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Pharmaceuticals Value Proposition
Pharmaceuticals Value Proposition
Invest In Egypt
Pharmaceuticals
Pharmaceuticals
Invest in Egypt
Contents
Pharmaceuticals: Sector Overview
Sector Drivers
Pharmaceutical Outlook
opportunities
Success Stories
Pharmaceuticals
Invest in Egypt
Pharmaceuticals
Invest in Egypt
Pharmaceuticals
Overview
The pharmaceutical sector in Egypt is one of the oldest strategic sectors in the country,
founded in 1939 with the establishment of the Misr Company for Pharmaceutical
Industries.
The Egyptian pharmaceuticals and cosmetics sector is considered the largest in the
region with regards to growth capacity and expansion during the coming five years
compared to similar sectors in neighboring countries
The industry has enjoyed a period of considerable development in recent years. There is
a strong domestic production sector and, while the majority is destined for the domestic
market and imports play an important role, Egypt has emerged as a leading exporter of
pharmaceuticals to Arab, Asian and Eastern European markets. Public production,
represented by the state-owned holding company HOLDIPHARMA, accounts for around
one-tenth of sales by value and nearly two-tenths by volume.
Investments in Egypt's pharmaceutical industry currently stand at EGP 26 billion, with
the industry employing a total of 39,500 professional staff and production workers.
Large multinationals, including GlaxoSmithKline (GSK), Sanofi-Aventis and Novartis are
among the top manufacturers of pharmaceuticals in the domestic market. Other leading
multinational companies active here include Pfizer, Bristol-Myers Squibb, Servier, Eli
Lilly, AstraZeneca and Otsuka.
Foreign participation in the local production of under-license pharmaceuticals is of
major importance to both the Egyptian economy and local consumers, supplying a
significant portion of domestic demand at a fraction of the import cost. Locally owned
Egyptian companies producing generic products also play a key role in the domestic
market with the Egyptian International Pharmaceutical Industries Company (EIPICO)
being ranked as the leading manufacturer in the domestic market and the largest Arab
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pharmaceutical company overall. A top company on the Cairo and Alexandria Stock
Exchange (CASE), EIPICO is also one of Egypt's 100 largest exporters.
Pharmaceutical prices in Egypt are based on a cost-plus formula, allowing for a profit
margin of 15% on essential drugs, 25% on non-essential drugs and 40% or more on overthe-counter products. The formula, managed by the Ministry of Health and Population,
guarantees positive returns for all companies operating in Egypt.
Providing the political situation stabilizes and the economy continues to perform well,
the Egyptian pharmaceutical market at retail prices is expected to rise by a double-digit
CAGR in US dollar terms between 2011 and 2016.
Espicom1 estimates that the market increased by nearly five times between 1995 and
2010. And went from EGP 18.23 billion in 2011 to EGP 20.33 billion in 2012; a +11.5% in
local currency terms. The countrys pharmaceuticals market is ranked 13th in BMIs
proprietary Risk/Reward Ratings (RRRs) for the region.
Projected Pharmaceutical Market, 2011-2015
Value USD billion
% GDP
% Health Expenditure
Per capita (USD)
2011
4.7
2
31
54
2012
5.4
2
31
61
2013
6.2
1.9
30.8
69
2014
7
2
31.6
77
2015
8
2
32.3
86
Source: ESPICOM
Espicom Business Intelligence is a UK-based company with a 30-year pedigree providing business
intelligence on Medical Devices, Pharmaceuticals & Healthcare and Therapeutics across global markets.
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Pharmaceuticals
Sector Drivers
Investor Benefits
Labor Force
Labor Costs
Unique opportunities to
minimize costs while
offering high-quality
services.
Diversity of
Opportunities
High Healthcare
Expenditures
Low Insurance
Penetration Rates
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Pharmaceuticals
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Pharmaceuticals
Outlook
Experts agree that, the Egyptian pharmaceutical industry is very positive: Rapid
population growth and expansion in healthcare coverage and expenditures are key
growth drivers, as are an increasing awareness of health issues and the modernization
of the healthcare industry.
Egypt's exports of pharmaceuticals have grown steadily in recent years, topping USD
270 million in FY 2011/2012 compared to USD 238 million in FY 2006/2007.
In April 2008, Novartis became the first multinational drug producer operating in Egypt
to add its local facility to its global supply chain. In addition to making 123 products for
local consumption, Novartis Egypt will now supply the company's global operations with
treatments for ocular and hormonal conditions.
