Analysis of Current Situation of Erythromycin: How will It Develop?

As one of the bulk APIs in China's export of medicines, erythromycin has long had export volume up to thousands of tons and export amount reaching hundreds of millions of USD. The export of erythromycin in China has recently showed the situation of volume increase and price decrease, and how will the future trend be?
 
1/Capacity continues to increase
     
The production of erythromycin in China has started to largely increase at a high speed after entering the 21st century with the continuous rise of the international market's demand for erythromycin. To date, the annual capacity of erythromycin in China has reached over 10,000t, with annual production of over 6,000t.
     
CFDA data show that there were 17 erythromycin API production approval numbers in total (including 3 approvals for erythromycin lactobionate) by May 17, 2017.

The major manufacturing enterprises include Ningxia Qiyuan Pharmaceutical Co., Ltd., Hubei Yidu HEC Pharmaceutical Co., Ltd., Sichuan Neijiang Shanshan Pharmaceutical Co., Ltd., Henan Xinxiang Huaxing Pharmaceutical Factory and Xi'an Lijun Pharmaceutical Co., Ltd., etc.
     
The production of the above enterprises accounts for about 85% of the total production in China, and that of other companies only accounts for about 15%.

Currently, the largest Chinese erythromycin API manufacturing enterprise is Ningxia Qiyuan Pharmaceutical Co., Ltd., with annual capacity of over 5,000t. The company has passed the Europe COS and U.S. FDA certifications for its APIs, including erythromycin and tetracycline hydrochloride, etc., and has stable customers in dozens of countries and regions in the Europe, South America, Africa and Southeast Asia, etc., with smooth export, and with high market shares and product reputations in the international market.

Yidu HEC Company and Neijiang Shanshan Pharmaceutical Company also have relatively large capacity up to over 3,000t.

2/The export is embarrassing, with volume increase and price decrease

Erythromycin has had rapid export growth since the 21st century, and has now developed to be a bulk export variety among the macrolide antibiotics in China, with export volume accounting for about 60% of the total macrolide drugs in China.

China's export volume of erythromycin reached over 500t at the beginning of the 21st century, accounting for about 60% of the production of the corresponding year. China's export volume of erythromycin first exceeded 1,000t in 2006, accounting for nearly 30% the total export volume of macrolide antibiotics.

China's erythromycin capacity already exceeded 9,000t in 2010, with production of over 2,500t and export volume of over 1,500t; China's export volume of erythromycin reached 2,390t in 2014, with export amount of USD 167.03 million.
 
The erythromycin exported by China is mainly used as feed additive, and mainly exported to the Asian, African and Latin American markets, etc. accounting for about 80% of the total erythromycin export volume, however, the volume of export to the EU countries and other developed countries only accounts for about 20%.

India is the largest export market of China's erythromycin, generally accounting for about 50% of the corresponding total export volume.

China's erythromycin API imported by Indian enterprises is mostly reprocessed to the best-selling semi-synthetic erythromycin and made into preparations to obtain higher profits.

Furthermore, countries like Malaysia, Puerto Rico and Spain also account for large shares in import of China's erythromycin.

South American countries like Puerto Rico and Brazil have grown to another important export market of China's erythromycin in recent years.
  
Ningxia Qiyuan Pharmaceutical Company has been ranking first in export shares among Chinese pharmaceutical enterprises exporting erythromycin in recent years, accounting for about 50% in China, and Yidu HEC Biochemical Pharmaceutical and Henan Huaxing Pharmaceutical, etc. are also large exporters of erythromycin.
    
However, the global market environment has still been sluggish in recent years, and the world trade is in the slow recovery period.

China's export of APIs has also encountered many difficulties, with export of many products showing the embarrassing situation of volume and price decrease or volume flatting and price decrease. The export of erythromycin is overall in the situation of volume increase and price decrease.
     
3/The market demand is strong

Erythromycin is mainly used as veterinary antibiotic, and has been widely applied as feed additive and animal growth promoter in foreign countries over the years.

Emerging countries such as China, India, Brazil and Russia have kept fast economic growth in recent years, with people's living standard continuing to rise. The total population of those countries is nearly 3.0 billion, with strong and rigid demand for poultry, meat and eggs, etc.

The huge market continues to promote the breeding industry to maintain rapid development, with huge demand for feed antibiotics and additives.

