By Suzanne Elvidge
Changes to the active pharmaceutical ingredient (API) market mirror those being made to the pharmaceutical market as a whole. So, what’s next?
According to Brian Scanlan, chief business officer at Cambridge Major Laboratories (a global chemistry outsourcing partner to the pharma and biotech industries), APIs are the “lifeblood of the pharmaceutical industry.” And the market for these basic building blocks of drug products is growing.
According to the Global Insights report Challenges & Opportunities In The Global APIs Market: Latest Developments and Future Outlook, published in early 2010, the global API market is projected to grow by around 7.3% to an estimated market value of $139.2 billion by 2014. “The API market is a multibillion dollar one, although it is only a small part of the pharmaceuticals market as a whole,” says Martin Widmann, head of the pharma ingredients and services global business unit at BASF, a huge chemical company with a portfolio including bulk and fine chemicals as well as plastics and agricultural products. “Growth in the API market will be different for each API. The life cycle of an API is the crucial factor for the market development. However, this does not mean that ‘old’ APIs do not grow any more — even established actives like ibuprofen still see solid growth.”
The increase in generics will provide opportunities for manufacturers of generic APIs, but will also reduce the demand for innovative APIs, not only because of the older innovative agents coming off patent, but because of the decline in income available to invest in development of new innovative agents and the reduction in innovation that has been apparent for a number of years. This is demonstrated by the sales figures — in 2008, sales of third-party generic APIs were around $17 billion, rising to an estimated $32.5 billion in 2014, according to the Global Insights report. This compared with $19 billion, rising to only $21.2 billion, for third-party innovative APIs.
“Due to rising regulatory hurdles and bioavailability challenges, new API launches from originators have been stagnant in the recent years, although many disease areas need drug innovation with new modes of actions,” says Widmann.
Another response to reduced levels of income will be the divestment of assets and personnel. This will create an opportunity for API manufacturers to acquire manufacturing plants, equipment, and experienced staff, as well as provide access to high-value drugs with large, long-term markets.
Biopharma companies are increasingly outsourcing their API development and production divisions. “Previously, large pharmaceutical companies were ‘one-stop shops’, discovering, developing, manufacturing, and marketing, but now they are more likely to work as part of a network of partnerships and alliances, which is actually creating more opportunities for innovation,” says Derek Hennecke, president and CEO of Xcelience, a Florida-based CRO providing formulation development, preformulation, and analytical and clinical trial manufacturing.
Keeping It Competitive
For some time, the lower-cost locations have been India and China, but the costs in these markets are now rising, driven by the increasing labor costs. To remain competitive on grounds of price, API manufacturers are establishing manufacturing bases or setting up partnerships in alternative lower-cost locations, such as Eastern Europe and Latin America.
Some API companies choose to remain in Western Europe and the United States in order to remain close to customers. These companies promise a better level of customer service in a similar time zone, as well as high levels of regulatory compliance. API producers outside the region are aware of this as an advantage, and many have acquired facilities in Europe and the United States.
“Companies in the United States tend to want to outsource close by, so they will go to domestic providers,” says Hennecke. Scanlan agrees: “Even though the numbers of API manufacturers are still small in the United States, this suggests a good future for the U.S. API industry.”
There is a move to improve efficiency through the use of continuous processing technologies such as simulated-moving bed chromatography (SMB). Other changes include the use of chemistry-related process technologies, such as hydrogenation and chiral chemistry.
Rather than just relying on being the lowest-cost source of APIs, some companies, including those in India and China, are providing “value-add” services, such as the production of highly potent APIs (HPAPIs, which can be used at doses up to 50 times lower than standard APIs), radio-labeled APIs, and antibody-drug conjugates (ADCs). There also has been a move to make a differentiation by improving the environmental impact of API manufacturing.
Quality and regulatory compliance are further differentiation factors. Roquette produces starch derivatives. “Products such as glucose, mannitol, and sorbitol are considered as well-established use APIs. The market is driven by high-standard products complying with GMP and pharmaceutical standards requirements for parenteral applications,” says Elham Blouet, pharmaceutical project and development manager at Roquettes Frères.
