The Middle East: Pharma’s New Frontier

Room for growth in these markets

By Faiz Kermani, Ph.D.

The Middle Eastern markets, along with North Africa, account for only 2% of global pharmaceutical sales, but are of growing interest to companies in the healthcare sector. Analyses of the Middle Eastern markets suggest that the total regional value is around $10.6 billion, and that many markets are growing at double-digit rates.

“Generally, the Middle Eastern countries offer good markets,” said Jeffery Gren, director of the Office of Health and Consumer Goods in the U.S. Department of Commerce. “There is money there for spending on health products, but the details differ by country.”

Traditionally, the Middle East has been low on the agenda of pharmaceutical companies, due to reliance on strong growth in the U.S. market and, to a lesser extent, in Europe and Japan. However, the growth rates in these markets have slowed of late, persuading companies to look further afield.

“Driven by a rapidly growing population and significant oil revenues, the pharmaceutical markets of the Middle East will continue to grow significantly in the mid- to long term,” explained Vladimir Misik, senior regional director Middle East at Quintiles.

Professor Graham McClelland, chief executive officer of Luxor Developments SAE, Egypt, shares his optimism, remarking, “Regional governments are increasingly investing in education and healthcare provisions, thus standards are moving closer towards the levels enjoyed in the developed world. So, whilst the region is a relatively small global pharmaceutical market today, the percent growth in the coming years is likely to be very high.”

Figure 1: Value of Middle Eastern Pharmaceutical Markets

Regional Potential

With an estimated population of 280 million, one of the fastest growing in the world, backed by a thriving healthcare sector, most international companies will find regional commercial and R&D opportunities to suit them in almost every therapeutic area. “Despite all the problems in the Middle East, the region has an increasing GDP per person, and since people are inspired through television and the Internet, they are looking for better life standards,” observed Dr. Fatih Mehmet Gul, business development manager at the Acibadem Healthcare Group and also chief editor for the Healthcare Business Middle East portal.

A growing percentage of the Middle East’s population now lives in cities, so urbanization is having a great impact on society and disease trends. “Obesity, diabetes and cardiovascular disease are growing problems to be tackled,” explained Dr. Gul. Due to the complexity of politics, many countries face pressures on their healthcare systems due to events taking place within their borders or elsewhere in the region. As a result, diseases associated with poverty and social inequality persist in some countries.

Figure 2: Total per capita expenditure on health in the Middle East

Many western companies have shown interest in Israel and Jordan, due to the historical success of their domestic sectors. Israel’s Teva is among the top 20 pharmaceutical companies in the world and around 80% of its $9.4 billion sales now come from the North America and Western European markets. Jordan’s Hikma is highly internationally focused and markets generic drugs and injectable products in 40 countries. Since 2005, the company has been listed on the London Stock Exchange.

“Israel is a center for innovation in the Middle East region,” commented Mr. Gren. “Jordan has also become a healthcare center and has benefitted from the U.S.-Jordan Free Trade Agreement.”

Many experts also highlight Egypt as an attractive pharmaceutical market for foreign companies. Valued at $2.2 billion and growing at around 5% per year, the market has seen a steady influx of foreign companies. The private sector accounts for about 70% of the domestic market, which is highly consolidated. Of those in dominant positions, six companies are multinationals and four are domestic companies. Of the multinationals, GlaxoSmithKline is the leading company, with 9% of the market.

“Egypt has a very robust and solid pharmaceutical background and tradition,” stated Frank Mueller, R&D manager at Egyptian-based Minapharm.

This viewpoint is shared by Sherif Hanala, senior consultant at Global BioFocus LLC, a U.S.-based consultancy: “Egypt produces the vast majority of pharmaceuticals it consumes. This established manufacturing capability is the largest in the region and is a basis for pharmaceutical services development. However, this capability is yet to reach its full potential, as a source of services.”

Dr. Gul encouraged companies to look across the region, remarking, “Saudi Arabia’s high population and new healthcare investment make it a promising country. Dubai and Bahrain also count as having business-friendly environments, although they do not have large populations. Since they are easier than other markets, many companies operate here. Therefore for long-term growth, companies need to target the large markets.”

