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Industries:  Pharmaceutical 

India: emerging sourcing hub for Excipients

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By: Kirti Vatsa
Lead Analyst,CMO Formulations and Drug Delivery devices

calender28 Feb 2018

Abstract

1.   Introduction

            Currently, big pharmaceutical companies are sourcing very low amounts of excipients (<5–10 percent) from India and are opting to engage with suppliers located in the developed market. In India, there has been an increase in the percentage of drug master files (DMFs) for excipients (7 percent in 2011 to 13 percent in 2017) as well as an increase in exports of few excipients to developed market. The excipient market in India has lucrative growth opportunity due to the availaibilty of low-cost raw materials, labor costs, and quick adaptability of suppliers to new technology. The Indian excipient market is growing at 10–12 percent as against the global growth rate of 5–7 percent. The global excipient manufacturers are also shifting towards India via different entry strategies—joint venture, new manufacturing facility, and acquisition of domestic suppliers. Hence, based on these trends, India would soon be considered an alternative sourcing destination by MNCs at least for commodity/non-functional excipients. However, factors such as quality risk and high supplier switching cost would decide if pharmaceutical companies can leverage this changing trend.

2.   Main Focus

            This whitepaper has focused on favorable factors that can make India an alternative sourcing destination for big pharmaceutical companies; the whitepaper has also discussed current market trends in the Indian pharmaceutical excipient market. It has also analyzed excipients that are currently being exported to the U.S. and Europe and focused on the leading suppliers (with the U.S.-DMF and good manufacturing practices (GMP)) that are currently active in the Indian pharmaceutical excipients market.

3.   Recommendation

            It is expected that the big pharmaceutical companies will consider India as the potential sourcing destination for excipients in the near future (5–10 years). With an increase in the number of suppliers with DMFs and an increase in exports to the developed market, it is expected that excipients, such as cellulose (mainly microcrystalline cellulose (MCC) and croscarmellose sodium), gelatin, coatings, and phosphate-based excipients, would be exported in larger quantities and at a lower price.

Excipient Market (Developed versus Emerging)

The global excipient market is dominated by suppliers from the U.S., Europe, and Japan, altogether contributing to 85 percent of the overall market supply. India records a share of only 5–7 percent in the global excipient market. However, Indian suppliers offer an advantage in that they provide conventional excipients at a lower price when compared to industry leaders.

The demand for oral solid-dosage-form (OSDF) excipients by volume was almost the same in all regions (Europe, the U.S., China, and India) in 2013, which was 100 kilotons per region. However, its consumption in India and China is expected to show a growth rate of 7–8 percent as opposed to Europe and the U.S. (4–5 percent). However, its demand by value was different in each region in 2013—the U.S. (39 percent), Europe (34 percent), India (13 percent), and China (14 percent). This is due to the presence of highly expensive functional excipients in other regions when compared to cheaper alternatives available in both India and China. Due to a high demand for functional excipients (8–10 percent) when compared to traditional excipients (3-4 percent), the U.S. and Europe lead in this segment.

Sourcing of Excipients by Big Pharmaceutical Companies

Major pharmaceutical companies generally engage with one to two qualified suppliers/excipients. In order to source most of the excipients, these companies engage with top suppliers from the developed market. For example,

  • FMC Corp./ JRS Pharma for MCC
  • Ashland Inc./Dow Chemical for hydroxypropyl methylcellulose (HPMC)
  • Ashland Inc./Nisso HPC for hydroxypropyl cellulose (HPC)
  • Capsugel (acquired by Lonza in 2017)/Qualicap for empty hard gelatin capsules.
  • Rousselot/Gelita AG for gelatin

They prefer engaging with these suppliers as they not only supply high-quality excipient but also offer customized technical services based on the exact formulation need of big pharmaceutical companies.

For example, suppliers, such as Ashland Inc., BASF, Colorcon, and Lubrizol Corp., among others, are being preferred by MNCs as they provide functional excipients, new excipients for use in controlled release modifications, and hot melt extrusion (lowers the drug manufacturing cost), among others. Big pharmaceutical companies favor alternative suppliers from India and China primarily to leverage price against their current suppliers to stay competitive; these companies do not intend to switch unless they have some compelling reason, such as meeting their local demand from regional sourcing. They do not switch often as the cost of switching and the supply chain risk associated with cheaper source dramatically outweighs the savings.

