GLOBAL PHARMACEUTICAL CHEMICALS MARKET SIZE AND SHARE ANALYSIS - GROWTH TRENDS AND FORECASTS (2024-2031)

Market Size and Trends

The global pharmaceutical chemicals market is estimated to be valued at USD 137.76 Bn in 2024 and is expected to reach USD 224.32 Bn by 2031, exhibiting a compound annual growth rate (CAGR) of 7.2% from 2024 to 2031.

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The market has been witnessing steady growth on account of increasing investments in R&D by major players and the growing generics market worldwide. Regulatory approvals and drug development have also accelerated. The demand for pharmaceutical chemicals is expected to be primarily driven by growth in the generics market globally over the coming years. Increasing prevalence of diseases globally is also supporting the need for development of new drug molecules. Further, the market is witnessing consolidation with major players undertaking mergers and acquisitions to expand their product pipelines. Innovation and development of specialty chemicals will present new growth opportunities in the market.

Rising healthcare needs of aging global population

As life expectancy increases and populations age around the world, the demand for pharmaceutical products and healthcare services is growing substantially. People are living longer with chronic diseases like diabetes, cancer, heart disease, and others which require long term medical treatment and management. According to the United Nations, the number of people aged 60 years and older is expected to more than double by 2050 and reach around 2 billion people globally. The aging population needs access to innovative drugs and therapies to improve quality of life and cope with health challenges. Pharmaceutical manufacturers are racing to develop specialized drugs targeting the healthcare needs of elderly patients. Many nations are also expanding healthcare coverage and access to medications for senior citizens. This widening segment of aging consumers presents a massive market opportunity for the pharmaceutical chemicals industry to supply active pharmaceutical ingredients and develop specialized medicines. The industry must prepare for steady long-term growth driven by the healthcare demands of a rapidly expanding global population of older individuals.

Market Concentration and Competitive Landscape

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Another important driver is the increasing rate of non-communicable diseases like cancer, diabetes, and cardiovascular diseases in developing nations. As emerging market economies progress and lifestyles become more sedentary, risk factors for these chronic illnesses are growing sharply. Countries that had previously only grappled with infectious diseases and undernutrition are now facing a dual burden of communicable and non-communicable diseases. Lack of access to primary healthcare and medical services compounds the problem in many developing regions. Multinational pharmaceutical companies and local drug makers have a significant chance to fill this treatment gap and expand accessibility of drugs combating cancer, diabetes, heart diseases and other common chronic conditions. The continuous economic growth and urbanization witnessed across Asia, Africa, Latin America, and other emerging markets is translating to a fast-rising patient base requiring long term medical care. Catering to this burgeoning patient pool of non-communicable diseases will be instrumental in sustaining high growth levels for the global pharmaceutical chemicals market in the coming decades.

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The pharmaceutical chemicals market faces several challenges. Stringent regulatory norms around the globe have increased compliance costs for manufacturers. Additionally, the patent cliff of many blockbuster drugs has resulted in lower profit margins. Developing innovative drugs is a lengthy and expensive process. Furthermore, price control policies by governments have put downward pressure on prices. Rising prices of raw materials and changing trade policies have also negatively impacted production budgets.

Market Opportunities: Outsourcing of manufacturing activities

Outsourcing of manufacturing activities can bring new opportunities for growth in the pharmaceutical chemicals market. As pharmaceutical companies look to focus more on core activities like research & development and marketing, outsourcing of manufacturing processes can help optimize costs and drive efficiencies. This allows pharmaceutical companies to leverage the specialized manufacturing capabilities of contract manufacturers. Many contract manufacturers have made huge investments in setting up facilities with world-class production capabilities and quality systems as per global regulatory standards.

