Global Merchant API Market (by Molecular Type, Segment, Type, Type of Synthesis, End-User, & Region): Insights and Forecast with Potential Impact of COVID-19 (2022-2027)

The merchant API (or contract manufacturing) value chain encompasses all activities related to the development and manufacture of active pharmaceutical ingredients (API) for both clinical trials and commercial products.

Because of the expertise and equipment required to manufacture the compounds, there has been an increase in the willingness of pharma and biotech companies, particularly smaller ones, to collaborate with specialized entities. Furthermore, pharmaceutical companies are increasingly focusing on core competencies such as R&D and marketing, leaving manufacturing to specialized entities. As a result of increased pharma outsourcing to improve margins and potentially shorten time-to-market, the merchant API market has experienced growth. The global merchant API market is expected to reach US$90.97 billion in 2023, growing at a CAGR of 6.97% over the projected period.

Segment Covered

By Molecular Type: In terms of molecular type, the report offers insights of the global merchant API market into two segments: Small Molecules and Large Molecules. Small molecules held the maximum share of the market owing to the market's expanding need for small-molecule medications and the rising outsourcing trend. The large molecules segment is expected to be the fastest growing segment in the forecasted period owing to strong pipeline growth across all modalities, increasing complexity of therapies and vaccines, and maturing biotech projects entering the late stage of development & commercial launches.

By Segment: On the basis of segment, the report provides the segmentation of the global merchant API market as follows: CDMO and API Solutions. CDMO held the highest share in the market and is expected to be the fastest-growing segment in the forecasted period. CDMO market has been further bifurcated based on molecular type: Small Molecule and Large Molecule. Small molecules held the highest share in the market, whereas the large molecule segment is expected to be the fastest-growing segment in the coming years. CDMO has also been analyzed based on end-user: Peptides, Oligos, and Others. As peptides have low stability in the stomach, the volume of API required for oral administration is 50-200x higher than the volume required for injectable forms. The conversion to oral should therefore further support the peptide market growth.

By Type: The report further provides an analysis of the market based on type: Innovative API and Generic API. Generic API is expected to be the fastest growing segment in the coming years fueled by factors such as rising biopharmaceutical therapeutic demand and increasing patent expirations of drugs, and generic production capacities.

By Type of Synthesis: According to the type of synthesis, the report provides a glimpse of merchant API market into following categories: Synthetic and Biotech. The synthetic molecules are cost-efficient, time-saving, and effective in the treatment of a wide range of diseases, and the specialized expertise offered by CDMOs are factors likely to propel the segment growth during the forecast period.

Geographic Coverage

According to this report, the global merchant API market is divided into four regions namely North America, Asia Pacific, Europe, and the Rest of the World. The countries covered in North America region are the US, Canada, and Mexico, while Europe includes Germany, The UK, France, Italy, Spain, and Rest of the Europe. Moreover, China, India, and Rest of the Asia Pacific are included in the Asia Pacific region. North America held the dominant share of the market. With increased competition, pricing pressures, and regulatory changes, drug manufacturers are resorting to outsourcing raw material procurement and manufacturing activities, thus the merchant API market has been growing in North America. Due to the higher costs associated with the production of APIs in western countries, India and China have become the two most preferred regions for contract manufacturing outsourcing. The major factors responsible for the growth of this market in the region are the easy availability of required skilled labor at an effective cost, favorable government policies, tax benefits, and better trade relationships. APIs are an increasingly important sector in India, and a series of initiatives, including establishing/reviving clusters, offering production-linked schemes, as well as other measures, have been implemented to improve the country’s API production and to make it more competitive globally for pharmaceutical API manufacturers.

Top Impacting Factors

Growth Drivers

• Increasing Incidence of Diabetes
• Increasing Research and Development Spending
• Growing Pharmaceutical Industry
• Growing Pharma Outsourcing Trend

Challenges

• Strict Laws and Regulations
• Lack of Transparency and Loss of Control

Trends

• Growing Use of Artificial Intelligence
• New Drug Approvals
• Increasing Patent Expiry
• Growth of the High-potency Active Pharmaceutical Ingredients (HPAPI)

Driver: Increasing Incidence of Diabetes

Owing to urbanization, changes in lifestyle, and increasing incidences of chronic diseases, the demand for drugs are rising continuously. Merchant API manufacturers have gained prominence amid the exorbitant costs of drugs and the rising incidence of chronic diseases. These firms can scale the production of branded and generic drugs and supply them to customers in developing countries. Thus, the market has experienced a positive trend in the past few years owing to the increasing incidence of chronic diseases.

Challenge: Lack of Transparency and Loss of Control

One of the most common manufacturing issues faced by pharmaceutical companies is the lack of transparency when problems arise. It becomes increasingly challenging to prevent and/or avoid testing missteps if the contract manufacturing organizations fail to report protocol deviations or incident reports promptly, if at all. Once a problem is identified, the difficulty quickly becomes tracing problems to their source. Moreover, outsourcing may result in losing some element of visibility and control over the production process. This has several implications for the company, including Loss of critical knowledge and skills around production techniques; Supply chain issues related to poor quality; and Shipping challenges. Owing to these challenges, many companies do not outsource the manufacturing of APIs to CMO, which becomes the hurdle for the merchant APIs’ market growth.

Trend: Growing Use of Artificial Intelligence

AI processes can help produce more accurate dosing as well as improve standardization across batches for APIs. Companies can use machine learning to capture historical batch performances for the real-time optimization of critical process parameters to achieve optimal quality output. Another way that this technology helps pharmaceutical companies meet demand is through its ability to reduce hold times between stages, which would allow them to maintain their supply chain without experiencing any delays due to manual processing or paperwork mistakes along the process. Thus, the integration of AI in the manufacturing process of APIs can help companies to overcome various challenges, and thus, this would drive market growth in the coming years.

The COVID-19 Analysis

In 2020, the global merchant API have experienced slower growth. Lower pharmaceutical volume demand has been seen in several areas, with lower rates of doctor visits and new diagnoses. However, many other contract manufacturing organizations saw some significantly increased demand related to new COVID vaccines and therapeutics projects. A significant spike in demand for novel drugs has led to the higher manufacturing, export, and import of APIs thus, leading to an average price hike in API products and intermediates. Moreover, favorable policies and initiatives taken by various governments are expected to smoothen the production of APIs in the long run, and this would support the merchant API market growth in the post-COVID era.

Analysis of Key Players

The global merchant API market is highly fragmented. The key players in the global merchant API market are Thermo Fisher Scientific Inc., Pfizer Inc. (Pfizer CenterOne), Sanofi (EuroAPI), Teva Pharmaceutical Industries Ltd. (Teva API), Bachem Holding AG, Siegfried Holding AG, Divi's Laboratories Limited, Centrient Pharmaceuticals, Lonza Group AG, Cambrex, Fabbrica Italiana Sintetici, and PolyPeptide Group AG.