Figure 3: Growth of Egyptian pharmaceutical market

Foreign Influx

Multinational companies have previously used deals with regional agents, but are now making their presence felt through direct moves into the Middle East. Novartis has been expanding since 2004 and is ranked number one or two in many of the Middle Eastern countries. Roche has also been growing in the region and launched an Arabic version of its health website in 2008. Recently, the UAE has become the biggest beneficiary of multinational investment, with Pfizer, Amgen and Genzyme setting up their regional headquarters at Dubai Biotechnology and Research Park (DuBiotech). Similarly, AstraZeneca and Wyeth Pharmaceuticals have their regional headquarters at Dubai Health Care City.

Indian companies have also penetrated the region due to a strong demand for lower cost generics. So far, the dominant Indian company has been Ranbaxy, with 160 drug approvals in the region, but it is fast being followed by others. There are predictions that Indian companies could quadruple their sales in the region by 2010.

“The Middle Eastern countries are close to India and easily accessible for trade,” commented Dr. Umakanta Sahoo, managing director of Chiltern India. “India’s generic giants strongly believe in giving tough competition to global pharmaceutical companies. Some Indian companies generate 10-20% of their export earning by selling their products in this region.”

Despite the opportunities, international companies need to have a robust regional strategy. “Companies new to the region have to set up operations from a central hub, using a network of local distributors in order to better cope with the peculiar characteristics of each national market,” explained Dr. Marco Baccanti, executive director of DuBiotech. “Since most companies have their headquarters in the west, cultural and operational differences may be an issue. The more tolerant and more open countries will be the most attractive for international companies.”

Companies must also be patient, as Prof. McClelland described from personal experience: “Unlike the West, the Middle East does not have a longstanding capitalist culture, so business setup time can be a lot longer than would be expected in the West. Egypt has made great improvements in recent years, but as an example, when I was setting up my own company, it took me six months of battling bureaucracy before I was able to start paying the taxes for my employees.”

Continued investment by foreign companies will depend on improvements in the regulatory and intellectual property (IP) environment, but Mr. Hanala is optimistic: “In terms of IP protection, the situation is improving, with Saudi Arabia committing to Trade-related Aspects of Intellectual Property Rights (TRIPS). Also, Jordan has instituted new intellectual property laws that are garnering some praise from abroad.”

Table 1: International exports of Jordanian pharmaceutical companies
Company	Main Markets
Amman Pharmaceutical Industries Co. (API)	Jordan, Oman, Romania, Algeria, Yemen, Bahrain Kuwait, Saudi Arabia, Sudan, Tunisia, Bosnia, Libya, Iraq, Qatar, Tanzania, Palestine, UAE, Somalia, Syria
Arab Center for Pharmaceuticals and Chemicals (ACPC)	Qatar, Iraq, Lebanon, Syria, UAE, Yemen, Bahrain, Oman, Algeria, Albania, Sudan, Egypt, Saudi Arabia, Libya, Palestine and Pakistan
The Arab Pharmaceutical Manufacturing Co. LTD (APM)	Saudi Arabia, Kuwait, Qatar, Bahrain, United Arab Emirates, Oman, Yemen, Iraq, Syria, Lebanon, Sudan, Libya, Tunisia, Algeria, Morocco, Nigeria, Ethiopia, Malaysia, Romania, Bulgaria, and Trinidad
Dar Al Dawa	Jordan, Saudi Arabia, Algeria, UAE, Oman, Bahrain, Lebanon, Iraq, Kuwait, Yemen, Romania, Libya, Tunisia, Malta, Hong Kong, Malaysia, Sudan, Ethiopia, Somalia
Hayat Pharmaceutical Industries Co. Ltd.	Algeria, Iraq, Saudi Arabia, Yemen, Sudan, Libya, Lebanon, UAE, Oman, Bahrain, Qatar
Hikma Pharmaceuticals	40 countries worldwide in North Africa, the Middle East, Eastern Europe, U.S., and the Far East
Jordan River Pharmaceutical Industries LLC (Joriver)	Middle East, Africa, Europe
Middle East Pharmaceutical and Chemical Industries and Medical Appliances Co.	Jordan, Saudi Arabia, Iraq, Kuwait, Qatar, UAE, Bahrain, Oman, Yemen, Libya, Tunisia, Algeria, Sudan
Pharma International Co.	Middle East, Iran, former Soviet Union countries, Africa, and Eastern Europe
Philadelphia Pharmaceuticals	Jordan, Oman, Algeria, Yemen, Bahrain, Kuwait, Saudi Arabia, Sudan, Tunisia, Libya, Iraq, UAE, Morocco
Ram Pharmaceutical Industries Co. Ltd.	Iraq, Yemen, Sudan, Algeria, Saudi Arabia, Bahrain, Oman, Lebanon and UAE
The United Pharmaceutical Manufacturing Co. Ltd.	Saudi Arabia, UAE, Oman, Qatar, Bahrain, Iraq, Algeria, Yemen, Libya, Romania, Lebanon, Kuwait, Egypt, Tunisia, Sudan, Ethiopia, Russia, Bulgaria, Germany, Belgium, Spain, Netherlands, Austria, Greece, Brazil, Finland, Portugal, Czech, Denmark, Switzerland, France, Liechtenstein, South Africa and Sri Lanka
Source: The Jordanian Association of Manufacturers of Pharmaceuticals and Medical Appliances

