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    Home > Medical News > Pharmaceutical Marketing > Get rid of the Red Sea fight API companies turned into CDMO

    Get rid of the Red Sea fight API companies turned into CDMO

    • Last Update: 2022-11-15
    • Source: Internet
    • Author: User
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    Pharmaceutical active materials (APIs), usually referred to as chemical APIs, are active ingredients
    in chemical pharmaceutical preparations.
    China is the world's largest API producer and exporter, with the improvement of environmental protection and product quality requirements for API enterprises at the policy end, low-end production capacity continues to be cleared, the concentration of API industry increases, and the competition of high-quality API enterprises tends to be fierce
    In this context, API companies have embarked on the road of
    transformation and upgrading.
    Under the influence of CDMO (contract R&D and production organization) pioneers such as Jiuzhou Pharmaceutical and Propharmaceutical, in recent years, more and more API companies have transformed into CDMO, and the market structure has become more diversified
    It's time to upgrade and transform
    In recent years, affected by multiple factors on the policy side and the demand side, the business model of domestic API enterprises has undergone obvious and profound changes
    From the policy side, under the background of green development and improved product quality requirements, API companies are facing stricter environmental protection requirements and production standards, which has greatly increased the entry threshold
    of the API industry.
    At the same time, because the quality of APIs will directly affect the results of the consistency evaluation of generic drug quality and efficacy, preparation enterprises pay more attention to the quality control of API suppliers, and the cooperation between preparation enterprises and API suppliers with related approvals has gradually stabilized
    Customer orders from low-end API companies continue to be lost, and low-end production capacity is gradually cleared
    The concentration of the API industry has been further enhanced, the overlap of products of high-quality API enterprises has increased, and the competition has become fierce.

    From the demand side, opportunities such as capacity transfer, product localization of multinational enterprises, normalization of centralized procurement and vigorous development of the innovative drug market have provided different development ideas for API companies (see Figure 1 for details): First, continue to focus on the field of APIs, expand product pipelines, increase production capacity, reduce costs and increase efficiency; The second is to cut into the downstream preparation market, take advantage of cost advantages and quantitative collective procurement opportunities, and enter the centralized procurement market; The third is to rely on its own large-scale production experience and cost control ability at the production end to improve the R&D capacity and develop CDMO business
    Different business development paths have different
    requirements and returns for API companies.
    Under the background of the normalization of centralized procurement with quantity, a number of characteristic API companies represented by Huahai Pharmaceutical and Tianyu Pharmaceutical have expanded their ability to integrate preparations by virtue of their original layout and cost efficiency advantages in their respective fields, and are more competitive
    than traditional pharmaceutical companies in drug prices.
    For API companies, the transformation of CDMO business is obviously attractive in terms of profit margin, growth space, capital market valuation, etc.
    , which can link the innovative drug market and expand the growth space
    of enterprises while releasing production capacity.
    Therefore, under the influence of pioneers such as Jiuzhou Pharmaceutical and Propharmaceutical, more and more API companies have begun to try to develop CDMO business
    The core reason for transformation
    API companies have tried to develop CDMO business, and the key factor behind it is the good growth prospects
    of the CDMO industry.
    From the perspective of the domestic market, the reform of the medical and health system has been steadily advanced, new policies have been frequent, and the process of local innovative drugs from R&D to commercialization has gradually accelerated
    Among them, the formal establishment of the drug marketing authorization holder system has further standardized the commissioned production of drugs, injecting a "booster"
    into local CDMO enterprises to undertake domestic orders.
    At the same time, with the escalation of challenges in the domestic innovative drug market, the number of declarations of new molecular entities is increasing and the structure is becoming more and more complex, the difficulty of research and development is increasing, the traditional vertically integrated R&D structure is impacted, the "research-production-marketing" integration model is gradually weakening, and the degree of industry specialization is improved
    More and more pharmaceutical companies are cooperating with CDMO to reduce the fixed cost of R&D and diversify R&D risks
    From the perspective of the international market, affected by the rising pressure of R&D, environmental protection, labor and other costs, the CDMO industry has gradually shifted
    from mature markets in Europe and the United States to emerging markets in Asia.
    Due to the considerable number of talents and the pharmaceutical market with huge potential, China occupies the "C position" of industrial undertaking, fully matching the core supply and demand of
    the CDMO industry.
    IQVIA predicts that China's CDMO industry market will grow at a compound annual growth rate of about 20% over the next five years, twice the global growth rate (see Figure 2 for details).

    Scale and technology are key to successful transformation
    According to the technical complexity and service scope, domestic CDMO enterprises can be divided into four categories, namely, API enterprises to transform CDMO, CRDMO (contract research, development and production organization), CMO (contract production organization) and emerging CRO (contract research and development organization)/CDMO
    in subdivided fields.
    Among them, scale effect and technical ability are the core
    Looking at the four types of CDMO enterprises, four key success factors can be summarized, namely customer resources, capacity scale, technical capabilities, and project management
    First, from the customer level, the first-mover advantage of CDMO leading enterprises is particularly significant
    Industry pioneers have formed a sustainable and stable cooperative relationship with customers through long-term market cultivation, which will also pose challenges and barriers
    to latecomers.
    However, with the rapid development of innovative drugs, pharmaceutical companies' requirements for CDMO are also being updated, and as a latecomer, API companies should keep up with the market and customer needs when developing CDMO business to obtain a certain scale of customer base
    Second, from the perspective of production capacity, the production capacity of CDMO enterprises directly determines the scale of
    enterprise revenue.
    API companies with innate advantages in production have innate advantages
    at the production capacity level.
    At the same time, API enterprises should also pay attention to the change of thinking when developing CDMO business, and in addition to the evaluation of production capacity and other indicators, they also need to pay attention to the flexibility of production capacity and actively adapt to the new project management model
    Third, from a technical point of view, continuous R&D investment is the core of
    CDMO companies to build technical barriers.
    At present, the number of R&D personnel of domestic leading CDMO enterprises is relatively large, such as the R&D personnel of Hequan Pharmaceutical and Kelleying have exceeded 40%, and the proportion of R&D personnel of Porton and Jiuzhou Pharmaceutical is about
    In addition to high-level R&D personnel, mature technology platforms are particularly important, API companies can continue to improve advanced technology application and R&D capabilities on the basis of the original technology platform and expand CDMO business opportunities
    through deep binding of key customers, extended mergers and acquisitions, and internal establishment of business departments.
    Fourth, from the perspective of project management, CDMO companies are deeply connected with pharmaceutical companies from the three stages of preclinical research, clinical trials and commercial production, and have high requirements for project flexibility and delivery time, which puts forward strict requirements
    for project management.
    CDMO businesses need to build organizational resources in key processes around customer needs, with members from different functions working
    together at the right time according to the specific needs of each stage of the project lifecycle.
    Compared with traditional API customers, customers of various CDMO businesses have higher requirements
    for project schedule, scheduling and standardized system management.
    "Although it is hard work, blowing the sand begins to gold
    " On the road to CDMO transformation, API companies need to redesign and optimize the organizational structure and management mode and improve the core capabilities
    of personnel in order to achieve customer expansion and technology transfer in the process of CDMO transformation.
    In addition, API companies should make full use of their strengths to complement their weaknesses, combine their own business models and product structures, improve their research and development level, deeply bind core customers, give full play to the scale effect of production capacity, and actively catch up with leading CDMO enterprises
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