What is one of the most significant trends driving growth in the global API market?
It’s the rise of niche APIs. They currently account for at least 25% of the market, and that percentage is expected to increase greatly in the near future.
Global demand for active pharmaceutical ingredients (APIs) is growing fast. According to a report published earlier this year, market revenue is expected to grow from $185.23 billion in 2020 to $331.37 billion by the end of 2030 — an increase of nearly 79%.
Unlike traditional bulk APIs, which historically have been manufactured in amounts measured in multi-tons, niche APIs are produced in significantly lower quantities. However, this doesn’t need to mean they are less cost-effective. There are several reasons for this:
- Higher potency —Many niche APIs are effective in much smaller doses, meaning they don’t need to be manufactured in huge batches. Although the process of researching, developing and approving high-potency APIs is longer and more complex, they also offer higher profit margins. Thus, the competitive advantages of these high-potency APIs far outweigh the additional development challenges and costs.
- Efficiency —Although some niche APIs are produced by large global pharma companies, they can also be manufactured by small and mid-scale operators in smaller facilities. Done right, this model has the potential to offer lower operating costs, superior quality control and more nimble responses to changing regulations, market conditions and demand.
- Small market size or patient population — Some niche APIs are designed to treat rare or highly-specific conditions. Although demand for these APIs doesn’t compare to more common blockbuster drugs, those who need them are often willing to pay higher prices. The growth in personalized medicine is also likely to drive demand for treatments with a patient population of as little as a single individual.
- Patent expirations — Mainstream pharma companies often stop manufacturing APIs when a blockbuster product becomes eligible for generic production, creating opportunities for smaller drugmakers willing to fill the gap.
- Innovation —An increasingly common strategy for large generic drug producers is to boost their competitive advantage by looking for new approaches to existing treatments. This can be achieved by improving existing products, swapping in new components, re-configuring formulations or leveraging new technologies [Read more about the 505(b)(2) pathway companies are using].
Together, these factors make a strong business case for niche APIs, while creating opportunities for more personalized, cost-effective, innovative and high-quality products. They also hold the promise of solving unmet medical needs for smaller, targeted patient populations.
That said, many modern niche APIs are highly complex products. As a result, sourcing them can be a more complicated and time-consuming process.
What to look for when sourcing niche APIs
Many factors need careful consideration when selecting a niche API provider. Unlike conventional bulk APIs, the smaller quantities involved can make it difficult (and in some cases impossible) to establish multiple sources for a niche product. Even when this is possible, diligent vetting will be critical to your success.
Here are six of the most important factors to review during the niche API sourcing process:
- Reputation —In addition to a proven ability to produce high-quality products, you’ll want to pay close attention to the manufacturer’s regulatory status, reliability and history.
- Capabilities —The API manufacturer’s capacity should play a substantial role in your decision, as this will affect the project’s lead time, cost, and other factors. This is particularly important if the molecule required isn’t available in the general market, which is often the case with niche APIs. Even if your sourcing team doesn’t need to pursue a custom synthesis approach, it will be critical for your manufacturing partner to have the necessary know-how to review and analyze multiple synthesis routes, to understand the chemistry of the product family, and to be capable of handling the product’s unique needs.
- Market expertise — Your API supplier should demonstrate a strong understanding of the needs of your target customer base, backed by extensive and ongoing research. They should also have a background in the type of product you are currently developing. This knowledge should extend not only to the APIs in question, but to the end products throughout the global market.
- Data analytics — The complexity of niche APIs makes it essential for your source to leverage the full advantages of database and data analytics technologies. These tools will enable you to make smarter research and business decisions, minimize supply chain risks, evaluate the performance of suppliers and predict shifts in market demand.
- API regulation —The regulatory status of any given API can impact the cost and time required to see return on your investment — or whether a particular project is subsequently worthwhile.
- Total cost of ownership (TCO) —Initial capital costs should never be the main driver in your decision. It is far more efficient (and often more profitable in the long run) to evaluate the total cost of your project over time – accounting for factors beyond the initial purchase price, including all variables detailed. above.
LGM Pharma can help you find the right source
In addition to contract development & manufacturing services, LGM Pharma is a world leader in API sourcing services. With proven expertise in supplier relationship management (SRM) and an extensive network of manufacturing partnerships, LGM has the multifaceted skills and tools needed to help you achieve lower costs, higher efficiency, superior customer service and continuous improvement when sourcing niche APIs. Contact us today to learn more.