Small Molecule API Market Size, Share & COVID-19 Impact Analysis, By Type (Branded and Generic), By Indication (Oncology, Diabetes, and Others), By Manufacturing Type (Captive and Merchant), and Regional Forecast, 2023-2030

The small molecule API market size was valued at USD 154.95 billion in 2023 and is projected to grow to USD 246.22 billion by 2030, exhibiting a CAGR of 6.8% during 2023-2030. Rising chronic diseases and the dominance of orally administered drugs fuel the market growth.

Small molecule APIs have been the mainstay of the pharmaceutical industry for a long period. These products have distinct advantages in terms of therapeutics, as they can be primarily administered orally and pass through the cellular membrane to reach intracellular targets. According to an article published by Pharmaceutical Technology, approximately 58% of drug products under development are small molecules. Therefore, the increasing prevalence of chronic diseases across the globe has led pharmaceutical manufacturers to develop more therapeutic drugs for which the demand for such products has surged. Furthermore, contract manufacturers that focus on developing and producing these products have increased their production capacity for small molecules and have experienced significant growth. 

• For instance, in September 2022, Cambrex announced the completion of the first phase of its USD 30 million investment for its small molecule active pharmaceutical ingredients manufacturing facility in High Point, North Carolina.

Along with this, the increasing research & development activities and the growing approvals from regulatory bodies also fuel the growth of the market.

• For instance, in December 2022, Mirati Therapeutics, Inc. announced that the U.S. FDA granted accelerated approval to KRAZATI (adagrasib) as a targeted treatment option for adult patients with KRAS mutated locally advanced or metastatic non-small cell lung cancer.

However, the adoption of biologics has increased exponentially as it provides more targeted treatment, slowly impeding the growth of small molecule Active Pharmaceutical Ingredients (APIs) for the production of pharmaceutical products.

COVID-19 IMPACT 

Supply Chain Restriction during the Pandemic Resulted in Slower Growth of the Market 

The COVID-19 pandemic influenced the dynamics of the pharmaceutical sector globally. During COVID-19, the market emerged as both a challenge and an opportunity globally. As the pandemic began, significant supply chain and logistics disruption was witnessed, impacting plant operations. This resulted in companies witnessing pricing pressure as the prices for these products increased during the pandemic.

However, the pandemic elevated the need for therapeutic drugs for the management of SARS CoV-2 virus, due to which manufacturing facilities across the globe increased the production of products such as Remdesivir, Favipiravir, and Itolizumab. Furthermore, the demand for the drugs used to treat COVID-19 symptoms also increased, which constituted anti-infective and antipyretic, positively impacting the small molecule API market growth.

• For instance, in June 2020, Dr. Reddy’s Laboratories Ltd. entered into a non-exclusive licensing agreement with Gilead Sciences, which grants the formed company to register, manufacture, and sell Gilead’s investigational drug, Remdesivir, a potential treatment for COVID-19, in 127 countries including India.

The launch of many therapeutic drugs for the management of COVID-19 by receiving accelerated or emergency approval also fueled the market growth during the year 2020. 

In 2021, companies reported an increase in their revenues compared to 2020, as the restrictions were lifted and the production capacity of pharmaceutical manufacturing companies increased. Furthermore, the backlog orders from the year 2020 were cleared in 2021, which led to a jump in revenue for most of the companies.

• For instance, Lonza reported an increase of 11.7% in the revenue for their small molecule segment in 2021 compared to the financial year 2020.

LATEST TRENDS 

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Increasing Demand for Highly Potent Active Pharmaceutical Ingredients (HPAPIs) in the Market

The drug development pipeline of major pharmaceutical companies is made up of highly potent APIs (HPAPIs). These molecules are commonly associated with innovative cancer treatments. The molecules are also effective in the treatment of autoimmune diseases, diabetes, and multiple other indications. Currently, the HPAPI molecules make up over 30% of the drug development pipeline.

The HPAPI molecules represent a new method of using small molecules to deliver innovative patient therapies and incorporate more precise delivery mechanisms. The gradual shift toward the adoption of HPAPI has led to the emergence of a more effective pipeline of effective medicines, with lower dose requirements and lesser side effects, thereby driving the adoption of such products for multiple therapeutic indications.

Furthermore, major companies focusing on the production of small molecule APIs, such as Lonza, are also working toward building a pipeline of HPAPI molecules by focusing on research and development initiatives.

• For instance, in June 2021, Lonza invested funds to expand API development and manufacturing facility in China. The project will include the installation of three 1,000 GMP trains along with a combined reactor volume of 12 cubic meters. The investment also fuels the development of GMP laboratories, which can be used to produce small-scale batches of HPAPIs.

