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Post-sanctions Iran attracts pharma investment

Published on 26/01/16 at 10:17am
Middle east
Credit: Wikipedia

Just a few days have passed since decade-long economic sanctions on Iran were lifted, as the middle-eastern powerhouse agreed to curb the progress of its controversial nuclear programme. But the race for the pharmaceutical industry to make the most of the situation is already on.

Novo Nordisk had already announced last year that it was to invest around $76 million in an insulin pen device production facility in the country. The Danish company is following this up with a new plan to more than double its staff head count in the Islamic Republic, adding 160 to the 130-strong presence in its Iranian offices.  

The sanctions on Iran, the world’s 17th largest economy, did not affect essential drugs, which were allowed to be imported. However they did restrict financial transactions and technology, making it hard for foreign companies to do business there. For example, Novo’s staff in the country could previously not use Microsoft Windows or Word, and were restricted from using their laptops.

There is still a climate of distrust between the country and the western world, and building that trust is a journey that could face setbacks and see certain parts of the sanctions re-imposed at any time. Pharma companies may also still be put off by the extremely strong generics market Iran has been forced to develop to be self-sufficient for the past decade. However, it is a far more attractive place to sell drugs today than this time last year.

The Middle East

If Iran now looks a more enticing location for pharma, the same could be said of large parts of the region, which has in recent years enjoyed strong investment from governments into improving healthcare provision. In 2014, Boehringer Ingelheim released a white paper on the state of the pharma industry in the Middle East and North Africa region (MENA), identifying it as an area positioned for sustainable growth.

This should make it an appealing location for companies not getting the results they had hoped in the BRIC nations, or ones simply seeking additional revenues streams. A common factor seems to be the desire of governments across the region to reduce reliance on foreign imports; therefore they will be glad to see the entry of international drugmakers to manufacture drugs locally – this is particularly true of the region’s largest pharma market (see below).  

Saudi Arabia

Iran’s near-neighbour Saudi Arabia is currently gripped by concern over the weakness of an oil market due to oversupply, and its government is therefore extremely keen to diversify its economy and reduce dependency. With a very young and growing population approaching 30 million, the Kingdom faces a chronic diseases challenge in the coming decades, offering opportunities for companies specialising in obesity and diabetes treatments, for example.

Indeed, this is common across the region; six of the countries with the largest diabetes prevalence in the world are in the Middle East, namely: Saudi Arabia, the United Arab Emirates (UAE), Kuwait, Lebanon, Qatar and Bahrain.

Boehringer’s research found that in 2012, Saudi had a pharmaceutical market valued at $5.1 billion, accounting for almost 60% of the Gulf region’s overall pharma market. But some 80% of the nation’s pharmaceuticals are imported, and the government wishes to reduce this dependence by expanding the local manufacturing presence. To this end, Pfizer began building a 32,000 square foot manufacturing plant north of Jeddah in 2013, set to come on line this year.

Deals between foreign pharma companies and domestic Saudi business are becoming increasingly common too. In 2014, Pfizer boosted its capacity further with a partnership with Saudi’s Tabuk, giving the latter rights to manufacture second-brand versions of four of its drugs, while Pfizer got the rights to 12 generic products in the kingdom. In the same year, AbbVie made a deal with the Arab Company for Pharmaceutical Products (Arabio) to manufacture Humira and other of its drugs in the kingdom.

United Arab Emirates

For market share, the UAE lags only behind Saudi Arabia, and foreign investors recognise this fact. At the end of 2012, Germany’s Merck KGaA made a deal with Neopharma, allowing the domestic drugmaker in the United Arab Emirates to manufacture Merck drugs including hormone therapy Euthyrox and diabetes med Glucophage. As a result of these kinds of investments, market researcher ReportsnReports has predicted the UAE’s pharma market to grow 5.3% year-on-year to reach $3.7 billion by the end of the decade.  

GCC

In 2014, the six countries making up the Gulf Co-operation Council (GCC) standardised drug import prices, in a bid to reduce the disparities between smaller and larger countries and populations, resulting in price cuts for thousands of medicines

Israel

Israel’s pharma industry is most famous for Teva, one of the largest generic drugmakers in the world, with companies like Dexcel, Quark and BioLineRx are making names for themselves, and the country is increasingly associated with an innovative start-up and research culture. International pharma giants including Merck and J&J also have R&D and innovation centres in the country. Israel is also one of the top five exporters of drugs to the world’s largest pharmaceutical market-the US. In all, the pharma market is worth some $2 billion per year.

Joel Levy

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