Downward Trends in Traditional Sourcing Markets and the Rise of Pharmerging Markets Kate Kuhrt CPhI Virtual Experience October 2010 © Thomson Reuters 2010.

Downward Trends in Traditional Sourcing Markets and the Rise of Pharmerging Markets

Kate Kuhrt

CPhI Virtual Experience

October 2010

© Thomson Reuters 2010

Agenda

• Key drivers of sourcing decisions– Quality

– Cost

• Evolution of various sourcing markets

• Predictions about the future


About 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


Many Drivers of Sourcing Decisions, Including…

• Capabilities

• Capacity

• Quality

• Speed

• Relationships

• Cost

• Regulations

• Risk

• PR


World generic API manufacturing landscape

166

256

287

1486

Established

Less Established

Potential Future

Local

Experience insupplying regulated

markets

Source: Newport Premium™ © Thomson Reuters 2010

Of the 400+ experienced manufacturers…• Close to 1/3 are located in India and China

• Only 160 are pure API players

127

67

53

34

36

15

14

94 USA

India

China

Italy

Japan

Spain

Germany

Others


Comparing Indian API Manufacturer Ratings, 2006 to 2010


http://images.google.com/imgres?imgurl=http://www.theodora.com/wfb/india/in.gif&imgrefurl=http://www.theodora.com/wfb/india/india_flags.html&h=256&w=365&sz=4&hl=en&start=4&um=1&tbnid=SP8FXUh-lC2Q8M:&tbnh=85&tbnw=121&prev=/images?q=india+flag&svnum=10&um=1&hl=en

Comparing Chinese API Manufacturer Ratings, 2006 to 2010


http://images.google.com/imgres?imgurl=http://sitemaker.umich.edu/sec005group1/files/china-flag.gif&imgrefurl=http://sitemaker.umich.edu/sec005group1&h=400&w=600&sz=5&hl=en&start=2&um=1&tbnid=kUUf4joe1J5hJM:&tbnh=90&tbnw=135&prev=/images?q=china+flag&svnum=10&um=1&hl=en

Comparing Italian API Manufacturer Ratings, 2006 to 2010


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Challenges in the European API Sourcing Market

• Constraining SPCs in Italy introduced in 1991

• No Bolar provisions until 2006

• Reluctance to change

• Expensive labor

• Environmental controls


http://www.google.com/imgres?imgurl=http://www.research4development.info/images/articles/eu_flag.jpg&imgrefurl=http://www.research4development.info/news.asp?ArticleID=190&h=255&w=382&sz=13&tbnid=aJPP8Tbjla4FLM:&tbnh=82&tbnw=123&prev=/images?q=eu+flag&zoom=1&q=eu+flag&hl=en&usg=__C1kYlKm7FKe1xBIbWSni4TXM01o=&sa=X&ei=qFm3TOG1Dp7enQe8oNjmBA&ved=0CB0Q9QEwAg

Drivers for India as a Major API Sourcing Destination

• No product patents until 2005

• Cost advantage

• Rich talent pool

• No language barrier

• Improving IP protection

• Large and increasing number of FDA approved facilities



Drivers for China as a Major API Sourcing Destination

• Rich talent pool

• Leadership in certain product classes over India– Fermentation-based APIs

– Steroid APIs

– Intermediates

– Base chemicals

• Cost advantage

• Improving IP and anti-counterfeiting environment

• Better infrastructure than India

• Government support for R&D



US DMF Filings (1999 – 2009)


FDA Inspections of API Manufacturers (2001 – 2009)

3

6

9

16

23

8

1619

31

3

10 9

9

13

4

1413

20

7

10

20

17

12

79

11

9

0

5

10

15

20

25

30

35

2001 2002 2003 2004 2005 2006 2007 2008 2009

Num

ber o

f Ins

pect

ed P

lant

s

India

China

Italy


Progression of Indian Manufacturers

Domestic FD, API

WW API

WW Formulation

CRAMS

NDDS

NCE

CostRisk

Source: Piramal Investor Presentation 2008



Total ANDA Approvals by Indian Generics



US ANDAs belonging to Chinese companies

• Only 3 companies with final ANDA approvals

• All approved ANDAs have been acquired

– Zhejiang Huahai (Huahai US Inc)• ANDAs for 5 products acquired from Kali, KV,

Par, Actavis• Nevirapine tentative approval under PEPFAR

– Beijing Pharmaceutical (Beijing Double Crane)• ANDAs for 2 products acquired from Ranbaxy

– Yabao Pharma Group (Beijing Yabao)• ANDAs for 2 products acquired from Par and

Ivax


Challenges in Indian and Chinese Sourcing Markets: Cost

Cost Type China India Europe U.S.

Labor $ $ $$$ $$$

Environmental $$$ $ $ $

Energy $$ $$ $ $

IP Protection $$ $$ $$ $$

cGMP Monitoring $$$ $$ $ $


Additional Challenges in Indian and Chinese Sourcing Markets• Language barrier in China

• Inadequate infrastructure in India

• Uneven enforcement of rules in China

• Possibility of fraud

• Long-distance management

• Lack of senior level talent in top level management, QA, IP protection

• Focus on quick targets rather than long-term opportunities

• Cultural differences


Looking Ahead

?


Will Manufacturing Move to the 2nd Wave Emerging Markets?

• Little experience with regulated markets

• Small API industry

• Limited Dose capabilities

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


What’s Next for 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



What’s Next for China?

• Strengthened SFDA oversight

• 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



What’s Next for Europe?

• Benefitting from increased focus on reliability and quality in Europe, US, Brazil

• Focus on niche products (high potency, peptides, controlled substances) and biopharmaceuticals

• Innovative technologies

• Global production facilities and strategic relationships

• Forward integration into dose

• Further consolidation


http://www.google.com/imgres?imgurl=http://www.research4development.info/images/articles/eu_flag.jpg&imgrefurl=http://www.research4development.info/news.asp?ArticleID=190&h=255&w=382&sz=13&tbnid=aJPP8Tbjla4FLM:&tbnh=82&tbnw=123&prev=/images?q=eu+flag&zoom=1&q=eu+flag&hl=en&usg=__C1kYlKm7FKe1xBIbWSni4TXM01o=&sa=X&ei=qFm3TOG1Dp7enQe8oNjmBA&ved=0CB0Q9QEwAg

Thank You!

Kate Kuhrt

Director, Generics and API Intelligence

Thomson Reuters

+1 207 871 9700 x26

[email protected]


Downward Trends in Traditional Sourcing Markets and the Rise of Pharmerging Markets Kate Kuhrt CPhI Virtual Experience October 2010 © Thomson Reuters 2010.

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