Pharmaceutical intermediates are chemical raw materials or products used in the synthesis process of active pharmaceutical ingredients. They do not require a production license for active pharmaceutical ingredients and can be produced in ordinary chemical plants. As long as they reach certain levels, they can be used for the synthesis of active pharmaceutical ingredients.

According to the degree of impact on the quality of the final active pharmaceutical ingredient, it can be divided into non GMP intermediates and GMP intermediates. Non GMP intermediates refer to pharmaceutical intermediates prior to the starting materials of active pharmaceutical ingredients; GMP intermediate refers to a pharmaceutical intermediate produced under the requirements of GMP (Good Manufacturing Practice), which is a substance produced after the starting material of the active pharmaceutical ingredient, during the synthesis step of the active pharmaceutical ingredient, and undergoes further molecular changes or refinement before becoming an active pharmaceutical ingredient.

Market situation of domestic pharmaceutical intermediates:
In 2009, the total output value of China's pharmaceutical intermediate industry (including pharmaceutical intermediates and active pharmaceutical ingredients) was about 310 billion yuan, a year-on-year increase of 10.71%. The pharmaceutical intermediate industry has been steadily growing. It is expected that under the background of industrial transfer, the growth rate of pharmaceutical intermediates in China will exceed the global average, and the industry growth rate will be over 15% in the future, while advanced pharmaceutical intermediates will be even faster. Especially with the expiration of a large number of patented drugs worldwide and the mass release of generic drugs, the demand for intermediates is rapidly increasing. In 2010, the market size of customized pharmaceutical research and development production in China was 1.7 billion US dollars, and it is expected to grow to 3.1 billion US dollars by 2015, with an average annual compound growth rate of 12.77%.
Pharmaceutical intermediates do not require production licenses like active pharmaceutical ingredients, with relatively low entry barriers and fierce competition. Therefore, quality, scale, and management level are often the fundamental factors for the survival and development of enterprises, and the increasing pressure on environmental protection has also led many small businesses to gradually withdraw from the competitive stage, and industry concentration is expected to rapidly increase. The following three directions will be key for relevant enterprises to enhance profitability, increase added value, and sustain growth:
1. Diversify and upscale products, shifting from producing crude low-end intermediates to producing refined high-end intermediate products;
2. Take the path of professional outsourcing services, continue to extend in the outsourcing service industry chain, and undertake R&D outsourcing services;
3. Focus on pharmaceuticals and attack downstream raw materials and formulations of intermediates.

Classification of pharmaceutical intermediates by application field:
Pharmaceutical intermediates refer to intermediate chemicals produced during the synthesis of chemical drugs, which belong to fine chemical products. Pharmaceutical intermediates can be divided into major categories according to their application fields, such as antibiotic drug intermediates, antipyretic and analgesic drug intermediates, cardiovascular system drug intermediates, anti-cancer drug intermediates, etc.

Industry cyclicality:
The pharmaceutical CMO industry fluctuates due to the overall demand of downstream pharmaceutical industries, and its periodicity is basically consistent with that of the pharmaceutical industry. These influences are divided into external factors and internal factors:
External factors mainly refer to macroeconomic cycles and new drug approval cycles, which have a significant impact on the outsourcing of innovative drug research and development. The approval pace of new drugs by drug regulatory agencies such as the FDA also has a certain impact on the industry, mainly referring to the time span of new drug approval and the number of approved new drugs. When it is beneficial for pharmaceutical companies, it will increase the demand for pharmaceutical outsourcing services.

The internal factor is mainly the patent protection period of innovative drugs. Once the patent protection for innovative drugs expires, pharmaceutical companies will have to face a significant impact from generic drugs, which will prompt them to outsource their own production supply chains in order to reduce production costs and bring more business opportunities to pharmaceutical CMO companies.

Regional and seasonal characteristics:
1) Regional characteristics
The pharmaceutical outsourcing service industry with high-end technological barriers is gradually shifting to emerging countries, and a very small number of excellent Chinese pharmaceutical CMO enterprises have formed a competitive situation with traditional advantage CMO enterprises in Europe and America.
Seasonal characteristics:
For pharmaceutical CMO companies, factors such as budget management and R&D production cycle arrangements directly affect their quarterly revenue.
The technical requirements of the pharmaceutical CMO industry are high, especially in the research and development of pharmaceutical processes. Intellectual property related to pharmaceutical processes is an important component of the pharmaceutical industry. Pharmaceutical CMO companies also need to provide continuous process optimization services to help pharmaceutical companies reduce production costs while ensuring drug market supply; Before and after the expiration of drug patents, pharmaceutical CMO companies use innovative and even disruptive technologies to improve production processes or break through patent barriers, thereby achieving the goal of significantly reducing production costs. All of the above require pharmaceutical CMO companies to have strong technical reserves and a research and development team with continuous innovation capabilities.
From this perspective, due to the peak period of patent drug expiration from 2013 to 2020, the next five years will also be another major opportunity for the development of the pharmaceutical intermediate industry.