In addition, erythromycin is also a key intermediate and API in synthesizing the three types of best-selling semi-synthetic erythromycin: azithromycin, roxithromycin, and clarithromycin in the international pharmaceutical market.

The sales of macrolide antibiotics led by the third-generation erythromycin, such as azithromycin, clarithromycin, and roxithromycin, have been rising steadily in recent years, with market shares continuing to expand, from 5% in 2000 to about 12% in 2014.

Since China's introduction of the Administrative Measures for the Clinical Use of Antibacterial Drugs in 2012, many cephalosporin antibiotics, quinolones and aminoglycoside antibiotics have been listed in the scope of "restricted drugs" and "special drugs", leading to large restrictions on market expansion, sales shrinking, and reshuffle of the antibiotic market.

Antibiotics like erythromycin are also listed in the scope of "restricted drugs" in some provinces and municipalities, however, erythromycin, azithromycin, roxithromycin, clarithromycin, erythromycin ethylsuccinate, and dirithromycin, etc. are all listed in China's national medical insurance drug catalog and national essential drugs list.
    
The anti-infective drug market experienced rise, rapid decline, picking up and conventionalized development stages, etc. in the 12th Five-year Plan period as affected by "restriction order of antibiotics usage" and other factors.

In recent years, in the hospital drug market of China, the semi-synthetic erythromycin products such as azithromycin, roxithromycin, clarithromycin, and erythromycin ethylsuccinate have been favored clinically, with the usage in Chinese hospitals continuing to increase, currently accounting for over 90% market shares among macrolides.
     
The market demand for the erythromycin API is very strong as it is the basic raw material for synthesis of the above erythromycin products. China's export volume of erythromycin has still been rising in recently years, however, the proportion of export volume in total production has declined due to the increase of usage in the Chinese market. In other words, the increase of veterinary drug and human drug demands will become a main driver to promote the continuous prosperity of the erythromycin market.
 
4/The supply seems to be slightly insufficient

The production of erythromycin, a fermented product, produces a large amount of "three-waste" substances. Fermented products have gradually been eliminated overseas as countries raise environmental requirements. Many foreign erythromycin manufacturing enterprises have stopped production as affected by high environment-related cost and relatively small API profits, etc.

The U.S. Abbott and countries like Russia and Poland have stopped erythromycin production and turned to China to purchase the required products, and the erythromycin supply in the international market becomes tight, therefore, the market demand for the relevant Chinese products largely increases.
     
After years of efforts, the production capacity of erythromycin in China has reached over 10,000t, and this can basically satisfy the market supply if going into full production, but the production capacity of Chinese enterprises still cannot be fully released, and the annual production of erythromycin in China is currently about 6,000t, about half of the production capacity, therefore, the erythromycin API supply seems to be slightly insufficient.
     
According to the analysis of an insider, there are two main reasons:

One is the environmental factor. It is very difficult to treat the toxic substances produced in the production of erythromycin in an environmentally friendly way, which requires a large amount of water for dilution. The Measures for the Treatment of Sewage of Pharmaceutical Industry issued by China several years ago has raised requirements for each environmental indicator.

China has paid more and more attention to the environmental issue in recent years, and enterprises' cost in environmental management has become increasingly higher. Enterprises cannot and dare not go into full production if the environmental issue is not well addressed.
     
Two is the production technology factor. Fermented products are unlike the synthetic compounds, and the strains are a key factor in erythromycin production. Unqualified strains will directly result in problems in product quality, yield and production cost, etc., which is the threshold restricting the large-scale production and project launch of some enterprises.

According to an insider, except the good product quality of a few enterprises in China, the product quality of other enterprises still has a gap with the standard for human drugs, and their products can only be used as veterinary drug. The market prices of veterinary drugs are much less than those of human drugs.

Substandard product quality will also lead to increase of production cost and decline of enterprise economic benefits, which is unacceptable to enterprises.
     
Some places in China have competed to invest and launch new erythromycin API production lines and some old factories have expanded their original production scale, due to the long-term optimism about the erythromycin market.

The production capacity and production of erythromycin API in China will climb to a new level and the export volume will further rise once those new projects are completed and put into production. China's erythromycin export peaked annual export of over 4,000t previously, which was 1,000t more than the present annual export volume of over 3,000t.