The year 2020 is a year when the global pharmaceutical industry is deeply affected by the epidemic, and also a year when China's API industry with stands the test of fluctuations in the international market. According to the preliminary statistics of China Medical Insurance Chamber of Commerce, China's export of API products reached 35.7 billion US dollars in 2020, a new record high, with a year-on-year growth of about 6%.
In 2020, China's API export growth benefited from the stimulation of the epidemic, which increased the global demand for anti-EPIDEMIC related API, and also affected the production of other main API producing areas such as India and the European Union, and increased the transfer orders of China's API in the international market. Specifically, the export volume of China's API increased by 7.5% year-on-year to 10.88 million tons. From specific export category, anti-infection, vitamins, hormones, antipyretic analgesic, part of antibiotic resistance to disease related API category of export amount is mostly realized the different levels of growth, some specific varieties is growing rapidly, such as dexamethasone exports rose 55% year-on-year, lamivudine, vitamin C, vitamin E and other exports more than 30% year-on-year growth, Paracetamol, Analgin and other exports grew by more than 20% year on year.
Since April 2020, the COVID-19 epidemic has become increasingly serious in India, and local governments have taken measures such as shutting down cities and shutting down production. As China's main competitor of APIS in the international market, the serious epidemic situation in India will affect the normal production and export of apis. It is reported that in early April, the Indian government has announced a ban on the export of Remdesivir API and preparations to meet the country's anti-epidemic needs, resulting in a global supply shortage of Remdesivir API. In view of the instability of India's API supply, it is expected that China will continue to accept some API transfer orders in the international market this year, just like last year, and maintain the steady growth of China's API export.
However, the export opportunities brought by the epidemic are short-lived after all. How to face the deeper risks and opportunities after the epidemic is an urgent issue to be considered for the future international development of China's API industry.
01 The pattern of global API industry will change. What is China's international market position?
The pharmaceutical industry is a strategic safety industry. The shortage of medical supplies and drugs caused by the epidemic has caused a certain degree of tension and concern, and once again aroused the attention of all countries to establish an independent and perfect medical supply system.
The fundamental position of China's API in the global pharmaceutical industry chain has aroused unease in the United States and heated discussions on promoting the return of the pharmaceutical industry. Since last year, the US government has taken a number of measures to strengthen the API supply chain and reduce its dependence on China's API, such as initiating relevant acts to safeguard the pharmaceutical supply chain, signing production contracts with enterprises and inviting bids to reserve key APIS.
In Europe, the European Parliament, the European Commission, the European Medicines Agency and other institutions are discussing, studying and releasing strategies on strengthening the pharmaceutical supply chain, and planning to take measures to attract the re-flow of API production.
The Government of India has announced the Production-linked Incentive Scheme (PLI) for Apis and Key Starting Materials to encourage greater localisation of apis and pharmaceutical intermediates. In January, the program approved its first batch of production applications from Indian companies. In addition, Brazil, Iran and other countries are also taking measures to promote the indigenous production of API.
In the future, as the policies of various countries to support the localization of API production gradually deepen and show effects, the global API industry pattern may change slowly, and the international market position of China's API may decline. European and American enterprises under the government support is expected to regain some of the key API production capacity, and reserves to expand production capacity, the source of Chinese API still has an important role in European and American markets, but say the challenge, the source of India API to increased market share in Europe and the United States, from Europe and the United States to support other API source will occupy a place in the market. India on the one hand, to expand its own API production capacity, Chinese enterprises' international market share, on the other hand upstream pharmaceutical intermediates, promote intermediates manufacturing ability, break the relation with the upstream and downstream of the supply chain in China, India and China future will enter the medicine for the whole industry chain competition era, especially will be increasingly fierce competition in the field of active pharmaceutical ingredients.
02 Focus on overcapacity
China's API industry has always had the problem of overcapacity. From 2017 to 2019, under the joint action of stricter environmental protection and safety regulation and the deepening of supply-side reform, some domestic API production capacity with high energy consumption, high pollution and backward production process was gradually phased out. The problem of overcapacity was alleviated, and the profit margin of enterprises rose and their performance improved. However, since 2019, new or expanded API projects in China have been launched intensively. In the following years, overcapacity in the industry may become a large probability event.
From the domestic perspective, firstly, with the relocation of pharmaceutical and chemical enterprises to the park under the guidance of environmental protection and safety supervision, part of the production capacity of API has been restored. Second, the epidemic has prompted some enterprises to urgently expand the production of API, hoping to seize the short-term "dividend" of the epidemic. In April last year, Shanghai Pharma expanded its hydroxychloroquine production line, and recently, some companies rushed to launch the Maredesivir production project, and some chemical plants also switched to API production during the epidemic, all of which led to the increase in API production capacity. Third, the bottom-up demand transmission of centralized procurement with quantity makes enterprises have personal experience and good expectation that the actual procurement of centralized procurement exceeds the agreed procurement, and choose to expand the production of apis and preparations to cope with the future large-scale supply of centralized procurement. Fourth, enterprises build or expand API production lines for the consideration of scale benefit or upstream and downstream coordination of the industrial chain, so as to enhance their advantageous position.