The development of HPAPI molecules is majorly driven by the research for targeted therapy for cancer treatment. This is driven by the increasing prevalence of cancer, which has increased the demand for oncology drugs across the globe. Therefore, the continuous efforts by all pharmaceutical companies to cater to the growing need has increased the development of HPAPI, thus driving the market.

• For instance, in June 2022, MilliporeSigma, a Merck KGaA subsidiary, opened a USD 65.0 million Highly Potent Active Pharmaceutical Ingredient (HPAPI) manufacturing facility to focus on cancer treatments.

SMALL MOLECULE API MARKET GROWTH FACTORS

Rising Demand for Pharmaceutical Products and Increasing R&D Activities to Foster the Market Growth 

The increasing prevalence of chronic disorders has resulted in the rise of the patient population across the globe. This has led to an increasing demand for novel therapeutic products.

• For instance, according to the American Cancer Society, it was projected that in 2022, 1.9 million new cancer cases would be diagnosed in the U.S.

Thus, to cater to the demand, pharmaceutical companies have increased their R&D efforts and are focusing on manufacturing therapeutic drugs which can be used as a targeted treatment for chronic disorders.

• For instance, in September 2022, Taiho Oncology, Inc. and Taiho Pharmaceutical Co., Ltd. announced that the U.S. FDA granted them approval for the LYTGOBI for the treatment of adult patients with previously treated, unresectable, locally advanced or metastatic intrahepatic cholangiocarcinoma (iCCA) Harboring Fibroblast Growth Factor Receptor 2 (FGFR2) gene fusions or other rearrangements.

Such initiatives by major pharmaceutical companies have led to a staggering increase in the demand for small molecule APIs, leading to market growth.  

Strong Clinical Pipeline Candidates for Small Molecule to Augment Market Growth

Small molecule APIs have always been the backbone of the pharmaceutical industry, and this is due to the staggering increase in the number of small molecules being developed as drug candidates. The increasing number of marketed small molecules and the growing pipeline have led to the growth of the market across the globe.

The broadening landscape of small molecules in several new therapeutic indications has led pharmaceutical companies to focus on R&D initiatives, which has led to a strong pipeline for small molecule products.

• For instance, in October 2022, Pfizer Inc. announced positive topline results from its Phase 3 TALAPRO-2 study of TALZENNA in combination with XTANDI to treat metastatic castration-resistant prostate cancer.

Furthermore, the increase in approval from government bodies has led to the growth of the market.

• For instance, according to the Drug, Chemical & Associated Technologies Association (DCAT), in 2021, 50 New Molecular Entities (NME) were approved, of which 36 products were small molecule entities.

Therefore, the increasing pipeline of small molecule drugs by several pharmaceutical companies has led to the growth in the production of these API products, thus fostering market growth.

RESTRAINING FACTORS

Increasing R&D Initiatives to Introduce New Biologics to Hinder Market Growth

In recent years, there has been an accelerated uptake in the production of biologic drugs. This is due to the increasing need for drugs targeting specific pathways and cells while treating challenging diseases such as cancer and rare disorders. With the introduction of new modalities, such as mRNA, biologics are expanding the range of treatments available to patients, and thus can be used as an alternative to small molecule drugs.

Additionally, several major pharmaceutical organizations are slowly entering the biologics market to cater to the increasing demand. These companies are focusing on multiple R&D initiatives to launch new biologic drugs.

• For instance, in December 2022, Pfizer Inc. announced that the U.S. FDA accepted its Biologics License Application (BLA) for review of its investigational pentavalent meningococcal vaccine candidate in adolescents. 

Companies are also focused toward expanding their manufacturing facilities to accommodate the growing demand for biosimilar drugs.

• For instance, in September 2022, Merck & Co., Inc. opened a viral clearance laboratory as a part of the first building phase of its new China biologics testing center. 

Such strategic initiatives by pharmaceutical organizations to increase the manufacturing of biologics across the globe have led to a decline in the adoption of small molecule API over the years. Furthermore, rise in the adoption of biologic drugs is estimated to gradually hamper the market in the forecast period.

SEGMENTATION

By Type Analysis

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Branded Segment to Grow Owing to Rising R&D Activities by the Market Players

Based on type, the market is segmented into branded and generic.

The branded segment held the largest small molecule API market share in 2022 owing to substantial R&D programs by pharmaceutical organizations focusing on developing innovative products to launch innovative therapeutic drugs. Furthermore, the growth in the therapeutic application of these products such as high-potency active pharmaceutical ingredients is anticipated to provide new growth avenues to the production of branded small molecule APIs.