The Rise of Biotech

Due to changing disease profiles, there is a growing demand in the Middle East for biotech products from the major multinational companies. Smaller biotech companies have also benefited. Generex Biotech has been using local consultants to aggressively source and evaluate prospective licensing opportunities in the region. It has made inroads into markets such as Lebanon and Syria with its proprietary oral insulin spray product Generex Oral-lyn.

This success has not gone unnoticed by domestic companies; several have set up dedicated R&D divisions to develop biotech products. In terms of innovation, Israel’s biotech sector is the regional leader. In other countries most products are essentially biogenerics, since they are versions of products marketed by foreign companies.

“It is very important that local companies recognize the value of technologies such as biotechnology, and that they are courageous enough to invest,” said Frank Mueller. “Mina-pharm Pharmaceuticals for example, as a local Egyptian company, has been investing since the late 1990’s in its production of biotech-derived products such as PEGylated interferon — a key player in hepatitis C therapy — and since 2006 into its own R&D department for development of an innovative product pipeline.”

Elsewhere, Jordanian Pharmaceutical Manufacturing’s subsidiaries Delass and Aragen have been established to exploit underdeveloped niche markets in biotechnology. The UAE’s Julphar has recently announced its intention to invest in the biotech production of insulin, while Neopharma has set up a joint venture with India’s Biocon. Iran’s CinnaGen Co. produces CinnoVex (recombinant interferon beta 1a) for the domestic market and has been looking to sell its product in foreign markets. Another Iranian company, Exir Pharmaceutical Co., produces the hepatitis C treatment interferon gamma under the brand name Gamma Immunex.

“Several Middle Eastern companies have started to develop their own biogenerics, but these developments are first-of-all intended for the local markets only,” commented Dr. Michael Kracht, principal consultant and owner of CDC-Clinical Development Consulting in Germany. “But companies are realizing that it could be advantageous for them to develop biogenerics in an international, GCP-conformist way, since this would enable them later to market these drugs internationally.”

Many governments want to promote the development of a mainstream biotech industry, to mirror the U.S. model, but progress has been slow. Inadequate funding, poor planning and a shortage of experienced individuals have hampered growth of the industry in most countries. “Biotech is entering the region from the sales and marketing door,” Dr. Baccanti outlined. “R&D activities have not yet reached the necessary critical mass required for the development of new molecules.”

Going forward, one of the most impressive developments is DuBiotech in the UAE, which is the world’s first free zone dedicated to the life science industry (Table 2). It has succeeded in attracting a number of major multinational companies to base there, but whether this investment strategy will also promote local biotech start-ups is unclear. Saudi Arabia, and Qatar are also fostering biotech research through investment in science parks with a view to emulating DuBiotech.

Table 2: DuBiotech’s Current Business Partners
A Benza FZ LLC Alliance Global FZ-LLC Al Zahrawi Medical Services Amgen (Middle East) FZ-LLC Asia Cryo-Cell Private Limited Avesthagen Middle East FZ LLC BioPharma Middle East & Africa Boston BioCapital FZ LLC Caverion TFS Middle East FZ LLC Country Healthcare FZ LLC	CUH2A Inc Middle East Cryo-Save Arabia FZ LLC Eastern Biotech & Life Sciences FZ LLC Eppendorf FZ LLC Epygen Labs FZ LLC Ergomed Clinical Research Limited Genzyme Middle East FZ LLC Getz Pharma Int’l FZ LLC Global Leveregg Consultants Limited Index Holding Maquet Middle East	MerckSerono Middle East FZ LLC NeoBiocon FZ LLC Pfizer International Corporation Respironics Int’l. Global Enterprise Inc. Richard Wolf Middle East Taiba Middle East FZ-LLC Trompeter Ita Middle East FZ LLC Welcome Healthcare Investment Organization FZ LLC
Source: DuBiotech

