geo-sourcing trends 2011: analysing the latest sourcing trends and

REUTERS/Michaela Rehle

GEO-SOURCING TRENDS 2011ANALYSING THE LATEST SOURCING TRENDS AND PHARMERGING MARKETS

MOLLY BOWMANMARCH 23, 2011

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THOMSON REUTERS GENERICS & API INTELLIGENCE • 20 years experience in tracking API manufacturing and generics

• An industry pioneer in research and analysis of global API manufacturing activity

• Develop and market the Newport database family

• More than 300 customers and 3,000 users across 43 countries in the Innovator, Generic, OTC and API manufacturing industries

• Serving the needs of– Business Development & Licensing Professionals– Portfolio Selection Teams– R&D and Regulatory Specialists– API Sourcing Specialists

• Team based in Portland, Maine, USA

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AGENDA• Examining sourcing trends

• Evolution of sourcing markets

• Analyzing rising costs

• Western shift

• Pharmerging markets

• Prospects for the future

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GLOBAL MANUFACTURING

Source: Frost & Sullivan, CIBC

• China and India projected to represent 10% worldwide outsourcing

In-house68%

Outsourced FD20%

Outsourced API12%

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GLOBAL API CONSUMPTION

Source: CPA 2008 Figures

• Global API market expected value of $108 billion in 2015

• China and India hold 60% of Western EU API market

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MERGERS & ACQUISITIONSCompany Backward

Integrated?Target

Teva Barr, IVAX, Sicor, ratiopharm

Sandoz (Novartis) Hexal, Eon, Ebewe

Mylan Merck Generics, Matrix

Watson Andrx, Arrow, Sekhsaria

Hospira Mayne, Orchid

Perrigo Agis

Zentiva (Sanofi) Eczacibasi, Sicomed

Actavis Amide, Alpharma

Dr Reddy’s Betapharm

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DRIVERS OF SOURCING DECISIONS• Capabilities

• Capacity

• Quality

• Speed

• Relationships

• Cost

• Regulations

• Risk

• PR

• Logistics

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API MANUFACTURING LANDSCAPE

Source: Newport Premium™

175

253

301

1488

EstablishedLess EstablishedPotential FutureLocal

Experience in supply regulated

markets

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REGIONAL HUBS – API MANUFACTURING


Over 1/3 of the 400+ experienced manufacturers are in India and China 104

67

5235

15

18

12

125 USAIndiaChinaItalySpainJapanGermanyOther

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API MANUFACTURER RATINGS - INDIA


0

20

40

60

80

100

120

Established Less Established Potential Future

20062010

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API MANUFACTURER RATINGS - CHINA

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20

40

60

80

100

120

140

160

180

Established Less Established Potential Future

20062010


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API MANUFACTURER RATINGS - ITALY

0

5

10

15

20

25

30

35

Established Less Established

20062010


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US TYPE II DMF FILINGS


0

50

100

150

200

250

300

350

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

India China Italy RoW

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US FDA INSPECTIONS


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100

120

140

160

180

200

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

RoW

Italy

India

China

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US ANDAS – INDIAN COMPANIES


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US ANDAS – CHINESE COMPANIES• Chinese ANDAs

– First final approval in December 2010 (Novast)

• Three additional companies with final ANDAs acquired from companies like Ranbaxy, Par, Actavis– Zhejiang Huahai (Huahai US Inc)– Beijing Pharmaceutical (Beijing Double Crane)– Yabao Pharma Group (Beijing Yabao) (ANDAs discontinued)

• Additional filings waiting for approval

• FDA backlog slowing down manufacturing transfer to China

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EUROPEAN COS FILINGS

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40

60

80

100

120

140

160

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

IndiaChinaItalyRoW

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SOURCING DRIVERS - INDIA • Cost advantage

– 50% less to make drugs, trials at 10% of the cost, research at 15%

• Capital efficiency– Up-front costs 25-50% less due to local labor, materials and equipment

• Improved process engineering drives down costs

• Capacity increasing annually– 2000-2004 tripled– Second and third tier companies now investing and reaching into regulated markets

• Rich talent pool– 125,000 chemical engineers and 25,000 pharmacists graduate each year

• FDA approved infrastructure only eclipsed by the US

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SUPPLY AGREEMENTS - INDIA

Company Partner ActivityDivi’s AstraZeneca naproxen, esomeprazole API

Hikal Degussa API and intermediates

Dishman Solvay eprosartan API

Neuland Bausch & Lomb besifloxacin, ofloxacin API

Alembic Greenstone azithromycin API

Cipla Boehringer amlodipine API

Ranbaxy AstraZeneca esomeprazole API

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SOURCING DRIVERS - CHINA • Talented pool of scientists and engineers

• Lower cost base

• Improving IP and anti-counterfeiting environment

• Leadership (cost and/or technical) in certain product classes– Fermentation-based APIs– Intermediates– Base chemicals

• Scale of infrastructure

• Government support for R&D

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SUPPLY AGREEMENTS - CHINA

Company Partner Activity

Zhejiang Huahai Merck API, intermediates

Zhejiang Hisun Eli Lilly capreomycin API, vet drugs

Zhejiang Hisun Alpharma vancomycin API supply

Ningbo Smart Novartis diclofenac sodium API

Chongqing Huapont Janssen API supply

Hubei Shine Star Flamma amino acid & derivative supplyHisoar Boehringer API, intermediates

Zhejiang Medicines Hospira vancomycin API

Shenzhen Hepalink APP heparin

Aurisco Xellia mometasone API

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SOURCING CHALLENGES

Cost Type China India Europe U.S.