From the international perspective, the future as the global epidemic under the vaccine spread gradually improving, India, the capacity of producing active pharmaceutical ingredients, such as the European Union would soon resume, not only in the local support policies may also increase, and the United States, Brazil and other countries in production on a localization under the stimulus of new capacity, global API capacity will usher in a wave of expansion in an all-round way.
China's API export has been plagued by overcapacity for a long time. Such as penicillin, vitamins, antipyretic analgesic traditional bulk active pharmaceutical ingredients, such as the major share in the international market in our country, but the pricing power has been is not high, the main reason is related to product production capacity than global demand, domestic companies to compete for international market share are low price campaign, enterprises to export small profit even loss at the same time, Also suffered from some countries market anti-dumping investigation, to the healthy development of the industry brought great obstacles.
Since the outbreak, the production capacity of apis at home and abroad has increased simultaneously, which indicates that the problem of overcapacity may appear on a global scale in the future.
01 China's strong economic recovery has brought more attention and opportunities for the development and upgrading of the pharmaceutical industry
In 2020, China's GDP grew by 2.3% year on year, becoming the only major economy in the world to achieve positive economic growth. China's GDP grew 18.3 percent year-on-year in the first quarter of 2021, the highest since quarterly GDP statistics began in 1992. These "jaw-dropping" figures fully demonstrate the strong momentum of China's economic recovery. At the same time, China has exported a large number of medicines and anti-epidemic supplies to more than 200 countries and regions around the world, giving strong support to the global fight against the epidemic. Driven by the export of anti-epidemic products, the growth rate of pharmaceutical exports also hit a record high. According to the preliminary statistics of the China Medical Insurance Chamber of Commerce, China's export of pharmaceutical products increased by about 68% year-on-year to reach us $123.8 billion in 2020.
The above outstanding performance makes the world look at China with new eyes, and also brings more attention and opportunities for the development and upgrading of China's pharmaceutical industry, which can promote the internationalization capacity upgrading of China's API industry from at least two aspects. First, Chinese API enterprises have the opportunity to enter the supply chain system of some multinational companies with high barriers, such as becoming alternative API suppliers or accepting technology transfer of patented API; 2 it is through the CDMO get more chances of new product development and production, the developed countries, multinational drug companies tend to view the API outsourcing production of innovative medicine, retaining only the most profitable research and development, sales and other links, and CDMO market in China is still at a high speed growth, combined with the outbreak of stable production environment, have made our country become the ideal API development, production and outsourcing to undertake
02 The epidemic has made apis more important and policies more supportive
The stability and safety of the API supply chain has attracted global attention due to COVID-19. China has also begun to pay more attention to the API industry, and the status of API has been elevated. First, the government issued policies to guide the development of the API industry to become more standardized. For example, the Anti-Monopoly Guide on THE API Field (draft for Comments) issued by the State Administration for Market Regulation in October 2020 has the consideration of ensuring the safety and stability of the domestic pharmaceutical supply chain and promoting the healthy development of the API industry. Second, local governments actively explore new ways to support the development of API industry, so that chemical parks are more willing to accept the settlement of API enterprises and transform into pharmaceutical parks. For example, according to the document spirit of relevant ministries and commissions of the state, Suzhou took the lead in exploring and proposing "referring to the identification management mode of chemical parks and monitoring sites, The development path of constructing high-standard pharmaceutical green manufacturing industrial park and key pharmaceutical monitoring point is to promote the implementation of API projects.
How to deal with the "danger" brought by the epidemic, and at the same time seize the "opportunity" brought by the epidemic, so as to remain invincible in the future international development, is an important topic that Chinese API enterprises should consider carefully and prepare for a rainy day.
One, increase the intensity of innovative research and development, product development to the complicated structure and high value-added segment type development, obtain certain threshold technology, technology development to efficient, low pollution, green upgrades, such as biotechnology and enzymatic process, on the way to intelligent manufacturing such as continuous, automation, modularization to upgrade.
Second, optimize the supply chain system, actively undertake pharmaceutical division of labor and cooperation, deeply embed in the global pharmaceutical industry chain, and establish long-term and solid cooperative relations with upstream and downstream enterprises.
Third, occupy the commanding height of cost. On the premise of meeting the requirements of environmental protection and safety, cost advantage can be improved through technological improvement, process transformation and large-scale production. Under the same conditions, cost advantage is always the most important weapon to occupy the market.
Fourth, adhere to the global layout, adapt to the changing trend of the global API industry pattern, and consider establishing production bases in Europe and the United States and along the "Belt and Road".
Fifth, both domestic and foreign countries should pay attention to both the international market and the domestic market, improve the ability to serve the two markets and deal with the "double cycle", and prevent the international "black swan" events caused by market fluctuations and survival crisis.