Egypt is the largest consumer of pharmaceuticals in the MENA region with an annual
increasing pharmaceutical spending reaching about USD 2.48 billion, by the end of 2009,
and experts forecast to continue rising to reach about USD 4.24 billion by 2014 at a
compound annual growth rate (CAGR) of 11.4%, although Egypt's pharmaceutical
expenditure per capita is still one of the lowest in the region.
Annual production is recorded to be EGP 15 billion in 2009. In 2010, the market size has
reached USD 4.1 billion at retail prices or USD 48 per capita which represents 1.9% of
GDP and 30.6% of health expenditure.
Egypt has the largest drug manufacturing base in the MENA region accounting for
around 30% of the regional market. Local production covers around 93% of the market
with 7% made up of highly specialized pharmaceuticals not produced locally.
Multinational corporations account for about 30% of local sales through domestic
manufacturing, and about 35% through licensing agreements, while the remaining ratio
represents generic medicines produced by local companies.
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This industry has a good potential for the future with investments keep increasing. The
number of pharmaceutical factories has increased from 90 factories in 2006 to 120
factories in 2010 with other 70 plants that are under construction.
Large multinationals as GlaxoSmithKline (GSK) is the leading company in the Egyptian
market with 9% of the market share. Sanofi-Aventis and Novartis are also among the top
multinational manufacturers in the market. Furthermore, multinationals like Pfizer,
Servier, and Bristol- Myers are active players in the pharmaceutical industry in Egypt.
Holdipharma, the state owned producer, contributes with 1700 types of medicine,
42.1% of them are sold in cheap prices, with LE 1.3 billion as new investments every
three years, bearing LE 0.5 bn. annual losses because of its low prices. The total capital
of Holdipharma and its affiliates is about LE 2 billion, with a cumulative growth rate over
the last five years 50%.
Opportunities
-
The government's plans to introduce a basic health insurance that will extend its
benefits to more Egyptians.
It's expected that the industry will witness an increase in its value through the coming
three years to reach USD 8 billion in 2015 with an average CAGR of 14.3%. However, it
will keep a consistent percentage of the GDP ranging from 1.9 - 2.0 %.This increase is
accompanied with the increase in health expenditure to form 32.3% of the market value
in 2015. Moreover, per capita share is anticipated to increase to be USD 86 in the same
year.
The Pharmaceutical industry in Egypt is rising, stimulated by many factors like the
increasing size of the market and the entrance of new investors to the market. The
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government seeks more liberalization for the industry with less control over prices and
more privatization for the sector. This industry faces many challenges like the rising
competition with international producers and poor healthcare system in Egypt.
However, many specialists have positive expectations that Egypt would become one of
the leading countries in that field.
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Success Stories
VACSERA
VACSERA (Holding Company for Biological Products & Vaccines) is a vaccine
producer, comprising five subsidiaries, and manufactures blood and biotech
treatments as well as being the sole local producer of a variety of vaccines. The
company also has a solid R&D infrastructure. BMI estimates its annual revenue to be
in the region of USD 45-65 million.
Misr Pharmaceuticals
Originally established in 1939 as the first pharmaceuticals company in Egypt, Misr
Pharmaceutical Industries is one of the government-owned pharmaceutical firms in
Egypt, and part of Holdipharma. Misr exports to a number of countries in the region,
as well as in Africa and Romania in Europe. The company employs around 1,750
individuals.
Misr is engaged in production and wholesale trade in pharmaceuticals, as well as
some research and development of new drugs. The company mostly produces
medicines in a powder, syrup, ampoule and tablet forms, although some of its
output is generated as creams and vials. Most sales are in the human medicines
segment, with animal health representing the remainder. In FY08/09, Misr posted
EGP155.9 million in net revenue.
Amoun Pharmaceutical Company (APC)
APC is one of the leading domestic drug makers in Egypt, with five branches in the
country manufacturing human and veterinary pharmaceuticals products and
nutritional supplements. Following the sale of two factories to GSK Egypt in the
1990s, Amoun was the first Egyptian drug firm to gain ISO 9001 certification, and
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now operates a large modern plant in El-Obour City. It was also the first private drug
company founded in the country to import and distribute drugs.
APC was established as a drug import and distribution firm in 1976 and currently
operates three facilities, which produce cardiovascular drugs, analgesics, vitamins,
antihistamines, antirheumatics, gastrointestinal drugs and antipyretics, as well as
food supplements. APC exports to 19 countries in Africa, Europe and the Middle
East, and has sister companies in the US, Romania, Russia and Kenya. Amoun works
as a contract manufacturer for German Merck and Rowa, and French Leurquin, as
well as for Sanofi-Aventis (for some veterinary products).
