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Lab chem and reagents market to gain traction post Covid

A Raju, Hyderabad
Thursday, December 31, 2020, 08:00 Hrs  [IST]

The lab chemicals, reagents and equipment market in India is expected to gain traction post Covid-19, aver industry analysts. The major growth driver for the growth of these segments is due to the fact that a large number of pharma, biotechnology, research institutions have embarked upon increased research activities, in a bid to discover or invent new medicines and vaccines to comprehensively deal with the ever-expanding pandemic across the globe, they opine.

Moreover, as the advanced western world, in a bid to cut costs on their research and manufacturing activities, started outsourcing their drug development and manufacturing activities to emerging and development countries like India, the lab chemicals industry witnessed an accelerated growth since the last one decade.  The laboratory chemical reagents market in particular is expected to witness significant growth with Asia-Pacific region including India, China and other major countries emerging as the fastest growing regions exhibiting an annual growth rate of 5.7 per cent in the year 2018-19. It is expected to further grow in the range between 6-8 per cent during 2020 and beyond.

According to Vijay Krishna, MD of Shrirvasta Life Sciences in Hyderabad, the main reason for growth in laboratory chemicals and reagents markets is due to the escalating clinical research outsourcing activities in the Asian region.

Particularly in India, this has further accentuated the demand for lab chemicals for measuring drug quality or testing the quality of products in the chemical industry, food industry or biological areas of research and development. With this new forecast, lab chemicals markets in the country is all set to add another Rs. 300 cores to its earlier value of Rs.1,250 crore in 2019 and is expected to reach Rs. 1,550 crore for the year ahead, according to industry experts.

Lab chemicals and its significance
Laboratory chemicals are compounds or substances that are used to perform experimental and investigative procedures and for the preparation of drugs and other chemicals. These are used in large scale for commercial applications and research purposes. The significant increase in the use of chemicals in basic research applications, coupled with large-scale commercial applications has helped the laboratory chemicals market to grow. The laboratory chemicals market is mainly driven by the growing research and development activities in the field of biological and chemical sciences. The development and improvement of ongoing technologies, such as cell culture and recombinant DNA have enhanced the scientific community’s ability to produce important human therapeutic agents over the years. The increasing demand for laboratory chemicals in the biotechnological industry will drive the market growth in upcoming years.

Growth segments
If Covid-19 has accelerated the growth of this sector at present, earlier it was driven on the basis of products segments and end users.

The product segments category can be subdivided into molecular biology (gene expression, gene synthesis, vectors, monoclonal  and  polyclonal antibodies, extraction kits, enzymes, cloning and sequencing, PCR reagents, and others), cytokine and chemokine testing, carbohydrate analysis, immunochemistry, cell, tissue culture, environmental testing (pesticide residue and others) and biochemistry. Of this microbiology currently holds the largest share of the market whereas, cytokine and chemokine testing is expected to emerge as the fastest growing segment in near future. Biotechnology, academic segment, non-academic segment and corporate segment, are some of the end users of laboratory chemical reagents.

According to a report from Global Industry Analysis, the laboratory chemical reagents market is on the growth trajectory mainly due to the increased use of laboratory chemical reagents in basic research coupled with large-scale commercial applications. Moreover the growing interest of world scientific community in laboratory chemical reagents also will contribute to market growth.

In addition to this, there is a continuous refinement and advances in technologies such as cell culture, recombinant DNA and bio-therapeutics which has enhanced the scientific community’s ability to identify and produce important human therapeutic agents over the years. This is also another significant factor that had fuelled the robust growth of laboratory chemical reagents market during the past several years. Further the large-scale commercial applications and increasing application in basic research are also spurring the demand for laboratory chemical reagents. The emerging disciplines such as neurosciences and proteomics are also expected to help drive the market growth.

As the healthcare sector is growing, more and more number of diagnostics centers is emerging across the world. Especially in countries like India, China, Central Asia and other African and European countries, the lab chemical markets are poised to have a positive growth. Antibodies are becoming increasingly significant, both as diagnostic as well as therapeutic tools for targeting the diseased cells and cell compounds.

A wide variety of new antibodies that could offer effective treatment for a range of diseases are being released into the market, owing to technological advances in the field. The field of molecular biology has witnessed a plethora of new opportunities with the conclusion of human genome project which has expanded the usage of polymerase chain reaction. The market for PCR is growing on account of rising awareness and increased acceptance of real-time PCR. The reagents used in real time PCR offer instant and quality results as compared to conventional PCR which is consequently expected to increase the sales of PCR reagents.

Furthermore, the market for laboratory chemical reagents would be fuelled by increasing launch of monoclonal antibody therapeutics products and growth in cell culture manufacturing which would also benefit the market for laboratory chemical reagents.

Export competitiveness
Another important factor that is driving the growth of lab chemicals in India is export competitiveness. There is a global demand for Indian chemical products due to their high quality and competitive pricing.

India exports significant volumes of generic agrochemicals and pharmaceuticals which accounts for nearly 40 per cent and 60 per cent respectively. India’s expertise in developing low cost yet high-end chemical products is the key growth driver for Indian chemical exports. The Indian strength lies in contract manufacturing leveraging its low operational costs. Consequently, the share of exports in total bulk drug production is soaring and India is turning out to be a major exporter of pharmaceuticals.

