The Journey from API to Dose Form

The worldwide generics market continues to grow, up from US$90 billion a few years ago to US$150 billion today. It is becoming increasingly difficult to find profitable opportunities as many key generics markets are experiencing flat or negative growth.

Thus much attention is focused on companies based in India and China, and their capabilities to produce low cost active pharmaceutical ingredients (API) and finished dose forms.

While the South Korean generics industry may not receive the same attention like those of powerhouses India and China, it is arguably one of the biggest producers of generic medicines within Asia Pacific after Japan, China and India.

All about API

It comes as no surprise to say that China leads in terms of the overall number of companies manufacturing API, with over one thousand to India’s five hundred and Korea’s fifty. However, much can be revealed about how these countries compare upon closer examination, particularly concerning regulatory filings such as US Drug Master Files (DMF), Japanese DMF and European Certificates of Suitability (COS).

The Newport API Intelligence research team at Thomson Reuters assigns a Newport Corporate API Rating to each manufacturer. It is a metric which takes into account a company’s ability and history of supplying API to regulated markets.

Figure 1 examines the proportion of API manufacturers based in India, China and Korea and their Newport Corporate API Rating. Proportionally, more Chinese companies are only capable of supplying their local market and lessregulated markets. They lack the ability to pass inspections by agencies such as the US FDA.

China also has fewer companies with an Established rating, that is, with a record and history of supplying regulated markets for many years. South Korea by contrast, while having far fewer companies, has a greater proportion of groups expanding their reach into regulated markets.

Table 1goes into greater detail with respect to regulatory filings and API manufacturing capacity. It is unsurprising that across the three countries, companies with a higher Newport Corporate API Rating will have more regulatory filings. However, it is evident that India still leads with generally higher average numbers of confirmed API manufactured, active US DMF andEuropean COS per company.

Examination of the holders of COS, Japanese DMF and Chinese Import Registrations in Newport Premium shows that many of these companies have a global focus and active presence in the regulated North American, European and Japanese markets as well as China.

The future should see many of the Less Established and Potential Future companies gaining further penetration into the US and European markets.

In regards to API regulatory filings, South Korean companies have a heavier emphasis towards Japanese DMF, indicating interest and activity in supplying API to the Japanese market (see Figure 2). Indeed, with the introduction of the Japanese DMF in 2005, Korean companies were among the first and most aggressive to register.

However, although Korean API manufacturers hold several Japanese DMF, they are not vertically-integrated in this market and no Korean company has ever launched products in Japan. This is most likely due to the unique challenges of operating in the Japanese generics market, which include brand recognition and preference for local products and finding local companies to partner with.

China and India lean towards the other direction, demonstrating a heavier preference for US DMF and COS filings, although both countries have many companies that maintain all three documents.

The difficulties of marketing as a foreign company in Japan are also echoed by Indian and Chinese companies, as both are having little and no dose form market presence respectively.

Be that as it may, many Indian companies have marketing agreements or other relationships with local Japanese companies such as Zydus Cadila’s acquisition of Nippon Universal Pharmaceutical in 2007 and Lupin’s subsidiary Kyowa Pharmaceutical Industry.

Korean API manufacturers are also supplying to both India and China, with 17 companies holding Indian and/or Chinese Import Registrations.

There is a mild preference towards supplying China over India, but generally companies importing into China will also be importing into India and vice versa.

Forming a picture of dose forms

In terms of marketed dose forms by Indian, Chinese and Korean-based companies in global markets, there are some interesting differences regarding where these companies are focusing internationally.

Certainly China easily leads the way in sheer number of companies with marketed dose forms, around 1300, which is more than double that of India’s five hundred, and towering over Korea’s approximately 130 companies. Closer inspection shows that only four percent of Chinese-based companies market their products outside of China, illustrating that for much of the industry there is still a focus primarily only on the local market.

For South Korean companies, 61 percent have product launches in international markets, outpacing India, where 47 percent have international launches. Korean companies also appear to be expanding internationally, as an additional 10 companies have entered into international markets over the past year.

Currently no South Korean or Chinese companies have marketed dose products in the US. This is in stark contrast to India’s heavy presence.

Understandably, the primary focus for companies in all three markets is their local markets. However, among the three countries there are differences in where the international activity is (see Figure 3).

Indian companies prefer to launch products in Ukraine and Russia, most likely helped by the close diplomatic and economic ties to Russia. Historical ties to the former Soviet Union also make launches in Latvia, Lithuania and Estonia quite common and these represent the most heavily-penetrated European countries by Indian companies.

The most common markets for South Korean companies are primarily within Asia with those of Singapore and Pakistan being the most common. Others include the Middle East (Egypt, Lebanon and United Arab Emirates) as well as some of the Eastern European markets (Bulgaria and Russia). Only one South Korean company is present in the EU top five of the UK, France, Germany, Spain and Italy and eight companies overall have launches in European markets.

It has already been noted above that a relatively small proportion of Chinese companies have had international launches and this is also represented in Figure 3 which shows a lower presence even in the more common markets favoured by Chinese companies.

Korean and Chinese companies have almost no presence within India, most likely due to saturation of the Indian market and intense competition from local companies. In contrast, Korean companies are particularly active in China with 17 companies marketing products there. India shows a similar level of activity in China. China has only one company in the Korean market.

Currently there are 13 Indian-headquartered companies with marketed products in the US, excluding Daiichi Sankyo’s Indian subsidiary Ranbaxy. Indian companies' finished dose products are marketed in the U.S. through marketing alliances. Of these 13 companies, all but one are also vertically integrated into API manufacturing capabilities and hold active US DMF.

Many first entered the US market via their API and pursued forward integration strategies to expand their presence in the US to dose form manufacturing and marketing. All but two of these companies have an Established Newport Corporate API Rating. Wockhardt and Zydus-Cadila Healthcare dominate with respect to the most number of products launched globally by an Indian company, closely followed by Lupin and Intas Pharmaceuticals.

Nevertheless in the US, Sun Pharmaceuticals has more marketed dose forms than any other Indian-based company (due to their acquisition of Caraco) with Wockhardt a near second. Sun Pharmaceuticals also has the highest number of US Orange Book Approved Drug Products though Aurobindo Pharma. Wockhardt also has a high presence. Dr Reddy’s and Aurobindo Pharma come out on top with the most number of active US DMF as well as COS. In spite of this, both also have extensive portfolios of launched dose products globally. Ten of these companies have registered abbreviated new drug applications (ANDA) with Paragraph IV certification. Sun Pharmaceuticals, Dr Reddy’s and Lupin are particularly noteworthy in the level of patent challenge activity. On the other hand, it is also likely that additional Indianbased companies are supplying API to ANDA with Paragraph IV.

The generics drug industry has always been noted for deals activity and Indian companies with a US presence are no exception. Several Indian-based companies have marketing deals with US-based groups but may not necessarily market their own dose forms in the US market.

Examples include Ipca with its Oct 2008 agreement with Heritage Pharmaceuticals to manufacture propranolol hydrochloride oral tablets to be marketed by Heritage in the US market. Cipla has been particularly active in this area with multiple agreements with companies such as Watson, Akorn and Ivax (now Teva).

Other Indian companies with US presence via manufacturing and marketing deals include Alkem with Taro Pharmaceuticals, Strides Arcolab with KV Pharmaceutical and Sagent Pharmaceuticals, and Unichem with Lannett.