In recent years, there are two things about Indian drugs: 1) on March 3, 2020, the Indian Foreign Trade Agency issued a notice restricting the export of 26 raw materials and their preparations, including paracetamol, tinidazole, erythromycin and clindamycin. Foreign drug prices have taken the lead in rising, and the market of raw materials in China has also begun to rise. 2) two years ago, the film "I am not the God of Medicine" was released, and the protagonist bought cheap generics of the targeted drug "Gleeville" on a large scale from India. People are beginning to know that India's cheap and effective generic drugs.

Since March, India has restricted the export of a variety of raw materials and their preparations, providing an opportunity for China's API market.China and India have played an important role in the global supply of APIs, while Italy and Spain are both major exporters of APIs. At present, the global COVID-19 epidemic is not optimistic, and many countries around the world are in a state of suspension of production. According to Johns Hopkins University epidemic data, as of April 15, 2020, there were about 1.98 million confirmed cases worldwide, with 609000 confirmed cases in the United States, 162000 in Italy and 11000 in India. In addition, considering the actual situation of local health and medical resources in India, India is likely to become another "tipping point" of the epidemic.

From March 2 to April 15, the field of medicine and biology increased by 6%, and chemical APIs in the field of medicine and biology increased by 8%, far outperforming the 15 points of Shanghai and Shenzhen 300. This article will show you why India bans the export of APIs and how Chinese pharmaceutical companies can benefit from it.

I. definition of API:

The English full name Active Pharmaceutical Ingredients (API), that is, the active component of a drug, is the basic substance that constitutes the pharmacological action of a drug, and the API can not be directly used by patients.The preparation must be further processed by adding excipients before the patient can take it.。

II. Classification of APIs:

The classification of API is mainly defined according to the cycle in which it is located:

Bulk APIs:The products have been on the market for a long time, and there are no patent problems. China has obvious advantages, such as vitamins, antibiotics and so on.

Characteristic API:Varieties that will pass or just pass the patent period are mainly supplied to generic drug companies, which are more difficult to develop and have higher added value than bulk raw materials, and the advantage of the Indian market is more obvious. Among them, the representative varieties are chronic disease drugs, central nervous system, anti-tumor, heparin, contrast agent and so on. The demand is closely related to the life cycle of downstream preparations.

Patented API:Varieties still in the patent periodMainly supplied to the original drug research enterprises, the development is extremely difficult, the added value is the highest, customized according to the needs of downstream customers, the market advantages of European and American countries are obvious.

Third, the supply and demand of APIs:

1) demand side:

According to the China Business Intelligence Industry Research Institute, the global market size of chemical raw materials is US $165.7 billion in 2018, an increase of 6.90% over the same period last year. The market size is expected to reach US $186.4 billion in 2020. The growth rate of the API market (gray line) will be faster than that of the global drug market (black line).

From the perspective of industry development, the global API industry has maintained a stable development in recent years:

A) long-term reasons:The global aging trend is obvious, especially in Europe, the United States, Japan and other developed countries, which greatly increases the demand for drugs, and the continuous expansion of the scale of the drug market directly leads to the increase of the global market scale of raw materials year by year.

B) short-term reasons:In recent years, a large number of major global patents for original research drugs have expired, and related generic drugs have been put on the market one after another, which further promotes the growth of related APIs.

2) supply side:

Although there are relatively many API manufacturers in the world, there are not many manufacturers who really meet certain qualifications and can supply APIs to the standardized drug market. according to the export situation of the standardized market, the global supply of APIs is very concentrated. The first seven countries account for 76% of the global market for API supply.

Among them, the United States has the highest share, about 36%, followed by India, China, Italy and Japan, accounting for 2%, 9%, 7%, 6% and 6%, respectively. The highest market share in the United States and Europe is mainly related to related patented drugs, and the price of professional drugs is higher, resulting in a larger market scale.

Except for the United StatesIndia and China are the two largest markets in the global supply of APIs, accounting for about 21% of the global industrial chain.If the irregular market is considered, their market share is expected to be higher, so it can be seen that China and India play a key role in the global API industry chain.

