The rise of ingredients companies in lower-cost markets, such as India and China, prompted Western businesses to focus on more complex, higher-margin work. This shift is continuing with the rise of high potency active pharmaceutical ingredients (HPAPI) and anti-cancer conjugate antibodies.
“A greater percentage of [custom pharma] will become highly specialised offerings”, Rakesh Sachdev, Sigma-Aldrich CEO, said at JP Morgan Healthcare Conference. Sachdev said focus in APIs is on “very unique products” and this is driving Sigma-Aldrich to expand its high potency compound capabilities.
Growing in the sector could give Sigma-Aldrich a competitive advantage. HPAPIs are “very hard to manufacture”, Sachdev said, and this barrier to entry limits competition from low-cost emerging market businesses.
In other sectors, such as generic APIs, where Sigma-Aldrich has a presence, competition is intense. “[Asian companies] have successfully done a lot of work on APIs and are very competitive”, Sachdev said. Competition is set to become fiercer.
“The objective for the API business will be to continuously increase sales from developed markets”, Glenn Saldanha, managing director of Glenmark said at JP Morgan Healthcare Conference. Saldanha said the percentage of sales coming from developed markets will grow every year.
Generic API sales at Glenmark accounted for 12 per cent of total revenue in fiscal 2011. By shifting from emerging to established markets and introducing new APIs, such as the four it added in 2011, Glenmark hopes to grow the business.
However, sales at the generic API unit were flat in the first half of the fiscal year. Sales over the six months were down almost one per cent but strong performance in the US and particularly Europe drove 25 per cent growth at the overall generics business.