Labor $ $ $$$ $$$

Environmental $$$ $ $ $

Energy $$ $$ $ $

IP Protection $$ $$ $$ $$

cGMP Monitoring $$$ $$ $ $

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INDIAN IMPORT REGISTRATIONSTop Companies• Organon • Zhejiang Hisun• Evonik Rexim SAS• Kyowa Hakko Kirin• BASF• ACS Dobfar SpA • Archimica SpA

Top Products• clavulanate potassium

• erythromycin thiocyanate

• cefotaxime sodium

• thiamine mononitrate

• amoxicillin sodium

• amoxicillin

• ceftriaxone sodium


588

67103

207

56

54

31

46

42

43

237 China

France

Germany

Italy

Japan

Netherlands

South Korea

Spain

Switzerland

USA

RoW

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CHINESE IMPORT REGISTRATIONSTop Companies• Kyowa Hakko Kirin Co Ltd• Ajinomoto Co Inc • Ranbaxy Laboratories Ltd• Societe Oril• Orchid Chemicals• Dr Reddy's Laboratories Ltd• Janssen Pharmaceutica NV• Evonik Rexim SAS

Top Products• clavulanate potassium

• cefixime

• cephalexin

• amoxicillin

• cefaclor

• ceftizoxime sodium Source: Newport Premium™

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97

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48

158

53

17

27

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98

FranceGermanyIndiaIrelandItalyJapanSouth KoreaSpainSwitzerlandUSARoW

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WESTERN SHIFT

• Indian companies purchasing EU made API

• Returning projects– Pfizer Center Source

• tried to establish steroid production in China and Taiwan, moved production back to US and improved processes

– Custom (UK)• set up a facility in China, returned to UK due difficultly finding

quality management, demand from customers for EU made product

Company Partner ActivityAlbemarle Dr Reddy’s Ibuprofen API

DSM Guangzhou Baiyunshan & Shandong Xinhua

Cefalexin API

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QUALITY ISSUES• Suspended COSs from Indian & Chinese

companies– Fleming, Shantong Jinyang, Calyx, Tianjin Zhongan

• Heparin from China

• Ranbaxy imports banned

• Apotex sourcing issues

• Aurobindo restricted imports

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SPECIALIZED MANUFACTURING• High Potency

– Lucrative targets for API manufacturers– Many companies investing (SAFC, Novasep)

• Continuous Process & Separation– Indian companies using enzymatic catalysts– More Asian companies investing in micro-reactor

technology

• Micronization– Improves formulation and dissolution properties– Better bioavailability, less API needed

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FOLLOW-ON BIOLOGIC DEVELOPMENT

Company Proteins Antibodies Vaccines LaunchesTeva FP UD FP EPO, GCSF

Sandoz FP UD EPO, HGHBiocon FP UD FP GCSFHospira FP UD EPO, HGHZydus FP UD GCSF

STADA FP UD EPOActavis FP Via Bioton

Ranbaxy FP UD FPDr Reddy’s FP FP GCSF

Apotex FP UD FPCipla UD

Key: FP = Full Production, UD = Under Development

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PHARMERGING MARKETS• Predicted to expand by $90bn during 2009-2013

• Emerging Markets:– Argentina, Poland, Thailand, Indonesia, South Africa, Romania,

Ukraine, Pakistan, Mexico, South Korea, Taiwan, Brazil, Russia

India

China

Pharmerging

Location of API Manufacturers


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PHARMERGING API MANUFACTURERS

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Established

Less Established

Potential Future

Local


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FUTURE PROSPECTS SECOND WAVE EMERGING MARKETS• Many sourcing challenges

• Little experience with regulated markets

• Small API industry

• Limited dose capabilities– Some specialties in Argentina (high potency, biologics)

• No indications of significantly better price at acceptable quality than in India or China

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FUTURE PROSPECTS - INDIA• Increased emphasis on FD for regulated markets

• Increased CRAMS business

• Greater reliance on China for APIs and advanced intermediates

• Increased costs as Chinese materials become more expensive and salaries rise

• Increased investment into local market

• Continued emphasis on large batch production

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FUTURE PROSPECTS - CHINA• Strengthened SFDA oversight

• New GMP regulations

• Greater EHS, waste treatment enforcement

• Increased costs of labor

• Improvements in quality, technical packages, IP

• Additional companies will expand into finished dose for regulated markets

• Many companies will stay focused on local market

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FUTURE PROSPECTS - EUROPE• Majority of APIs coming off-patent post 2015 are

specialist driven

• Continued investment in process improvements and niche product manufacturing

• EGA proposed regulations to allow stockpiling and export to countries with less IPR

• Continued pricing pressures and competition from India & China

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THANK YOU

Molly BowmanManager, Small Molecule ResearchThomson Reuters

+1 207 871 9700 [email protected]

mailto:[email protected]�

geo-sourcing trends 2011: analysing the latest sourcing trends and

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