These five API companies may benefit as drug makers seek to reduce dependence on Chinese Raw material.
Discl: Invested in API companies. Please apply due diligence before investment.
Discl: Invested in API companies. Please apply due diligence before investment.
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India-China Stand-off threatens to disrupt the worldâs biggest exporter of Generic drugs!
The Article lists the name of API makers likely to be affected in case of disruptions in imports of Key Starting Raw material from China !
Discl: Invested in a basket of API makers âŚ
It is not a buy sell recommendation. Please apply due diligence before investments
Well, I think it would be important to know few things -
- If there is any alternative to the key raw ingredients for API players other than China or not
- If yes, how cost effective the alternatives are and will the business viability be impacted. In any case, existence of alternatives even if significantly costly is a huge plus for long term.
- If not, do we have the capability to create alternatives - How soon and how effective?
- Will China ever curb that export as they like to do manufacturing business and to most good business owners, business is business and never mixed with emotions - unless of course things proceed towards worse.
Would be good to know thoughts of those who have in depth knowledge of the sector.
Disc: As do not understand anything on above points, not yet invested in any API players. Have some exposure to MNC Pharma and couple Indian formulation companies
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Though I am not an expert on Pharma Sector, will try to answer your queries, as I am tracking this sector due to my investment interests and because of the ongoing Border conflicts between India & China.
(1) The way in which India is one of the leading exporter of Generic/ formulations to the world at competitive price, similarly China is a leading exporter of API & Its Starting key material to the World at competitive ratesâŚSo the entire world including India sources itâs API & Its key starting material from China at a competitive rates.
Chinaâs expertise lies in producing the Starting key material for API by fermentation process from rotten vegetables and fruits. It is highly technolgy driven fully supported by Chinese Govt. Thus the Chinese Industry is able to offer a cheaper and cost effective product to the world.
(2) To become Atma Nirbhar, we have identified most essential 53 molecules which we are currently importing from ChinaâŚthough there may be many more we must be importing due to cost competitivenessâŚPLI scheme has been declaredâŚthe list of 53 molecules attached in the link below. A lot of issues are still being debated including whether brown field projects would be included⌠technology supportâŚetcâŚ
(3) Alternate source for key starting Raw material from other countries are also being exploredâŚ
(4) I was looking for import content of different API makers from respective threads in Valuepickr forum⌠but there is no concrete data available. It seems to be a Grey Area and there seems to be a lack of transparency among the promoters of the API companies in disclosing and quantifying the exact volume of imports from China , risks involved in China imports and mitigation plan thereof.
(5) I am attaching an interesting article- what is a possible way out for India with regards to Key starting material for indian API industry? and though it is a long drawn process.
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Good summary of what is happening in Pharma.
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Government starts probe against vitamin C dumping by China
I was wondering why Vitamin C tablets are off the shelf nowadays- for example Limcee - a very popular Vit C tablet are not available during the pandemic due to supply disruption though
China was dumping this vitamin C Ascrobic Acid in Tonnes in India before pandemicâŚ
Now seeing that Govt is taking action on China imports , half a dozen companies led by Bajaj Health care have lodged complaint and DGTR has started investigation to levy Anti-dumping duties on Chinese vitamin C.
Interestingly, I never heard of Bajaj Health care - listed company with promoters 67% holding and very good return ratioâs and making a wide range APIâs consisting of several acute and chronic segments apart from nutraceuticalsâŚ
There is no thread in valuepickrâŚ
Please have a look at the company website âŚ
Any views from members welcomeâŚappears interesting from investment point of view unless there is some corporate governance issue with this company.
http://www.bajajhealth.com/api/
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There were several questions about how pharma/API industry will be affected by supply issues with KSM from a country. I find the below research doc very illuminating about âtheirâ methods. For the impatient, go straight to âin-depth case studiesâ arround page 20. Starts with norway case. They are very averse to affecting their own to punish others.
The CCPs coercive diplomacy_0.pdf (7.6 MB)
I infer that, if an api is indirectly/directly connected to their domestic pharma needs, then its KSM supplies are very likely safe for now (based on the research report of historical measures). The condition in which this rule will break would be if they have already stocked enough for a possible disruptive event (Example: War). Another way to view would be that if the supplies are not yet disrupted, then it could mean the current stock is not enough to start a war.
Can someone point to the countryâs import data for medicines?
What about price escalation? Similar arguments can be made for the same. Waiting on commentary from others.
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Dr Reddyâs Lab tie up to manufacture and distribute Sputnik-V- Covid19 vaccination after indian Govt (Regulatory) approval.
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CNBC TV interview with RDIF CEO Kirill Dmitriev on Sputnik -V Covid19 vaccination tie up with Dr reddy 's lab
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GV Prasad of Dr Reddyâs Laboratories:
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China seems to have increased price of Key Starting Raw material by 20% for our API makers⌠So if any of our API maker is dependent upon china only for the raw material , then the bottom line could be hit to the extent of its Chinese import content. The API maker may not be hit , if it has a second source either from india or some other country at a reasonable/ competitive price !
