Merchant API Market: Analysis By Molecular Type, By Segment, By Type, By Type of Synthesis, By End-User, By Region Size And Trends With Impact Of COVID-19 And Forecast up to 2027

The global merchant API market was valued at US$79.50 billion in 2021. The market value is expected to reach US$119.11 billion by 2027. The merchant API (or contract manufacturing) sits within the wider Pharma value chain and encompasses all activities related to the development and manufacture of active pharmaceutical ingredients (API) both for products clinical trials and commercial products.

There has been an increase in the willingness of, especially smaller pharma and biotech companies to collaborate with specialized entities due to the expertise and equipment required to manufacture the compounds. Additionally, pharma companies are increasingly focusing on core capabilities like R&D and marketing, leaving the manufacturing side of the process to specialized entities. Thus, merchant API market growth has increased due to increased pharma outsourcing to improve margins and potentially shorten time-to-market. The market is expected to grow at a CAGR of approx. 7% during the forecasted period of 2022-2027.

Market Segmentation Analysis:

• By Molecular Type: The report provides the bifurcation of the market into two segments based on molecular type: Small Molecules and Large Molecules. In 2021, Small molecules held the major 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: The report further provided the bifurcation based on the segment: 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 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: The report also provides a glimpse of merchant API market based on type of synthesis: 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.
• By Region: The report provides insight into the merchant API market based on the regions namely North America, Asia Pacific, Europe, and the Rest of the World. North America held the major 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.

Market Dynamics:

• Growth Drivers: The global merchant API market growth is predicted to be supported by numerous growth drivers such as increasing incidence of chronic and lifestyle diseases, aging population, increasing healthcare expenditure, increasing research and development spending, growing pharmaceutical industry, growing pharma outsourcing trend, and many other factors. Contract manufacturing offers many benefits to the associates as it provides them with a supply of drug products from clinical production to commercial manufacturing under Good manufacturing practices (GMP) manufacturing operations. Other than this, companies get the time and financial relief to work on selling and marketing products instead of only focusing on the drug manufacturing process. Thus, owing to these factors, the trend of outsourcing has increased which has positively influenced the merchant API market growth.
• Challenges: However, the market growth would be negatively impacted by various challenges such as strict laws and regulations, lack of transparency and loss of control, etc.
• Trends: The market is projected to grow at a fast pace during the forecast period, due to various latest trends such as growing use of artificial intelligence, new drug approvals, increasing patent expiry, etc. New and innovative drugs expand treatment options, for instance, for previously unmet needs or new population targets (e.g. children), increasing the number of drugs consumed. The need for APIs grows as more drugs are approved, thus companies outsource the manufacturing of the APIs to manufacture the drugs more economically. Thus, the demand for merchant APIs is anticipated to rise in the upcoming years as a result of the rise in novel medicine approvals.

Impact Analysis of COVID-19 and Way Forward:

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.

Competitive Landscape:

The global merchant API market is highly fragmented. The key players in the global merchant API market are:

• Pfizer Inc. (Pfizer CenterOne)
• Bachem Holding AG
• Thermo Fisher Scientific Inc.
• Teva Pharmaceutical Industries Ltd. (Teva API)
• Sanofi (EuroAPI)
• Siegfried Holding AG
• Lonza Group AG
• PolyPeptide Group AG
• Divi's Laboratories Limited
• Centrient Pharmaceuticals
• Cambrex
• Fabbrica Italiana Sintetici

To keep ahead of the competition, companies in the market undergo regular R&D operations. In order to stay ahead of the competition, companies operating on the global market are also anticipated to turn to aggressive expansion methods including mergers, acquisitions, and strategic alliances. For instance, in 2022, Bachem Group announced the signing of a further work order for the delivery of large volumes of peptides over a five-year period from 2025-2029. On the other hand, Sanofi and Innovent Biologics announced a collaboration to bring innovative medicines to patients in China with difficult-to-treat cancers. Also, Siegfried announced that the company had decided to extend the collaboration with Novavax, a US-based biopharmaceutical company, for the aseptic fill & finish of Novavax's protein-based coronavirus vaccine Nuvaxovid.

In 2021, Lonza held a share of 2.58% of the global merchant API market, whereas in CDMO market, Lonza had a market share of 4.6%.