However, as the major blockbuster drugs are going off-patent along with the comparatively high cost, the demand for branded drugs is gradually decreasing over the years. As a consequence of this, generic small molecule APIs are estimated to grow at a significant rate during the forecast period. Furthermore, the rising adoption of OTC drugs and the comparatively lower cost of these products are expected to fuel the growth of the generic segment.  

By Indication Analysis

Oncology Segment is Projected to Dominate Owing to Strong Prevalence of Cancer 

On the basis of indication, the market is segmented into oncology, diabetes, and others.

The oncology segment dominated the market and is expected to grow at a higher CAGR, owing to multiple factors such as increasing prevalence of cancer across the globe and rising development of novel therapeutics for its treatment. A significant rise in the development and drug discovery of small molecules for cancer has been witnessed over the past few decades. Pharmaceutical companies are emphasizing targeted drugs that can specifically target cancer cells, resulting in high potency and low toxicity. Several research and development initiatives related to small molecule cancer drugs are among the major factors driving the segment's growth.

Furthermore, the increasing number of approval from regulatory bodies across the globe also fuels the segment’s growth.

• For instance, according to an article published in Springer Nature Limited in May 2021, by December 2020, 89 small molecule targeted antitumor drugs were approved by the USFDA and the National Medicinal Products Administration (NMPA) of China.

The diabetes segment witnessed substantial growth in 2022 owing to the escalating global prevalence of diabetes across the globe.

• For instance, according to the International Diabetes Federation (IDF), in 2021, 74,195 patients suffered from diabetes in India, and it is estimated to increase to 92,974 by the end of 2030. 

Due to the growing prevalence, the demand for drugs for managing diabetes has increased. The increased need has led pharmaceutical companies to develop and manufacture new products for the management of diabetes, thus leading to the growth of the segment. For instance, in April 2022, AVM biotechnology announced the beginning of a study for its small molecule AVM0703 for the reversing of Type 1 diabetes with the receipt of a Phase II Small Business Innovation Research (SBIR) award of USD 1.6 million from the National Institute of Diabetes and Digestive Kidney Disease (NIDDK).

On the other hand, the others segment is expected to grow in the market owing to the rising focus of the market players to develop innovative products to treat therapeutic indications such as rare diseases and diseases related to the central nervous system.

• For instance, in September 2022, the European Commission (EC) granted Alnylam Pharmaceuticals, Inc. marketing authorization for AMVUTTRA (vutrisiran), an RNAi therapeutic used for treating hereditary transthyretin-mediated (hATTR) amyloidosis in adult patients with stage 1 or stage 2 polyneuropathy.

By Manufacturing Type Analysis

Captive Segment to Lead due to Availability of Raw Materials

On the basis of the manufacturing type, the market is segmented into captive and merchant.

The captive segment accounted for the largest share in 2022. Easy availability of raw materials, and extensive investment by pharmaceutical organizations to introduce advanced manufacturing facilities, have been pivotal in pharmaceutical companies focusing on in-house manufacturing of active pharmaceutical ingredients. Furthermore, strategic initiatives by major players, such as manufacturing facility expansion and entering into supply contracts with other players, are some of the factors propelling the growth of the captive segment.

The growth of the merchant segment is facilitated by the lower manufacturing cost in India and China, which makes them a popular choice for pharmaceutical companies to outsource their API production. The cost-effectiveness of contract manufacturing organizations allows large companies to gain high profits, thus accelerating the segment’s growth.

REGIONAL INSIGHTS

Based on region, the global market is segmented into North America, Europe, Asia Pacific, Latin America, and the Middle East & Africa.

North America accounted for the highest small molecule API market share and generated a revenue of USD 55.25 billion in 2022. The region is anticipated to dominate the market during the forecast period. The growth is characterized by the growing incidence of chronic diseases and increased government initiatives to develop innovative therapeutic drugs. The rapid adoption of small molecule drugs among patients for the treatment of several chronic disorders is driving the growth of the market in North America.

• For instance, according to the Alzheimer's Association, in 2022, 6.5 million Americans age 65 or older are living with Alzheimer’s. Therefore, the growing prevalence of such chronic diseases has accelerated the growth of the market in the region.

Europe witnessed positive growth in 2022 due to rise in funds for R&D initiatives and the presence of major pharmaceutical manufacturing companies in the region.