Similarly, China has hiked its API price by 20% and so our Generic pharma makers those who depend upon China only for its API could also be hit to the extent it imports from China!
I am ok with that if India takes it a challenge and goes the whole gamut of manufacturing the entire product range from start to finish. We might face immediate roadblocks but it could turn out to be a blessing in disguise for Indian Pharma companies.
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I was watching this wonderful interview with Amit Ranjan (link), here are the key points that I could gather. If anyone is interested in learning about Indian pharma septic practices I will recommend watching his videos.
- Injectable facilities can easily shift to US because it doesnât require lots of space, is high value item, and also doesnât require a bioequivalence study (which accounts for 1/3rd of an ANDA price). This can be a big issue for companies like aurobindo and Sun which have bet big on specialty injectables; Cadila hasnât bet on injectables
- Oral solids will not move away from India because its labor intensive and is very low in the value chain (okay for companies like Ajanta, alembic, hetero)
- NCE : Cadila realized early that getting FDA approval is not easy (geopolitics and data integrity issues) and then marketing the drug is hard. So they started the process of getting approval from DCGI and then going to markets abroad which recognize drugs approval by DCGI. Wockhardt and Glenmark might need to realize this at some point
- API : Big ones wonât become giant unless they put up a lot of capacity (companies like Divis and Unichem); A lot of smaller companies will get business because entry into generic API is not at all difficult
- Fermentation based API : India cannot even compete with China because of low power costs in China (eg: vitamin, pencillin, gentamicin)
- CDMO : Indian companies didnât get contracts for high margin drugs because of trust deficit. Only biocon through syngene could get that business because of Kiranâs trustworthiness from foreign clients. Now this could be a shift going forward and might benefit companies like Suven and Hikal (already working with innovators in agri division)
- Indian pharma story : Now big companies are focusing more on Indian pharma (eg: Dr. Reddyâs). Also Ayush bharat healthcare scheme was a game changer for Modi in the Hindi belt, so itâs possible that there will be pricing control in the next election season starting 2023-24. Be careful on pure play domestic pharma companies (because of increased competition and government price intervention) except companies working in critical products in terms of therapy like oncology, kidney replacement drug, blood treatment, etc. Other more acute therapies might have the branded option removed from them and only have the generic options.
- A lot of Indian companies like Shilpa medicare, Caplin point, Vivimed, etc. get one product approval from US FDA, never launch those proucts (so FDA never visits them) and because their plants are FDA approved, they get large business from other geographies such as Brazil, Africa, New Zealand, Australia, etc.
- India still has a large problem with maintaining sterile facilities because of poor hygiene practices. This is amplified by the contract workers employed at these facilities (account for 20-30% of workers). Employing contract worker for injectable facility is a criminal offense; this should be taken up by the FDA. Biocon moved their facility to Malaysia and realized later that even in Malaysia the hygienic practices are poor
Disclosure: Invested in a number of Indian pharma companies (Lupin, Cadila, Biocon, Ajanta, Natco), detailed portfolio here
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Hello @harsh.beria93
Saw one comment from you on Glenmark on hitesh jiâs thread. Just wanted to know your thoughts on probability of successful capital raise by Ichnos.
Thanks
USFDA warning letter to Shilpa could be a beginning of the bad news for the pharma industry itself. USFDA issues have been the biggest concern for Indian pharma industry for last 5 years. Covid pandemic changed that a lot as USFDA started going easy on many companies for past 6 months (more and quick approvals). This brought in wave of optimism in the pharma sector thereby raising almost all export oriented pharma companies to their lifetime highs. Now Shilpa medicare getting USFDA letter could be potentially turn of stance for USFDA. Maybe USFDA feels that they can go back to their original stringent implementation levels. If so, indian pharma dependent on US exports can quickly turn negative. So need to watch next few months, in terms of number of approvals vs no. of warning letters.
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Company specific USFDA approvals and observations should anyways be closely watched. Indian Pharma is too diverse and companies have their own compliance records. A general or broad view is not very helpful. Another way look at this event is that market will value the companies that have a good track record with USFDA .
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In this interview with Eli Lilly CEO, we can see that he is talking about CMO partnerships with Samsung and Amgen for its monoclonal antibodies.
Is there any Indian CMO with similar capabilities for monocolonal antibodies
Syngene is the preferred antibody production partner by our clients leveraging our scientific expertise and flexibility required for high quality antibody production. Syngeneâs tailored facility and experienced scientists offer small and large scale monoclonal and polyclonal antibody production and purification services. Syngene also offers services surrounding Hybridoma generation and screening.
https://www.syngeneintl.com/services/discovery-biology/antibody-generation
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