Certain sectors of the pharmaceuticals market are growing more quickly, and these will affect the API market — for example, the biotechnology segment is forecast to reach around 23% of the pharmaceutical market by 2014, which could drive an increase in the production of biogenerics (also known as biosimilars).
Because biologic drugs are high-priced but have greater efficacy and safety in certain therapeutic areas, such as oncology, the market for biogeneric biotechnology-based APIs is growing faster than innovative biotechnology-based APIs. This growth rate is set to accelerate as increasing numbers of biotechnology drugs are launched on the market. However, because of the costs involved in the development and production of biotechnology-based APIs, only a limited number of companies, particularly those already working in biologics, is likely to move into this market. A “value-add” step could be to collaborate with other companies, such as drug delivery specialists, to produce “biobetters” — next-generation versions of the biologic agents.
“Biotechnology-based APIs will be attractive for companies, but the costs will be very high,” says Hennecke. Scanlan agrees: “There will always be a market for small molecule generics, because the cost of manufacturing biological molecules is so high, even once they have become generic.”
The Regulatory Environment For APIs
Good manufacturing practice (GMP) guidelines aim to ensure the quality and consistency of APIs, but there are variations between markets. In the United States, current GMP (cGMP) guidelines allow for inspection of API producers worldwide, though the majority of inspections appear to be for domestic manufacturers, despite concerns about poorly regulated facilities elsewhere. Proposed legislation will be tighter, calling for mandatory inspections of cGMP facilities worldwide every two to four years.
Under EU GMP regulations, the holder of the drug marketing authorization must ensure that APIs comply with the GMP requirements, and the EU can inspect API producers worldwide. There are proposals under discussion to tighten EU GMP regulations.
China and India have their own GMP regulations, and in the past, these have not been considered to be as rigorous. China’s regulations are expected to come more in line with international regulations during 2010. India’s GMP regulations have been revised, but these are still not as strict as the international guidelines. However, as many facilities in India and China also claim compliance with U.S. and EU GMPs, they will be subject to international inspections.
“There is a significant push in Europe and the United States to clamp down on API supply chain concerns, including importation practices and quality regulations. While these are important, the increased need for quality and regulatory oversight will increase costs in these regions, making them less competitive than in locations where the regulations are less rigorous,” says Scanlan.
One of the challenges in the API market is that of counterfeit APIs. According to the European Fine Chemicals Group, between 10,000 and 1,000,000 patients could be exposed to drugs based on a single batch of counterfeit APIs. These concerns have even created commercial opportunities, where companies such as Diapharm are offering joint third-party cGMP audits.
It is very important for pharmaceutical companies to work closely with API manufacturers early in the development process to deal with any potential formulation challenges. For example, rather than looking at ways to make a highly insoluble drug more soluble, the two groups could collaborate to select the clinical candidate with better physical characteristics.
One of the major causes of project delay in API outsourcing is a lack of communication between parties at different stages of the process. Using an integrated project management strategy, such at Xcelience and Cambridge Major Laboratories’ Chemistry Playbook, will improve collaboration and timelines (see case study).
Case Study: Chemistry Playbook
Cambridge Major Laboratories and Xcelience created a product development plan for a solid oral dosage form for a Phase 1 clinical trial that would maximize time savings, minimize product risk, and exploit functional synergies. Cambridge Major Laboratories initiated chemistry evaluation and began to develop the manufacturing process. Cambridge sent the API to Xcelience, which initiated preformulation work to determine the optimal salt form and screen for polymorphs. Cambridge Major Laboratories prepared a demonstration batch, and Xcelience was able to initiate formulation development activities as soon as GLP (good laboratory practices)-grade API became available. Xcelience carried out excipient compatibility studies, completed formulation development/selection, and initiated prototype stability.
The Chemistry Playbook model helped to maximize the chance of “first time right” and improved overall ease of working with multiple suppliers. It also ensured a shorter timeline, delivering clinical trial material with ICH (International Conference on Harmonization) stability data four months more quickly than a traditional program, reduced the risk of stability issues based on identification of the optimal salt form, and improved the intellectual property position from polymorph screening data.