In-depth interpretation of the | medical intermediates industry of medical and health research

Chapter I, Industry overview

I. Pharmaceutical intermediates industry: the crossover industry of chemical industry and medicine

Pharmaceutical intermediates are intermediate substances in the API synthesis process, a pharmaceutical fine chemical, requiring no drug production license for production, which can be divided based on the impact on the final API quality into the non-GMP intermediate and GMP intermediate (pharmaceutical intermediates produced under GMP requirements defined by ICHQ7).

The pharmaceutical intermediates industry refers to those chemical enterprises that produce and process organic/inorganic intermediates or raw drugs for pharmaceutical enterprises by chemical synthetic or biosynthetic methods under strict quality standards.


(1) Pharmaceutical intermediate subindustry can be subdivided into CRO and CMO industries.


CMO: Contract ManufacturingOrganization refers to the entrusted contract manufacturer, which means the pharmaceutical company outsources the production link to the partner. The business chain of the pharmaceutical CMO industry generally starts with special pharmaceutical raw materials. Industry companies need to purchase basic chemical raw materials and classify them into special pharmaceutical raw materials, and reprocessing will gradually form API starting materials, cGMP intermediates, API, and preparations. At present, major multinational pharmaceutical companies tend to establish long-term strategic partnerships with a few core suppliers, and the survival of companies in the industry is clear through their partners.

CRO: Contract (Clinical) Research Organization refers to the commissioned contract research agency where pharmaceutical companies outsource the research link to the partners. At present, the industry mainly to customized production, customized research and development and pharmaceutical contract research, sales as the main cooperation, no matter which way, regardless of pharmaceutical intermediates products are innovative products, judge the core competitiveness of the enterprise is still to research and development technology as the first element, side reflected as the company’s downstream customers or partners.


(2) From the classification of business models, intermediary enterprises can be divided into general mode and customized mode.


Generally speaking, small and medium-sized intermediate manufacturers adopt the general mode, and their customers are mostly generic drug manufacturers, while large intermediate manufacturers with strong research and development ability adopt customized mode for innovative drug enterprises. The customized model can effectively enhance the viscosity with customers.

Under the general product model, enterprises identify the general needs of mass customers according to the results of market research and carry out specific business activities such as research and development, production, and sales as a starting point. That is to say, before the specific business activities, no established customer relationship was established between the enterprise and the public customers. Since then, in the process of carrying out specific business activities, enterprises generally only maintain regular communication with public customers to ensure that the general needs of public customers are met. Therefore, the sales of generic products are first general products, then mass customers. The business model is based on general products and core, and the enterprise and public customers are only a loose customer relationship. In the pharmaceutical industry, the generic product model is mainly applicable to the research and development, production and sales of pharmaceutical intermediates, API and preparations needed for generic drugs.

In the customization mode, customized customers provide confidential information to the enterprise after signing the confidentiality agreement with the enterprise, and clarify the customization requirements.The enterprise starts from the customized needs of customized customers to carry out research and development, production, sales and other specific business activities.That is to say, before conducting specific business activities, enterprises have established a very certain customer relationship with customized customers.Since then, in the process of carrying out specific business activities, enterprises need to maintain continuous, two-way and in-depth communication with customized customers to ensure that the customized needs of customized customers in all aspects.Therefore, the sales of customized products is customized customers, then customized products. The business model is customized customer-based and core, and there is a close customer relationship between the enterprise and customized customers.In the pharmaceutical industry, the customized mode is mainly applicable to the research, development, production and sales of pharmaceutical intermediates, API and preparations needed for innovative drugs.


II. Industry-related laws and regulations


Pharmaceutical intermediates belong to the chemical industry, but they are more stringent than the general chemical products.Adult and API manufacturers need to receive GMP certification, but not the intermediates manufacturers (except the GMP intermediates required under GMP standards), which lowers the industry access threshold for the intermediates manufacturers.