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Product type segment is sub-segmented into solvents, precursors, reagents & catalysts, active ingredients, preservatives, and others. Active ingredients segment is anticipated to hold 29.1% of the market share in 2024. Active pharmaceutical ingredients (APIs) are the medicinally active compounds that show biological effects in the body. As new diseases emerge and existing diseases spread, pharmaceutical companies are increasingly investing in R&D to discover innovative drugs. This has led to a surge in discovery of novel APIs over the past decade across a wide range of disease areas like cancer, diabetes, cardiovascular disorders etc. The demand for APIs is expected to further rise as the drug development pipeline remains robust. Several big pharma and biotech companies have hundreds of drugs in various stages of clinical trials. A large number of these experimental drugs will get approved and commercialized in the coming years if they prove to be safe and effective. This will translate into increased consumption of the underlying APIs during commercial manufacturing of these novel drugs. Moreover, patent expiries of blockbuster drugs are also prompting companies to develop improved successor drug candidates with better APIs.

Insights, By Drug Type: Large number of generic drugs available in the market

Drug type segment is sub-segmented into generic and branded. Generic segment is estimated to contribute the highest share of the pharmaceutical chemicals market and is projected to hold 64.8% of the market share in 2024. Generics are essentially identical copies of brand name drugs in dosage form, safety, strength and quality. They offer significant cost savings compared to their branded counterparts when patents expire. This makes generics highly attractive options for patients as well as governments trying to curtail healthcare expenditure. Both developing and developed countries have laid special emphasis on boosting generic consumption as part of their national health policies. For example, the Food and Drug Administration in the U.S. has undertaken various initiatives like generic drug user fee program to facilitate faster approvals of generic applications. This has enabled more off-patent branded drugs to be replaced swiftly by affordable generics. At the same time, large pharma firms are also promoting generic subsidiaries and acquiring generic drug companies. They aim to take advantage of the high-growth generic space as branded drugs are facing upward price control and payer pressure from governments worldwide.

Insights, By End User: Outsourcing of chemical manufacturing by pharma companies drives the CMO segment growth

End user segment is sub-segmented into pharmaceutical companies, CRO, CMO, and others. CMO segment is estimated to contribute the highest share of the pharmaceutical chemicals market and is projected to hold 32.1% of the market share in 2024. Pharmaceutical manufacturing is a highly specialized process that demands stringent regulatory compliance and quality consistency. It also involves substantial capital investment in setting up facilities, equipment, and maintaining infrastructure. To focus on their core competencies like R&D and marketing, big pharma companies now prefer outsourcing non-core operations like chemical manufacturing, sterile filling and packaging to specialized Contact Research Organizations (CROs) and Contract Manufacturing Organizations (CMOs). CRO/CMOs offer project-based customized services on scale with expert capabilities. They are able to produce large volumes of drugs at competitive costs for multiple pharma clients simultaneously at their existing facilities. Outsourcing strategies particularly help small biotech innovators who lack manufacturing capabilities to develop and supply their novel drugs. CMOs act as a one-stop-solution to produce clinical trial material or handle commercial supply chains. It also enables pharma companies to ramp up production quickly during a drug’s lifecycle without investing huge capital.

Regional Insights

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The North America region has dominated the global pharmaceutical chemicals market for decades and is anticipated to hold 36.5% of the market share in 2024. The presence of major pharmaceutical companies along with advanced research capabilities have helped the region maintain its leading position. Several top American pharmaceutical players have large production facilities and R&D centers located across the U.S. and Canada. Additionally, supportive regulations around patents and intellectual property rights provide incentives for innovations. This has resulted in the region focusing more on developing novel drugs and biomarkers. The pharmaceutical chemicals should comply with stringent quality standards of regulatory bodies like the U.S. FDA. Local manufacturing helps in maintaining consistent supply chains and addressing the demands of the domestic market in a timely manner. North America also has a highly skilled workforce and necessary infrastructure for large-scale production. Major companies procure several raw materials from local suppliers, reducing import dependency. This has kept overall pricing competitive over the years despite high labor and production costs.

