Market Trends of India CMO Industry
Rise in Outsourcing Volume by Big Pharma Companies
- The Indian Drug Manufacturers Association (IDMA) highlighted that rising costs and regulatory pressures in developed markets are compelling global pharmaceutical companies to reduce their internal capacities in research, development, and manufacturing. Instead, these companies are increasingly turning to contract manufacturing, research services, and outsourcing of research and clinical trials in developing nations. Additionally, ageing manufacturing facilities in Europe have led companies to shift their research and manufacturing operations to India.
- Developing a biological Active Pharmaceutical Ingredient (API) is a technically challenging and capital-intensive, making its production cost significantly higher than conventional drugs. Notably, around 75% of the revenue from outsourcing biologics is derived from API production. Recognizing the high value and margins associated with biologic drugs, Contract Manufacturing Organizations (CMOs) heavily invest in expanding their capacities. However, pharmaceutical companies prioritize supply security over direct investments in manufacturing.
- The trend of rising outsourcing in the pharmaceutical sector is paving the way for successful partnerships, with contract manufacturing becoming a vital component of their value chains. The market is witnessing substantial growth, driven by an increasing number of large pharmaceutical companies in India seeking to outsource products domestically.
- As per the Union Budget of India, the pharmaceutical industry's budget allocation in 2020 was INR 3.34 billion (approximately USD 0.04 billion). This allocation was projected to surge to INR 40.9 billion (around USD 0.49 billion) by 2024. The global market is expanding, largely due to the cost-effective resources available in developing nations like India.
- India stands out as a favored destination for CMOs, boasting over 100 US FDA-approved manufacturing facilities, a number that's on the rise. The robust presence of major players like Zydus Cadila and LUPIN further strengthens the country's pharmaceutical landscape.
Understand The Key Trends Shaping This Market
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The Active Pharmaceutical Ingredient (API) and Intermediates Segment to Witness Growth
- The manufacturing of APIs has consistently increased over the past few years. This will continue to rise steadily, with further patent expiries expected in the future and a significant increase in global generic production capacities. Most businesses in the industry emphasize creating biological APIs and boosting API production.
- Furthermore, increased initiatives by the Indian government in the healthcare field, biologics innovation, and an increase in cancer and age-related disorders are just a few of the vital reasons propelling the expansion of the API manufacturing industry. The expansion could also be due to expanding R&D on medication, rising chronic illness rates, growing generic relevance, and rising biopharmaceutical usage.
- The Indian pharmaceutical industry produces a variety of bulk pharmaceuticals, which are active pharmaceutical ingredients that serve as the basic raw materials for formulations. Formulations comprise the remaining four-fifths of the industry's output, with bulk pharmaceuticals making up about one-fifth. The nation also possesses expertise in active pharmaceutical ingredients (APIs), as it is the manufacturer of more than 500 APIs and the source of 60,000 generic brands in 60 therapeutic categories.
- India also benefits from expanding the domestic CMO market by encouraging investments in pharmaceutical businesses to establish wholly-owned or joint venture facilities. According to the data by Invest India on the distribution of pharmaceutical exports from India as of April 2023, formulations and biologicals took the top position with 73.31%, followed by bulk drugs, intermediates, and other components. The cost structure in China and India has also diverged as China has become a more expensive outsourcing destination. Also, companies from the United States and Europe aim to diversify their supply chains, benefiting India.
- India, a significant player in the production and export of generic medications, has grown wary of its reliance on China. To bolster domestic production, the Indian government has initiated several measures. Responding to the stark realization of India's heavy dependence on Chinese imports, the government unveiled a substantial USD 400 million grant to bolster the country's API production. This move triggered a significant surge in the stock prices of key API players, including Lasa Supergenerics, Shilpa Medicare, Gujarat Themis, and Solara Active Pharma.