As a customized research & development production enterprise of pharmaceutical intermediates, its production activities are constrained by the Environmental Protection Law of the People’s Republic of China, the Law of the People’s Republic of China on Work Safety, the Product Quality Law of the People’s Republic of China and other laws and regulations.


Fine chemical industry is an important branch of China’s chemical industry. In recent years, the state has reiterated its support for the fine chemical industry in many programmatic documents.The downstream biomedical industry of pharmaceutical intermediates is also one of the strategic emerging industries vigorously developed by the country.


Ⅲ, industry barriers

1. customer barriers

The pharmaceutical industry is monopolized by a few multinational pharmaceutical enterprises.Medical oligarchs are very cautious in choosing outsourcing service providers, and the inspection period for new suppliers is generally long.Pharmaceutical intermediates enterprises need to meet the communication modes of different customers, and need to accept a long period of continuous assessment to gain the trust of downstream customers, and then become their core suppliers.

2. technical barrier

Whether to provide high-tech value-added services is the foundation of pharmaceutical outsourcing service enterprises.Pharmaceutical intermediates enterprises need to break through the technical bottleneck or blockade of the original route and provide the pharmaceutical process optimization route, so as to effectively reduce the drug production costs.Without long time, high cost research and development investment and technology reserves, it is difficult for enterprises outside the industry to truly enter the industry.

3. talent barriers

The technological innovation and industrial operation of pharmaceutical technology requires a large number of excellent research and development, production management talents and project execution personnel.Interbody enterprises need to establish a behavior model that meets cGMP standards, and it is difficult to establish a competitive R & D and production elite team in a short time.

4. quality regulatory barriers

The intermediate industry has a strong dependence on foreign markets. With the increasingly strict quality supervision requirements of FDA, EMA and other drug regulatory agencies, the products that have not passed the audit cannot enter the import country market.

5. environmental regulatory barriers


The intermediate industry belongs to the chemical industry, and needs to be produced according to the national environmental protection supervision standards for the chemical production industry.Intermediate manufacturers with backward technology will bear high pollution control costs and regulatory pressure, and traditional pharmaceutical enterprises mainly producing high pollution, high energy consumption and low value-added products will face accelerated elimination.


IV. Industry risk factors


1.Risk of the relative concentration of customers

For example, as it can be seen from the prospectus of Boteng shares, its largest customer is Johnson & Johnson Pharmaceutical, accounting for more than 60% of the revenue, this phenomenon can also be found from the intermediate suppliers such as Yaben Chemical.

2. Environmental Risk

1. The research and development, production, and sales of pharmaceutical intermediates, the industry belong to the fine chemical product manufacturing industry. According to the relevant provisions of Huanfa [2003] No.101 document, the chemical industry is tentatively designated as heavy pollution

3. exchange rate risk, export tax rebate risk

The pharmaceutical intermediary industry is more dependent on the export business, so the adjustment of the exchange rate and the export tax rebate will have a certain impact on the whole industry.

4. Risk of raw material price fluctuations

The intermediate industry has a large and scattered raw materials needed by the intermediate industry. Its upstream industry is the basic chemical industry, which will be affected by the fluctuations of raw material prices including oil prices. (pay attention to the horizontal comparison of the prices of important raw materials of the target company.)

5. technical confidentiality risk


The core competitiveness of fine chemical intermediates enterprises in technology is reflected in the chemical reaction, core catalyst selection and process control, while some key technologies have a high monopolistic nature, and the core technology is one of the key factors in the company’s production and operation.

6. technology updates at timely risks

7. technical brain drain risk


Chapter II, Market Conditions

I. Industry capacity

According to the China Market Survey Network “2015-2020 Future Market Development Potential and Investment Strategy Research Report” shows that China Medical intermediates Industry Analysis China Market Survey Network analysts pointed out that China needs more than 2,000 kinds of raw materials and intermediates supporting the chemical industry every year, with a demand of more than 2.5 million tons.After more than 30 years of development, the chemical raw materials and intermediates needed for China’s pharmaceutical production can basically match, and only a few parts need to be imported.Moreover, due to China’s rich resources and low raw material prices, many intermediates have achieved a large number of export.