India as an Attractive Excipient Sourcing Destination

India still holds a dominant position globally as the manufacturer of active pharmaceutical ingredient (API) , even though a few quality issues have been observed in the last 4 years. However, India is not a matured market for excipient manufacturing, and it is estimated that only 10 percent of excipients manufactured in India are currently being used in the U.S. and Europe.

In the last 4–5 years, there has been a gradual change in the Indian excipient market, with an increase in the export growth rate of few excipients, the number of DMF holders, and interest of suppliers to increase capacity mainly to export to developed markets. The Indian excipient market is expected to grow at the rate of 10–12 percent until 2020.

Similar to API, the advantage of sourcing excipients from India can be availed in the form of cost benefits; this is because the excipients are priced at 5–7 percent lesser in India when compared to the developed market.

Excipients such as starch, gelatin, and capsules are currently produced in India, are adequately supplied, and are mostly consumed by domestic pharmaceutical companies. The export of commodity excipients is expected to increase in future; additionally, several domestic suppliers are getting GMP and Excipact certifications, among others.

The factors that favor the growth of the Indian pharmaceutical excipient market are as follows:

  • Increase in DMF count, year-over-year, with 119 certifications in last 6 yrs
  • Strong exports to developed market
  • Investments by foreign excipient manufacturers through different channels such as setting up own facility, joint venture with domestic excipient supplier in India, and merger/acquisition of domestic supplier
  • ExciPact certification to domestic supplier

DMF Count by Year (2012–2017*)

In the past few years, there has been an increase in the count of DMFs for pharmaceutical excipients in India. Excipients such as cellulose, capsules, coatings, calcium phosphate received the highest number of DMF certifications. This is due to their high market demand and wide usage in co-processed excipients.

Note: *DMF count is provided till Q2 2017

Source: DMF List

Growth in Major Excipients’ Export to Developed Markets

Excipients such as MCC and croscarmellose sodium are currently being sourced by the developed markets from India. Local pharmaceutical companies mostly rely on imports from the U.S., Europe, and Japan for excipients such as povidone, crospovidone, polyethylene glycol (PEG), few cellulosic derived excipients, and other expensive excipients. However, the increase in global demand will lead global suppliers to increase production capacity in emerging markets either by establishing a joint venture (JV) or by acquiring a local supplier who has less number of excipients in the product portfolio.

  • DFE Pharma’s acquisition of Brahmar Cellulose in 2013
  • JV between JRS pharma and Gujarat Microwax for almost 10 years                  

Oral Solid Excipients

Export Growth rate (2016 vs 2015)

Major Indian Suppliers (the U-S.- DMF Holder)

Price

Market Structure

Calcium Phosphate

(Di-basic and Tri-basic)

6–8 percent - the U.S.

20–25 percent - Europe

Sudeep Pharma, Hindustan Phosphates, India Phosphate, and Crest Cellulose

Not Available

Consolidated market; a significant proportion of the excipient market is consolidated with suppliers from the U.S. and Europe.

Indian supplier only occupy 5–10 percent of the global market share

MCC

5 percent - the U.S.

2 percent - Europe

Sigachi, DFE Pharma, Gujarat, and Microwax Pvt. Ltd.

Developed market: $4–$5/kg

Emerging market: $2–$3/kg

Sodium Starch Glycolate

6 percent - the U.S.

2 percent - Europe

Crest Cellulose

Not Available

Source: Eximpulse, Beroe Analysis

Major DMF Holder Excipient Suppliers in India     

Domestic suppliers such as Corel Pharmachem, Ideal Cures, Hindustan Phosphates, Crest Cellulose are the top suppliers of excipients mainly for pharmaceutical coatings, phosphates, and MCC, respectively. Collaboration of global excipient suppliers with local suppliers would enable the former to avoid regulatory challenges as they upgrade manufacturing facilities in the local market..