Fourth, the epidemic situation has caused a gap in the supply side:

At present, the global COVID-19 epidemic is not optimistic. As of April 14, 2020, according to the wind COVID-19 epidemic database, the cumulative number of confirmed cases was 520100 in the United States, 159500 in Italy and 170100 in Spain. Italy and Spain are both major exporters of APIs in the world. In addition, it is very noteworthy that India is likely to become another "tipping point" of the epidemic.

If the epidemic in India continues to spread, we believe that there may be a large gap in the supply of APIs with global characteristics, mainly for the following reasons:

1) India has played an important role in the global supply of APIs.. And the proportion of self-use of Indian APIs is about 50%, and exports account for about 50%, so if Indian API companies stop production because of the epidemic, their exports will be directly affected. On March 3, India's General Administration of Foreign Trade imposed export restrictions on a total of 26 products, such as paracetamol (anti-inflammatory and antipyretic analgesics), metronidazole (bacterial infection) and acyclovir (antiviral drugs).

2) the influence will be more in the field of characteristic API, which accounts for a greater proportion of raw materials in the Indian market.In terms of categories, about 70% of the APIs in the Indian API market are chemical pharmaceuticals, and the main API categories in the Indian market are penicillin, clopidogrel, Atto vastatin and other varieties. are characteristic API varieties (mainly cardiovascular, infection, oncology, diabetes). If the Indian API market is hit, the supply of APIs with global characteristics will suffer a huge negative impact.

Opportunities for China's API market:

Due to the strong demand for drugs, if the Indian epidemic leads to a tight supply of APIs in India, it may lead to a reshaping of the global supply pattern of APIs. We believe that, in fact, China is the country most capable of undertaking API production capacity. There are mainly the following points:

1) China itself is in the upper reaches of the Indian API industry chain, and the product structure is similar to that of India.According to FDA2018 statistics, about 88 per cent of US (downstream) APIs come from overseas, of which 31 per cent come from India (mid-stream) and 14 per cent from China (upstream), while about 70 per cent of Indian exports of APIs come from China. It can be seen that India is highly dependent on Chinese APIs.

In terms of product structure, the product structure of China is also very similar to that of India.. According to RNCOS data, Indian raw materials are mainly in the fields of anti-infection, cardiovascular, central nervous system and respiration, of which anti-infection and cardiovascular account for about 55% of the total raw materials in India. China has a strong accumulation in the field of anti-infection and cardio-cerebrovascular.

By the way. At present, the number of DMF (drug master documents, documents reflecting drug production and quality management) held by Chinese enterprises continues to grow. By the end of 2016, 46% of the DMF in the United States is held by Indian companies, and the number of DFM in China (red) is growing steadily. In recent years, China's annual new DMF registration is second only to India (red), and now it has exceeded the number of the United States and five European countries, which can reflect the trend of capacity transfer of characteristic APIs in the world to some extent.

2) in terms of production capacity, the production capacity of API in China is also relatively sufficient.On the other hand, with its more mature basic industrial system and cost advantage, China has quickly caught up with India in terms of core technology, product quality system and DMF certification. China's API exports have continued to grow in recent years, with the export volume of APIs (including pharmaceutical intermediates) reaching 9.2972 million tons in 2018, with an export value of US $30 billion. In 2019, the export size of India's own API market is about US $15 billion. Therefore, in fact, Chinese API companies have the ability to undertake the production capacity of Indian API.

Summary:

The impact of the epidemic in India may create a large supply gap in the field of APIs with global characteristics. At present, China's exports of APIs are mainly bulk APIs, while those of India are characteristic APIs. The upstream of Indian characteristic API is the bulk API of China, which is difficult to develop and has great added value. However, with the medical policy reform in China in recent years, the new DMF registration obtained by China every year is second only to India, and the product structure of China is similar to that of India. China has rapidly caught up with India in core technology, product quality system and DMF certification by virtue of its more mature basic industrial system and cost advantages. This epidemic undoubtedly gives an opportunity for the export of APIs with Chinese characteristics.