According to the “Fine Chemical Pharmaceutical Interintermediates Industry Analysis Report” released by Qilu Securities in 2013, due to the migration of pharmaceutical outsourcing production to Asia, China’s manufacturing pharmaceutical intermediates have obvious advantages, and is expected to grow at an average annual rate of 18% (the global average growth rate of about 12%).Global pharmaceutical expenses growth slowing, rising research and development costs, reduce the number of new patent drugs and generic drug competition is increasingly fierce, pharmaceutical companies face of double pressure, the industrial chain to division of labor and outsourcing production become the trend of The Times, in 2017 global outsourcing production market value will reach $63 billion, CAGR12%.The cost of manufacturing in China is 30-50% lower than that of Europe and the United States, market demand maintains high growth, infrastructure is better than India and abundant talent reserve, but less FDA certified API and preparations, Therefore, it is judged that China will continue to take the lead in pharmaceutical intermediates manufacturing.China’s pharmaceutical outsourcing production market value is only 6% of global outsourcing production, but it will grow to $5 billion at 18% over the next five years.

Ⅱ.industry characteristics

1.Most production enterprises are private enterprises, flexible operation, small investment scale, basically between several million to 1 or 2 million yuan;

2.The regional distribution of production enterprises is relatively concentrated, mainly distributed in the areas with Zhejiang Taizhou and Jiangsu Jintan as the center;


3.With the increasing attention of environmental problems to environmental problems, the pressure of production enterprises to build environmental treatment facilities increases; (pay attention to punishment, compliance)

4.Product updates are very fast.Five years after a product is generally on the market, its profit margin drops significantly, which forces enterprises to constantly develop new products or constantly improve the production process, in order to maintain a high production profit;

5.Because the production profit of pharmaceutical intermediates is higher than chemical products, the production process of the two is basically the same, so more and more small chemical enterprises have joined the ranks of production pharmaceutical intermediates, leading to increasingly disorderly competition in the industry;

6.Compared with API, the profit margin of production intermediates is low, and the production process of API and pharmaceutical intermediates is similar. Therefore, some enterprises not only produce intermediates, but also use their own advantages to produce API.


III. Future development direction of the intermediates industry

1. industry concentration in both global and China is low, and Chinese CMO and CRO still have a lot of room for growth

Industry concentration is low in both the world and in China.Pharmaceutical intermediates are not limited by patent protection, and need not need GMP certification, so the threshold of entry threshold is relatively low, and there are many products. Therefore, both the world and China, the industry concentration is low, and the outsourcing of pharmaceutical intermediates is no exception.

Global: The 2010 top 10 pharmaceutical CMO represented less than 30%, the top three are Lonza Switzerland(Switzerland), Catalent(USA) and BoehringerIngelheim(Germany).Lonza,, the world’s largest CMO company, earned 11.7 billion yuan in 2011, accounting for only 6% of the world’s CMO.

2. products diversify and extend to the high-end of the industrial chain

Completely from extensive production of low-end intermediates to fine high-end intermediate products, and expand to other medical service fields.This has high requirements for the management and technical strength of the company, but also needs to accumulate customer reputation, and the cooperation time also has a great impact on the depth of cooperation.

3. takes professional outsourcing services 

The outsourcing service industry chain continues to extend, undertake R & D outsourcing services (CMO+CRO): extend from CMO to upstream, and undertake CRO(outsourcing R & D services), which has the highest requirements for the company’s technology and research and development strength.

4. focuses on pharmaceuticals, attacking API and preparations downstream of the intermediates

5. works deeply with large customers to share the fruits of common growth and enhance the core value

The concentration of downstream pharmaceutical industry is much higher than that of pharmaceutical intermediary industry, and the future demand mainly comes from large customers: from the perspective of concentration, the global pharmaceutical industry is high (the concentration of the world’s top ten pharmaceutical enterprises is 41.9%), which makes the main demand of intermediary CMO comes from multinational giants.The concentration degree of the intermediate industry is only 20%, the bargaining power is weak, and the future development direction will also belong to the development of the pharmaceutical industry.Multinational pharmaceutical giants are the major source of present and future demand.Locking big customers targets future needs.


