Coronavirus (COVID-19) is a novel disease which was first originated in China, Wuhan and then spread worldwide due to which World Health Organization has declared it as a global pandemic. The novel strain of coronavirus belongs to the same virus family that causes the acute respiratory syndrome (SARS) and middle-east respiratory syndrome.
Due to rapid growth of Coronavirus, lockdown and quarantine was the government initiatives in order to control the coronavirus spread. Therefore, these initiatives have created an unpredictable effect on both human daily lives and on global economy along with that the global pandemic of COVID-19 is affecting the health and personal decision-making of people.
APIs are the effective ingredient present in the medicine, and even small amount of active ingredients known to produce effective result. The APIs are manufactured using the raw materials which are known as intermediates. The intermediates are the key products for carrying out the process of formulating the active pharmaceutical ingredients. API and the intermediate market is such a huge market and has a great application in the medical field there is a huge demand of close monitoring of manufacturing process. But due to continuous pandemic of COVID 19 and long term shut down has put an adverse effect on overall drug manufacturing companies. The governments of several countries have reported that there is huge scarcity of APIs and intermediates amid the COVID 19 pandemic. The reason behind that is the barrier across the countries border that has an ultimatum effect over the import and export facilities of medicinal product among others.
The effect of COVID-19 is different for every industries and their products. Mainly COVID19 affect the economy by three different ways:
Demand of various API intermediates product and raw material increased in the pandemic situation of COVID19 due to increase in more respiratory disorder and people investing more in healthcare.
TABLE 1: Sales Data of API intermediates for 2019/2020
Sale 2019/2020 in Billion USD
BASF SE, Winthrop (A Sanofi Company), A.R.Life Sciences, Aceto are leading pharmaceutical companies for manufacturing API intermediates. Their sales affected due to the COVID situation because the supply of the intermediates were banned during the lockdown.
The COVID-19 outbreak led to a number of countries putting their citizens on various forms of lockdowns, although the terms differ from country to country. India and China are among the countries that have imposed highly restrictive mass quarantines that have impacted several markets and their economies. India and China is considered as one of the countries dealing with highest share in the field of APIs and their intermediates, as there were lockdown policies and all borders were closed so there has been a huge impact on the pricing as the active pharmaceutical ingredients and their intermediates are not available adequately.
Due to some factors such as disruption in supply chain, the cost of the APIs and their intermediates have increased up to 40-50% in India especially for the medicines such as paracetamol, penicillin and anti-asthma drugs. As there was risk in supply chain during the COVID-19 and there was a delay in the supply chain. The air shipments were decreased and the price of the shipment was increased by three times which will increase the price of the APIs and their intermediates as the shipment charges were increased.
There is increase in the demand for the API intermediates which are used for manufacturing of finished drugs. However, fear of COVID 19 infection is a major factor that effect the demand of products.
The price of many products increased due to great effect of COVID 19 on the supply chain of products and other factor responsible for the increase in price due to the demand of product.
Therefore, as the production of the APIs have been slower down by the manufacturing companies which has resulted in lower availability and increased the cost of the materials that is required in the production of finished products.
As during the pandemic, the supply of active ingredients for major chronic diseases has been shut down, increasing the demand for the product more.
Due to the spread of COVID-19, there is a lockdown in the world which leads to the closure of manufacturing plants and distribution channels, plus worker being held up to their homes slow down the production and supply of API intermediates which badly affected the global economy and also affect the demand of many products which indirectly increases the demand and need for the pharmaceutical product by the people.
During COVID-19, there was a slight change in the demand for APIs and intermediates as the manufacturing companies were involved in finding the novel treatment for the COVID-19 patients. There was an increase in demand for antiviral APIs and intermediates. The other chronic diseases were untreated as the demand was decreased from the consumer side due to fear in the patient population of the exposure of the virus.
This chart shows that there is the decrease in sales of intermediates of the manufacturing company BASF SE which is a leading industry for the production of API intermediates when compared to the annual sales in last year 2019. This indicates that demand of Active Pharmaceutical Ingredient intermediates market decreases as compared to last year due to the COVID 19 outbreak and shutdown of the unit & supply to other countries.
Following its COVID-19 lockdown, China has resumed manufacturing operations, and it is working to clear the backlog of orders of pharma intermediates and ingredients to reduce supply disruptions. Overseas orders comprise over 50 percent of the materials produced.
Due to extent of COVID-19 all type of transportation facilities such as air flights and ships ban across the globe have direct impact on the supply chain. As we all know that COVID19 spread began in China and this has a drastic effect on API intermediates as it requires raw material and china being the world leading supplier in that area. Moreover, with the virus scattering to the other countries, the production and export-import of active pharmaceutical ingredients APIs from other major countries, such as the US and India, are also affected. This ban in transportation lead to shortage of raw material and this shortage has a direct impact on the demand and supply of many pharmaceutical products. Major companies got shut down due to the pandemic.
Workers being held in their homes slows downs the manufacturing of the active pharmaceutical ingredient which is being required and increased during the lockdown.
This gives a great opportunity for the local supplier and manufacturing units to provide the API and intermediates. This will encourage the small companies to earn profit and start manufacturing API.
Moreover, as the market players are totally aware of the loss that they may likely to suffer due to disruption of supply chain, they are continuously monitoring their product supplies and manufacturing capabilities in order to prevent the loss to their overall business.
This signifies that COVID-19 is disrupting the supply chain of APIs and their intermediates, it is also restricting the procurement procedure of APIs and their intermediates from different sources among other factors but several initiatives are taken by the manufacturers and government organizations is creating a hope for the improvement of supply chain of APIs and the intermediates.
There are many decisions taken by the leading market players for increasing the revenue of the company and also for increasing the share in global API intermediates. Government also provided funds for R&D and clinical trial so that there will be new achievements can be seen during the upcoming years to overcome the COVID-19 affects. To deal with the COVID-19 outbreak challenges, many APIs and intermediate manufacturers are creating new strategies. To meet an actual as well as prompt increase in customer demand or to anticipated prospective increase in customer demand APIs and intermediate market players are exclusively concentrating on gaining the production capacity. It is predicted that these strategies are anticipated to escalate up the company revenue and its growth in the forecasted period.
There is increase in demand of API intermediates and raw material for clinical trials and production of many pharmaceutical products. The leading companies take strategic decision for increasing the sale and market share in global market.
As a result of COVID-19 pandemic is declared by WHO in March which leads to ban across the borders. There is a great economical unbalance throughout the world. Many pharmaceutical industries have faced the economic crisis due to COVID-19 but many of them will still continue their manufacturing of API intermediates and start focusing on local manufacturers for the supply. They fulfill the demand of pharmaceutical company for the API which indirectly fulfilling the demand of people. There is also increase in the demand of these and also the price of these ingredients and raw materials were increased. COVID-19 may have decreased the supply of the ingredients and raw material in the first quarter of the 2020 but there is enormous increase for the demand and supply for these which is a great opportunity for leading companies. This is also beneficial for the leading players in API market and thus many companies in in this sector gain extra profit in pandemic of COVID-19.