The Asia Pacific region has emerged as the fastest growing market for pharmaceutical chemicals globally in the recent past. Rapid expansion of the generics industry and presence of leading players from several emerging economies like India, China, and South Korea are driving the market growth. While China dominates pharmaceutical production volumes, India has specialized in active pharmaceutical ingredients (APIs). Governments in many Asia Pacific countries are promoting investments in pharmaceuticals through favorable policies. Improving regulatory guidelines and investment in infrastructure development have enhanced manufacturing capabilities.

Market Report Scope

Key Developments

• In February 2023, Piramal Pharma Solutions, a patient-centric Contract Development and Manufacturing Organization (CDMO) and subsidiary of Piramal Pharma Ltd, a pharmaceutical company. stated that it has commenced producing initial batches of active pharmaceutical ingredients (APIs) in new reactor suites at its site in Michigan, U.S.
• In January 2023, Agilent Technologies Inc., a leader in the life sciences, diagnostics, and applied chemical markets, stated that it will invest approximately USD 725 million to expand therapeutic nucleic acid manufacturing capacity in response to the rapidly growing USD 1 billion industry and strong demand for the company's high-quality active pharmaceutical ingredients (API)
• In August 2022, WuXi STA, a leading Contract Research, Development, and Manufacturing Organization (CRDMO), announced the ground-breaking of its new 190-acre pharmaceutical manufacturing facility in Middletown, U.S. This site, announced in June 2021, will be WuXi STA's second plant in the U.S., providing increased capacity and greater flexibility to satisfy the demands of customers in the U.S. and around the world.
• In March 2021, Avista Capital Partners, a leading private equity firm focused solely on healthcare, announced that it has signed a definitive agreement to invest in eMolecules, a novel and rapidly growing e-procurement platform for high-value chemicals and bioreagents used by leading pharmaceutical companies in drug discovery.

*Definition: The pharmaceutical chemicals market consists of companies involved in the research and development, manufacturing, and distribution of bulk active pharmaceutical ingredients and key starting materials required for making drugs. These chemical components form the basic raw materials used widely by pharmaceutical drug manufacturers across various therapy areas such as cancer, diabetes, cardiovascular, neurological disorders, and others. The market also involves suppliers of specialized chemicals, reagents, and solvents used during the drug production process.

Market Segmentation

• Product Type Insights (Revenue, USD BN, 2019 - 2031)
  • Solvents
  • Precursors
  • Reagents & Catalysts
  • Active Ingredients
  • Preservatives
  • Others
•  Drug Type Insights (Revenue, USD BN, 2019 - 2031)
  • Generic
  • Branded
•  Sales Channel Insights (Revenue, USD BN, 2019 - 2031)
  • B2B
  • Ecommerce
•  End User Insights (Revenue, USD BN, 2019 - 2031)
  • Pharmaceutical Companies
  • CRO
  • CMO
  • Others
• Regional Insights (Revenue, USD BN, 2019 - 2031)
  • North America
    • U.S.
    • Canada
  • Latin America
    • Brazil
    • Argentina
    • Mexico
    • Rest of Latin America
  • Europe
    • Germany
    • U.K.
    • Spain
    • France
    • Italy
    • Russia
    • Rest of Europe
  • Asia Pacific
    • China
    • India
    • Japan
    • Australia
    • South Korea
    • ASEAN
    • Rest of Asia Pacific
  • Middle East
    • GCC Countries
    • Israel
    • Rest of Middle East
  • Africa
    • South Africa
    • North Africa
    • Central Africa
• Key Players Insights
  • Spectrum Chemical Mfg. Corp.
  • BASF
  • AbbVie
  • Merck Group
  • Fine Chem Corporation
  • Allan Chemical corp
  • Spruhaa Healthcare
  • Kani Overseas Corporation
  • Tata chemicals
  • Lonza
  • Lanxess
  • Johnson Matthey
  • Jubilant Life Sciences
  • Hikal
  • Kenko Corporation
  • CLARIANT