Market Overview

The domestic active pharmaceutical ingredients (“APIs”) and drug intermediates (“intermediates”) market for FY2024 is estimated at 505,000 million yen (based on the sales at contract manufacturing organizations [“CMOs”]). Underpinned by the stable demand for APIs and intermediates for small molecule drugs and the outsourcing being a continuous trend in pharmaceutical manufacturing, the market continue to perform despite alterations in market conditions.
Meanwhile, the business performance of CMOs is challenged by the difficulty of coping with soaring costs for raw materials, electricity, transportation, etc., as well as the price drop of end products (drug prices) in response to NHI price revisions and difficulty of hiring human resources.

Noteworthy Topics

Expectations for Growth of Middle Molecule Drugs

While there is no unanimous definition for middle molecule drug, it generally indicates a drug that fall between the molecular weights of small molecule drugs and macromolecular drugs, which range from 500 to several thousand. They have the advantage over small molecule drugs for having a higher level of specificity toward specific targets. Typical middle molecule drugs are nucleic acid drugs and peptide drugs. Although we observe a slowdown in the discovery of new drug modalities due to a decline in funding for biotech startups, in accordance with the progress in the development of middle molecule drugs, the market can expect expansion hereafter.

Future Outlook

Going forward, the domestic APIs and intermediates market is expected to remain robust.


The demand is expanding for highly active compounds that exert strong pharmacological effects or toxicity on human body when even a very small amount is ingested (such as anticancer drugs), and for middle molecule drugs like nucleic acid drugs and peptide drugs. Development of APIs for these drugs require higher capital investment and greater technological capabilities than for APIs for small molecule drugs. While outsourcing continues to be a growing trend at pharmaceutical companies as an attempt to reduce costs, the growth of domestic APIs and intermediates market may also be fueled by the increase of reshoring stemming from the weak yen.

To ensure stable supply, CMOs of APIs and intermediates are vigorously investing in both production equipment and production manpower. Furthermore, we see some companies considering additional investment to capture the increasing demand. By capturing new demand of pharmaceutical companies, we believe there will be greater opportunities for CMOS to pass on incremental costs of raw materials, electricity, labor cost, etc., on the prices of APIs and ingredients.

Research Outline