• For instance, in February 2020, Bayer AG announced that it entered into a definitive agreement to transfer a large part of its Berlin-based small molecule research unit to Nuvisan, an international service provider for clinical studies, laboratory services, and contract manufacturing with several sites and clinics in Germany and France.

The Asia Pacific small molecule API market is projected to witness the highest CAGR throughout the forecast period. The growing number of CDMO facilities and pharmaceutical manufacturing companies in countries, such as China and India, propels the region’s growth. Currently, China and India are major countries focused on exporting these products to other countries. The abundant availability of raw materials in the region and the lower labor cost makes them an attractive destination for outsourcing the manufacturing of these products.

The market in Latin America and the Middle East & Africa also witnessed positive growth. Being an untapped market, these regions have led major pharmaceutical companies to open their manufacturing facilities in several countries. Furthermore, cheap labor costs also make the region attractive to many pharmaceutical manufacturing companies. Recent regulatory changes also drive market growth in these regions.

• For instance, in September 2021, the National Health Surveillance Agency (ANVISA) was accepted into the International program for rationalization of Good Manufacturing Practices (GMP) Inspections of active pharmaceutical ingredients. Thus, Brazil is part of a group formed by several countries that work to conduct inspections and share information.

KEY INDUSTRY PLAYERS

Strong Small Molecule Pipeline has Propelled Lonza, EuroAPi, and Pfizer Inc. to Lead the Global Market

The competitive landscape demonstrates a fragmented market with several large, medium, and small manufacturers.

Lonza, EuroAPI, and Pfizer Inc. are a few of the top small molecule API manufacturing companies with a diversified portfolio. The presence of advanced manufacturing facilities and their continuous focus on launching new small molecule API through several strategic initiatives have been instrumental in the dominance of these companies.

• For instance, in April 2021, Lonza announced that the company made an investment to construct a small molecule manufacturing complex at its site in Visp, Switzerland.


• Similarly, in March 2021, Pfizer Inc. collaborated with Iktos to adopt Iktos Artificial Intelligence technology for de novo design for the company’s small molecule discovery programs.

Apart from these large companies, many small and medium pharmaceutical manufacturing companies focus on introducing novel small molecule therapeutic agents in the market. The companies are working toward getting regulatory approval and continuously trying to establish a substantial market share.

• For instance, in March 2022, Marinus Pharmaceuticals, Inc. received approval from the U.S. FDA for ZTALMY oral suspension for the treatment of seizures associated with cyclin-dependent kinase-like five deficiency disorder (CDD), a rare form of genetic epilepsy, in patients two years of age and older.

LIST OF KEY COMPANIES PROFILED IN SMALL MOLECULE API MARKET:

• Teva Pharmaceutical Industries Ltd. (Israel)


• Cipla Inc. (India)


• Dr. Reddy’s Laboratories Ltd. (India)


• Sun Pharmaceutical Industries Ltd. (India)


• Aurobindo Pharma (India)


• Merck KGaA (U.S.)


• AbbVie Inc. (U.S.)


• Lonza (Switzerland)


• Sanofi (France)


• Pfizer Inc. (U.S.)

KEY INDUSTRY DEVELOPMENTS

• June 2022 – Dr. Reddy’s Laboratories Ltd. announced that its subsidiary formed a partnership with U.S.-based Olema Pharmaceuticals to conduct research, develop, and commercialize novel small molecule inhibitors for an undisclosed oncology target.


• January 2022 – Pfizer Inc. and Biohaven completed a collaboration transaction to commercialize small molecule migraine drugs, rimegepant and zavegepant, outside the U.S.


• August 2021 – Bayer AG announced the acquisition of Vividion Therapeutics, Inc., utilizing novel discovery technologies to unlock high value, traditionally undruggable targets with precision therapeutics. Vividion’s platform is able to produce a variety of small molecule therapies across indications, with an initial focus on targets relevant to oncology and immunology.


• May 2021 – Bristol-Myers Squibb Company and Exscientia entered into a collaborative agreement to use AI to accelerate the discovery of small molecule therapeutic candidates in multiple therapeutic areas.


• December 2022 – Eli Lilly and Company and Sosei Group Corporation collaborated to discover, develop, and commercialize small molecules that modulate novel G protein-coupled receptor targets associated with diabetes and metabolic diseases.

REPORT COVERAGE

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The small molecule API market report covers a detailed market analysis and overview. It focuses on key aspects such as pipeline analysis, regulatory scenario, recent approvals, and launches. Besides this, it offers insights into the market drivers, market trends, market dynamics, COVID-19 impact on the market, and other key insights. In addition to the factors mentioned above, the report encompasses several factors that have contributed to the growth of the market in recent years.

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