Research and development strength
Apart from available skilled human resources, the Indian industry is blessed with its inherent strengths as far as R&D is concerned. While drug discovery costs US$ 100-200 million in the west, it costs only US$ 10 million in India. India has a strong base for innovation through its network of 200 national laboratories and 1,300 R&D units. Thus, India has the potential to have 15 per cent of pharmaceuticals market from patented products soon.

Feedstock:  Continuous availability of feedstock at a competitive cost is a key concern for the companies operating in this sector. Feedstock (naphtha and natural gas) are critical inputs for both organic and inorganic chemicals industry. Costs of these raw materials are high as compared to countries like China, Middle East and other South East Asian countries such as Thailand and Malaysia, which makes the products uncompetitive in the international markets.

Infrastructure & logistics: The Indian bulk chemical industry is mainly concentrated in the West coast, especially Gujarat, due to close proximity of raw materials and ports. However, majority of the demand comes from the end-use industries located in the southern and eastern regions leading to distribution issues and high transportation cost.

Competition:  The chemical industry faces a major challenge in the availability of cheaper imported chemicals from low-cost manufacturing hubs like China. Large capacity additions in countries such as ethane-rich Middle East and shale gas rich USA is another cause of concern for the domestic players as it may affect their market. Since, ethane and petrochemical products are cheaper than petrochemical products in India; it will affect the margins of domestic players due to under-utilization of their capacities.

Regulatory issues:  The prevailing duty structure taxes raw materials (inputs) at a higher rate than the finished product, and thereby discourages domestic value addition through local manufacturing. Under various multilateral and bilateral agreements (FTAs), India has committed to gradually eliminate the tariffs on various chemical products in addition to non-tariff import barriers such as quotas based on amount and source. In addition, many of the chemicals are placed in Open General License (OGL) of imports. Also, Free Trade Agreements (FTAs) with certain countries ensure that the finished products draw negligible duty. If the government decides to reduce the import tariffs further to meet the increasing demand of the country, then the level of competition in the Indian chemical industry will further intensify.

Growth prospects
The Indian chemical industry can deliver on an accelerated growth phase, provided a clearly defined vision along with a strategic roadmap is developed to enable it. The industry and government will have to work in tandem to achieve the ambitious targets set for the chemical industry.

Focused growth and planning for the chemical sector would enhance our global competitiveness further, increase domestic value -addition, provide technological depth and promote sustained economic growth. In order to realize the growth envisaged above and leverage the India opportunity effectively, the chemical industry would require significant investments in capacity creation, technology development, access to feedstock and a larger pool of skilled human resources. This could translate into additional investment of $110-150 billion.

Pro-active action by the Government and nodal agencies through encouraging anchor tenants to establish facilities, making feedstock available for downstream plants and creating a favorable ecosystem in terms of infrastructure and other facilities will help them become true chemical manufacturing competence centers and also send a positive message to the global investing community. The chemical industry’s R&D spends would need to go up significantly from current levels of less than 0.5 per cent of sales to reach closer to global benchmarks of four per cent of sales. On the human resources front, adequate educational infrastructure would be required to impart vocational training to develop additional 4.5 to 5 million skilled workers.

As the Indian pharma industry is fast moving to a higher growth orbit, the future is quite promising for lab chemicals manufactures. Once it moves from mere manufacturing of raw chemicals to innovative development of fine chemicals, the prospects for lab chemicals markets will definitely improve in the coming years.

Laboratory equipment growth
The laboratory and analytical instrument industry in India is slowly picking up. From a stage where majority Indian players were important dependent a few years ago, now with indigenous and domestic laboratory equipment manufacturers coming in the market space, India is fast catching to become self reliant and very soon will also become a global exporter of laboratory equipments.

According to Durga, MD of Vignan Instruments in Hyderabad, in 2016 India had imported more than 83 per cent of its Industry share and this is gradually coming down to 74 per cent in the year 2020. The laboratory equipment market in India has been growing at a faster pace with a CAGR of 22 per cent from 2012-2020 and this is further expected to witness more growth.

“Indian lab equipment and analytical equipment consumption is mainly witnessed in key application sectors such as pharmaceutical, bio technology, testing, inspection & certification industry and government & academia etc. Growth of analytical instruments market largely depends on the performance and R & D spending of industries such as pharmaceutical, biotechnology, chemical and oil & gas etc. Life sciences, food & beverage are also emerging as prominent sectors which are expected to fuel the market for analytical instruments in the coming years. As all these sectors are witnessing faster growth, the consumption of lab chemicals and equipment is also rising,” observed Durga.

According to experts, the Indian lab equipment and analytical instruments industry will be topping EUR 2 billion by 2025 as India’s pharmaceutical sector has grown to a global R&D hub. India’s pharma industry exhibits strong manufacturing and export competencies allowing it to be one of the most competitive regions globally. The growth in life sciences, pharmaceutical research, biotechnology, chemical, oil & gas, food & beverage industry is fueling the consumption of analytical instruments in India. Indian analytical instrument industry is expected to reach EUR 2.4 billion by 2020 having a CAGR of 17 per cent which currently stands at four per cent of global market.


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