Why are Pharmaceutical Fine Chemicals Witnessing High Demand?

Pharmaceutical fine chemicals are complex, single, and pure chemical substances that are mixed with generic commodity chemicals to form complex molecules. Within the chemical industry, fine chemicals are produced in limited volumes and sold at relatively high prices. The market for these chemicals is highly fragmented with multiple privately owned companies contributing towards the global supply alongside large chemical enterprises. Pharmaceutical fine chemicals can be further categorized into building blocks, intermediaries, and APIs. A recent procurement market intelligence report from SpendEdge on the global pharmaceutical fine chemicals market has estimated the market to grow at an impressive CAGR of 7.7% over the next couple of years. The analysts attribute this growth to the increasing number of patent expiries, which will drive the demand for generics and biosimilars; thereby, driving the demand for fine chemicals.

Growth drivers in the global pharmaceutical fine chemicals market

New drug approvals

The number of drug approvals in the US by the FDA and EMA in EU has been on a rise, providing significant opportunities for players in the pharmaceutical industry. Pharmaceutical fine chemicals are widely used in the drug formulation process, and this increase in the number of drug approvals will result in the increased demand for such fine chemicals. Furthermore, new drug approvals and patent cliffs are leading to the bulk production of several drugs. This, in turn, will be a direct driver for the pharmaceutical fine chemicals industry.

Growth of the biologics industry

The introduction of targeted therapies along with rising adoption of personalized medicine is anticipated to fuel the demand for biologics. Additionally, biologic drugs have also been known to treat chronic diseases better and with lesser side effects. Since pharmaceutical fine chemicals are required in bulk quantities to produce biologics drugs, the growth of the biologics market will directly drive the demand in the fine chemicals market. Furthermore, the market for global biologic drugs is expected to grow at a CAGR of over 10% during the forecast period with companies such as Eli Lilly and Company, Novartis, and AstraZeneca investing heavily in developing biologics.

Growth of the pharmaceutical industry

The global pharmaceuticals market is expected to record a robust growth rate of around 6% during the forecast period, driven by consumer spending to cure medical ailments. Such an impressive growth rate is subsequently fueling the demand for innovation in the market. As a result, pharmaceutical companies are investing heavily in R&D activities to formulate effective medicines, especially in the field of oncology, cancer, and nervous system disorders. Additionally, companies are increasingly investing in novel formulations as well as reformulation approaches to support and sustain the rising demand. This, in turn, will drive the demand for pharmaceutical fine chemicals as they are used as raw materials in advanced formulations.

Increasing number of patent expiries

The pharmaceutical industry is highly dependent on patents to protect their innovation and recover a large part of their R&D costs. However, after a predefined period, the patent expires, and any manufacturer can formulate the medicine, which often results in a reduction of prices. Since the monetary value of fine chemicals used in the formulation of medicines is low as compared to the overall drug development cost, this market is largely dependent on the volume of sales for attaining value growth. As a result, the demand for fine chemicals will surge due to increased production of generics and biosimilars.

Read more about the growth drivers in the pharmaceutical fine chemicals market along with supply market insights, procurement best practices, sourcing strategy, and pricing insights in SpendEdge’s upcoming report on the global pharmaceutical fine chemicals market.