One of the examples is the JV of JRS Pharma with Gujarat Microwax for MCC and disintegrants. A new plant was commissioned in 2009 to produce disintegrants. This helped JRS Pharma to expand disintegrants and double its capacity in 2017.

Similarly, DFE Pharma’s acquisition of Brahmar Cellulose in 2011 led the former to focus on the cellulosic excipients and increase its global market share.

Excipact Certified Domestic Supplier in India

There is a total of 62 Excipact-certified manufacturing facilities globally, and India accounts for only 19 percent of Excipact-certified facilities across the globe, , which is expected to increase in another 2–3 years. ACG (supplier of HGC and HPMC shell) and Ideal Cures Pvt. Ltd. (supplier of coating) are the top suppliers by number of Excipact certified manufacturing facilities

Supplier

Issue Date

Facility

Excipient

ACG Associated Capsules Pvt. Ltd.

2017

Khandala, Maharashtra, India

Hard gelatin capsule shell (HGC)

Pithampur, Madhya Pradesh, India

HGC and HPMC shell

Thane, Maharashtra, India

HGC and HPMC shell

Ideal Cures Pvt. Ltd.

2015

 Anand, Gujarat, India

Methacrylic acid co-polymers and dispersions and ethyl acrylate copolymers

Jammu, Jammu & Kashmir, India

Coating

Thane, Maharashtra, India

Coating

Asha Cellulose (1) Pvt. Ltd.

2017

Valsad, Gujarat, India

Ethyl cellulose and its aqueous disp.

Sigachi Industries Pvt.Ltd.

2017

Dahej, District Bharuch, Gujarat, India

Cellulose

Chemfield Cellulose Pvt. Ltd.

2016

Nagpur, India

MCC

Colorcon Asia Pvt. Ltd.

2016

Verna, Goa, India

Plasticizers, pigments, and colors, among others

Sudeep Pharma Pvt. Ltd.

2016

Vadodara, Gujarat, India

Dicalcium Phosphate, Tribasic Calcium Phosphate, and Calcium Carbonate

Vikram Thermo (India) Ltd.

2015

Dist. Gandhinager, Gujarat, India

Acrylate based polymer

Source: ExciPact

Domestic Supplier Update

Supplier

Year

Type of News

Details

Nitika Pharmaceutical

2016

Expansion

Nitika has planned to build its fourth excipient plant in Nagpur, India, mainly to cater to export markets.

Dow-Colorcon

2014

New product launch

The alliance of Dow-Colorcon announced the launch of Methocel DC2 in Hyderabad, India. This product will help pharmaceutical companies to reduce manufactuing costs by upto 60 percent and shorten development time.

Colorcon Asia Pvt. Ltd.

2014

Expansion

Colorcon expanded its Goa facilty (dedicated to film coatings) with an investment of 700 million rupees.

Sudeep Pharma

2015

Joint Venture

Sudeep pharma entered into a JV with JRS Pharma for calcium-based phosphates.

JRS Pharma already has a JV with Gujarat Microwax for more than 10 years for MCC.

 Riddhi Siddhi

2012

Acquisition

Rouquette pharma acquired three cornstarch production sites of Riddhi Sidhhi

Source: Supplier website, news

Conclusion

In another five years, India is likely to become a prominent region for manufacturing excipients and the exports from India to the U.S. and Europe would increase by at least 10 percent. The global pharmaceutical companies would prefer to enter into an agreement either with a global supplier with regional presence (local manufacturing) or a domestic qualified supplier with no regulatory risk (GMP). The JVs enable the global suppliers to widen their geographical reach and help the domestic suppliers to upgrade their facilities to meet the demand of pharmaceutical customers. Thus, the number of top excipient suppliers entering into JVs with Indian suppliers would increase at a faster pace in another five years.

 Indian suppliers should not only produce excipients to comply with the pharmacopeia specifications, but they must also ensure that the excipients match the standards of GMP. They should gain the understanding required by quality-by-design (QbD) for getting an insight into the continuous manufacturing process; additionally, they must be prepared to work with their customers in providing the necessary technical support, that is, ‘to go the extra mile’ on behalf of the customer. Hence, if there are no regulatory risks, then there would be a strong opportunity to export Indian origin excipients to developed markets.

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