001 – 2007

Source: Newport Horizon Premium™

0

20

40

60

80

100

120

140

2001 2002 2003 2004 2005 2006 2007

Number of API Manufacturing Plants Inspected by US FDA: 2001 – 2007


Availability of High-Quality API: A Global perspective


Number of US DMFs filed by country: 1998 – 2007

India; 1270

USA; 698China; 359

Italy; 268

Germany; 226

Japan; 197

Switzerland; 189

Israel; 183

Spain; 117 England; 106


US DMF Filings by API Manufacturers: 1998 – 2007


Number of European COS filed by country: 1998 – 2007

USA; 326

India; 312

Germany; 201

Italy; 138

China; 131

France; 113

Switzerland; 103

Japan; 77

England; 71Israel; 71


COS Filings by API Manufacturers: 1998 – 2007


Indian Landscape for API Manufacture

12

•Abundant amount of API manufactured for local market

•Abundant amount of API Exported; plenty imported

Availability of API: India


14

Markets for API: India~1300 Indian Import Registrations filed since Feb 2003

• Companies with most IIRs

– Schering-Plough

– Teva

– DSM

– BASF

– Sanofi-Aventis

– Novartis (Sandoz, Lek)

– Pfizer

– Bayer

– North China Pharmaceutical Group

– Kyowa Hakko Kogyo• Products with most IIRs

– Clavulanate Potassium

– Erythomycin Thiocyanate

– Levonorgestrel

– Vancomycin Hcl

– CyclosporineSource: Newport Horizon

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Are there many opportunities to sell API into India?

• Pros– Not self-sufficient in all

products• Fermentation

• Steroids

• Prostaglandins

• Polypeptides

– Demand for Intermediates

– Costs rising in China and India

– Opportunities in high-quality API for export dose

• Cons– Abundance of locally

manufactured API

– Many local facilities FDA approved

– Extensive importing from China

– Local API manufacturers enjoy cost advantage

– Restrictive duty on API imports

Indian Corporate Groups Pursuing Regulated API Markets

16

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Are there many opportunities to source API from India?

• Pros– Many companies with

regulatory filings

– Many companies that are FDA approved

– Lower cost of API

– Rich talent pool (125,000 chemical engineers each year alone)

– No Language Barrier

• Cons– Increased FDA inspections

could lead to unfavorable results

• Example: Ranbaxy

– cGMP standards not always met

Chinese Landscape for API Manufacture

18

•Abundant amount of API manufactured for local market

•Abundant amount of API Exported; some imported

Availability of API: China

0 200 400 600 800

Established

Less Established

Potential Future

Local


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Markets for API: China~400 Chinese Import Registrations filed since September 2003

• Companies with most CIRs

– Kyowa Hakko Kogyo

– Novartis (Sandoz, Lek)

– Ajinomoto

– DSM Fine Chemicals

– Pfizer

– Chong Kun Dang

– Ranbaxy

– Dr Reddys

– BASF

• Products with most CIRs

– Clavulanate Potassium

– Amoxicillin

– Clarithromycin

– Diltiazem Hcl

– Cysteine

– Pioglitazone

Japan26%

India13%

USA11%

Switzerland9%

South Korea

9%

Germany8%

Italy5%

Netherlands4%

UK4%

France4%

All Others7%

Source: Newport Horizon

Changing Dynamics of API Market:China

• The days of cheaper API prices could come to an end

Effects of the Olympic games

+ Implementation of more stringent EHS regulations

+ Waste water treatment standards

+ Increasing cost of labor, inflation and energy

= Higher API prices

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IMPACT OF THE OLYMPICS

• Will intermediate manufacturing start moving to India? Europe? U.S.?

• Will API outsourcing into China slow down?

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Are there many opportunities to sell API into China?

• Pros– Rising costs in China

– Demand for difficult to manufacture APIs

• “nibs”

– Demand for high-quality API from dedicated facilities

• Newer cephalosporins

• Cons– China has manpower,

intellect and raw materials to manufacture most products locally

– Heavy focus on cost

– Importing from low-cost countries

– High-value of Euro

Chinese Corporate Groups Pursuing Regulated API Markets

24

25

Are there many opportunities to source API from China?

• Pros– Lower cost base (than

India)

– Improving IP and anti-counterfeiting environment

– Good at intermediate manufacturing

• Cons– Still lacking at meeting

strict GMP standards

– Cost of materials increasing

– Language barrier

– “Buyer Beware”• Heparin scare

Russian Landscape for API Manufacture

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•Some API manufactured locally, but for local market

•Overwhelming majority of API imported INTO Russia

Availability of API: Russia


Top API imported to Russia (2007)1. Cefazolin Sodium

2. Amoxicillin Trigitrate

3. Sorbitol

4. Metamizole Sodium

5. Aminosalicylic Acid

6. Ampicillin

7. Ascorbic Acid

8. Acetylcalicylic Acid

9. Paclitaxel

10. Ceftriaxone Sodium

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Source: PharmExpert™

11. Paracetamol

12. Tolperizone Hcl

13. Vinpocetine

14. Doxorubicin Hcl

15. Cefotaxime Sodium

16. Mannitol

17. Cefotaxime

18. Chlorpromazine Hcl

19. Docetaxel Anhydrous

20. Choline Alfoscerate

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Are there many opportunities to sell API into Russia?

• Pros– Almost all API is imported

• Little local production

• Little local expertise outside of supplements

• Local products w/ inconsistent quality

– Large number of local dose companies

• Cons– A lot of the API is coming

from India, China

– Many local dose companies buy from offshore distributors

• Suspect quality

– Red tape

Brazilian Landscape for API Manufacture

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•Some API manufactured for local market

•Very little exported

•Overwhelming majority of API imported INTO Brazil

Availability of API: Brazil


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Are there many opportunities to sell API into Brazil

• Pros– Most of API is imported

– Low import taxes

– Dose companies becoming more quality minded

– Regulatory environment becoming tougher

– Dose exports into neighboring countries

– Opportunities in• High-quality hormones

• Controlled substances

• Cons– Currently most API imports

from India and China

– Still heavy focus on cost rather than quality

– Euro to Real

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Are there many opportunities to source API from Brazil

• Pros– Universities and private

enterprise work together

– Recent push for new drug development

• Cons– Lack technical

documentation or expertise

– Lack of scale

– Lack of specialization

– Lack of export policy

– Can’t compete on cost

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• Opportunities exist for sourcing API from China and India

• Opportunities exist for selling API into China, India and Brazil

• Knowledge of API manufacturer is key– Are they really manufacturing this API?

– Are they able to supply regulated markets with API?

Conclusion

35

Thank you!

David Harding

Newport API Intelligence Specialist

Thomson Reuters Scientific

215 Commercial Street

Portland, Maine 04101

USA

+ 1 (207) 871-9700 x27

[email protected]

Identifying And Exploiting API Opportunities Across Emerging Markets API SOURCING STRATEGIES 2008...

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