“As one of several other actions, science parks can be of tremendous support for new technologies in general, but additional structural prerequisites are also necessary, of which investment in education is one of the highest priorities,” advised Mr. Mueller. “In Egypt for example there is a clear deficit of qualified individuals in the field of biotechnology, as this field is a relatively young one. Universities must integrate biotechnology within a pharmaceutics study plan.”

On a similar note, Dr. Baccanti concluded, “It is still too early to imagine the development of local biotech companies, because the investments in scientific research are still not comparable to those available in the world’s leading biotech research hubs.”

Clinical Trials

The interest in using the Middle East for outsourced clinical trials is also relatively recent. “I think that the growth of the sector in the Middle East has been stymied by the presence of India and to some degree China on the scene,” observed Mr. Hanala. “These two countries have absorbed a significant amount of outsourced activities.” Consequently, internationally sponsored regional trials are growing from a small base. According to Clinicaltrials.gov, between 2006 and 2009, while nearly 7,000 industry-sponsored trials were conducted in Europe, the number conducted in the Middle East was less than 400.

“The presence of several nationalities, a modern hospital system as well as genetic isolates in the local populations are important reasons for the recent development of clinical trials in the region,” explained Dr. Baccanti.

“Increased prevalence of diabetes, cardiovascular disease, gastrointestinal disorders and cancer in the region has fuelled a lot of the clinical trial activity,” added Dr. Sahoo.

Although many companies use regional trials to support products on a local basis, it is the ability to use locally generated data to support international regulatory submissions that is of greatest interest. “At the moment, ICH-GCP is widely unknown in this area,” commented Dr. Kracht. “To run trials to the satisfaction of international authorities, like EMEA or FDA, huge efforts in regard to training of the local CRAs and the local investigators will be required for each trial project.”

Nevertheless, global CROs such as Quintiles have built up considerable experience in the region and offer advice to newcomers. “There are expert CROs on the ground who have been conducting studies for a number of years so partner with them,” recommended Mr. Misik. “First test the region with one or two projects to get some experience and feel for the region, but plan for a long-term presence.”

As with other emerging markets, the interest of companies in using the region for global trials is prompting regulators to improve standards to ensure that patients are protected and respected. “With respect to clinical trial ethics, the situation is deemed acceptable, but vigilance on the part of the sponsor is highly recommended,” Mr. Hanala commented.

“Companies must be prepared to make an investment to help centers with their GCP training and to ensure that bodies such as IRBs are appropriately operating,” Prof. McClelland advised. “But once set up, these centers can have access to very large numbers of eligible patients, and thus quickly complete recruitment.”

The improving environment has convinced many experts, with experience in other emerging markets, that the region has a bright future for clinical trials. “It is our strong belief that Middle East today has the same potential that Central and Eastern Europe (CEE) had 10-15 years ago,” Mr. Misik predicted. “While CEE has developed into a clinical research powerhouse, delivering around 20% of global patients into clinical trials, it is estimated that fewer than 2% of global patients are currently recruited in the Middle East.”

Outlook

The Middle East continues to be uncharted territory for many biopharmaceutical companies, but this is rapidly changing. Regional markets have developed to an exciting stage where they can offer companies opportunities for long-term growth and a promising base for R&D activities. The growing scientific and medical community, coupled with good links to counterparts in other countries is also helping to open up the region.

“The Middle East is one of the few remaining pharma growth regions globally,” said Mr. Misik. “It is important to complement marketing activities in the region with growing R&D activities.”

Companies with international experience should be optimistic about the region as they can apply knowledge gained from elsewhere in the world. “The Middle East’s wealth diversity results in a complex pharmaceutical market and the changing regulatory situation creates great differences between the individual nations,” Prof. McClelland said. “Its culture is unique. Therefore, as with other emerging markets, it is important to establish a strong local presence.”

Faiz Kermani is a senior account manager at Health Interactions. He recently authored A Quick Guide to Healthcare and Biotechnology in the Middle East, which is available at http://www.bioplanassociates.com/quickguides/QGME.htm.