Chapter III Industry-Related Enterprises

I. Listed companies in the intermediate industry

1, Medialization Technology

Leading customized production enterprise: Lianhua Technology is a leading enterprise in pesticide and pharmaceutical customized production in China, and the proportion of customized production is increasing year by year.

Technical advantages: ammonia oxidation method introduces nitrile base technology, through the use of new catalysts and advanced production equipment, the technology reaches the international leading level, low cost and the operation process is basically non-toxic.

2, Jacob Chemical

Customstom production of pesticide and pharmaceutical advanced intermediates.Pesticide intermediates are primarily intermediates BPP of the insecticide chloroworm benzoamide and CHP, in which CHP is a precursor of BPP.Medical intermediates are mainly anti-epileptic intermediates and anti-tumouror intermediates, with the characteristics of small varieties.

The company’s main customers are all multinational giants, among which the pesticide intermediates are DuPont, and the pharmaceutical intermediates are Teva and Roche.Custom mode enhances customer engagement and locks in downstream requirements.Take the cooperation with DuPont as an example, As a strategic supplier of DuPont, the cooperation has built a solid foundation of trust and the barriers to entry over many years, and the depth of cooperation has been continuously enhanced.

3, Wanchang Technology

Wanchang Technology is the invisible champion in the field of pesticide pharmaceutical intermediates. Its main products are trimethyl proformate and trimethyl proformate. In 2009, the global market share was 21.05% and 29.25% respectively, making it is the world’s largest producer.

Unique technology, high comprehensive gross profit margin, has the characteristics of high quality and yield, less investment, superior economic performance.At present, the global protoformate industry has completed the reshuffle oligopoly, competitors do not expand production.The company has significant competitive advantages, the use of patent innovation of the “waste gas hydrocyanic acid method” process, the competitiveness is strong.

4, Boteng Shares

The core technical team, with obvious advantages in research and development, can provide integrated customized R & D and production services, and become the domestic first-class pharmaceutical intermediates customized production and research and development enterprise.It is mainly to provide customized pharmaceutical intermediates research, development and production services for multinational pharmaceutical companies and biopharmaceutical innovative drugs, which has been compared with the standard of the second and good target

1.The team has strong continuous research and development ability (involving research and development, not everyone can enter this industry. We should pay attention to the team age and academic structure and past experience);

2. has featured products, corresponding to generic or innovative drug customers (invention patent situation, what the enterprise customers have, the corresponding finished pharmaceutical products, what the indications are, and the market capacity of the indications);

3. targets have the ability to develop towards customized products, or even towards CRO or CMO, rather than only producing standardized generic products; (they may also develop towards the downstream pharmaceutical industry, but need the support of capital and brand)

4.The compliance of targets is good, and there is no punishment from environmental protection, customs and tax authorities.


(1)<<Pharmacology>>, People’s Health Press, 8th edition, March 2013;

(2)Boteng shares: IPO public offering and listed on the Growth Enterprise Board prospectus;

(3)UBS Gene: —— <<Investment Analysis on Pharmaceutical Interintermediates>>, May 2015;

(4)Guorui Pharmaceutical: “The Pharmaceutical Interbody Industry that You Do Not Know”;

(5)Yaben Chemical: IPO and listing prospectus on the Growth Enterprise Board;

(6)Pharmaceutical Supply Chain Alliance:<< The In-depth Survey and Analysis of the Market Prospect of the Pharmaceutical Interbody Industry>>, April 2016;

(7)Qilu Securities: <<Medical intermediates of fine chemicals>>”.Eleven of the top 15 pharmaceutical companies established customer relationships.


Post time: Oct-25-2021