How big is the opportunity for Indian active pharmaceutical ingredients' (API) manufacturers? Here is an estimate presented by Satish Khanna, group president, API, Lupin Ltd, at the Speciality Chemicals Conclave in Mumbai last week.
To develop his estimate, Khanna first examined the health care spend in India vis-à-vis developing and developed countries. The per capita spend in India is only $22 as against $54 in China. The average spend for Brazil, Argentina, China, Egypt and Hungary together is $212 which indicates the potential for growth in India.
Healthcare spend in India is currently about $26bn and can grow to $100-300bn by 2015. If we take the midpoint ($200bn) and assume that the pharmaceutical market is 25% of the health care market and the API component is 30% of the pharmaceutical market, then the API segment has the potential to grow to $12bn by 2015 from about $2bn in 2007.
Khanna expects 80% of API demand to be met locally, which would result in a $10bn market.
But this excludes the outsourcing opportunity which could be as much as $10bn, says Khanna.
With most Indian API companies operating at full rates there is a need for new capacities. However, companies are currently dealing with many challenges including rising raw material costs as a result of high oil prices, manpower shortage, appreciation of the rupee against the US dollar and the over dependency on imports of key chemicals such as sulphur and phosphorus.