Egyptian International Pharmaceutical Industries Co (EIPICO)
EIPICO started production in 1985 and now claims to be the largest domestic drug
manufacturer in Egypt, with a 10-12% total drug market share by volume and nine
manufacturing plants in the country. It exports medicines around the world,
accounting for 20% of Egypts total pharmaceuticals exports. The company also owns
majority shares in Egyptian International Ampoules Company (EIACO), which produces
some 800mn units annually.
Additionally, EIPICO holds a 30% share in the Saudi Arabia-based Universal for
Pharmaceutical Production, having invested EGP27.7 million. EIPICO has its own R&D
laboratories, which are included under its Quality Sector category of activities. This
category also includes its chemical control and Biotechnology Centre. The
Biotechnology Centre was inaugurated in 2001 to produce raw materials, extract
useful compounds from natural sources, and to conduct preclinical and clinical trials
for drug efficacy and bioequivalence as well as other detailed research using
pharmacology. This centre is considered as separate to the operations of the main
body of EIPICO, and has its own budget and staff. The drug production facilities are
GMP certified, which adds respectability to the companys standing as an exporter to
the EU.
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EIPICOs 2010 financial results show revenue increasing from EGP1.0 billion (USD 180
million) in 2009 to EGP1.1bn (USD195 million) in 2010. In 2010 net income rose 14% to
EGP326 million (USD 55 million). After the re-opening of the Egyptian stock market in
March 2011, EIPICOs share price slumped to EGP33.24, though it has since recovered
to EGP37.21.
South Egyptian Drug Industries (SEDICO)
SEDICO started production in 1990 and its facilities are GMP certified. The company
manufactures a variety of insulins, in addition to the non-traditional dosage forms
such as the soft gelatin capsules, lyophilized products, gels, sprays and effervescent
tablets. Products launched in the first quarter of 2007 include magnabiotic injections
(amoxicillin and clavulanic), bromurex and ultracillin vials. The company focuses on
generics, but also has three patented medicines all skin treatments containing
Jojoba oil as the active ingredient. The 24% share of SEDICO is owned by Akzo-Nobels
Organon, one of the companies for which SEDICO provides contract manufacturing
services. SEDICO is engaged in the production of some biotechnology products, in
partnership with foreign players. In 2009, the company posted EGP345.7 million in
sales, as a result of higher production levels (which reached a record EGP398.8mn).
Income before tax came in at EGP65.7million, with income after tax reaching EGP51.1
million. Exports were worth EGP15.2 million.
Medical Union Pharmaceuticals (MUP)
First established in 1984 through the cooperation of the medical professionals
syndicates union data, MUP was listed on the Egyptian stock exchange in April 1997
and has since gone on to become one of the largest domestic drug makers in the
country with a market share of 4.4% of the domestic market in value terms in 2010.
It is believed to produce 60 million units of drugs in various pharmaceuticals forms.
The company predominantly produces generic and licensed drugs with its most
important partners listed as Schering Plough and Kline Smith Beecham, although
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both of these two companies have since merged and no longer exist under these
names. According to its 2010 annual report the companys biggest shareholder is the
Arab Company for Drug Industries and Medical Devices (ACDIMA) which holds 40%
of the companys shares. The next biggest shareholder is the Industrial Investment
Company which holds around 10% of the companys equity.
MUPs sales grew from EGP456.5 million (USD 77.4 million) in 2005 to EGP780.9
million (USD 131.5 million) in 2010 at a CAGR of 11.3% in local currency terms. In the
same time period, net profit doubled from EGP84.2 million (USD 14.3 million) to
EGP167.1 million (USD 28.1 million). However, the company issued a sales guidance
note in September 2010 that forecast sales of EGP700 million for 2011, down 10%
on the previous year. The Egyptian financial year runs from July 1 to June 30 so the
latter half of FY 2011 is also likely to have been impacted by the effects of the
revolution.
GlaxoSmithKline (GSK)
GSK operates in Egypt through its 91%-owned subsidiary GSK Egypt, which employs
around 1,500 staff. The subsidiary, established in 1990, principally manufactures
ethical drugs, but also markets and distributes other pharmaceuticals products and
toiletries. GSK was listed in Egypt in 1985 and has a market capitalization of EGP1.55
billion (USD 266.45 million).
The company has more than USD 100 million of investments in Egypt. According to
IMS Health data for September 2009 MAT, GSK ranked first in Egypt, with an 8.7%
value share of the market. GSKs main activities in Egypt are manufacturing,
packaging, marketing, selling and distributing GSK products. GSK Egypt also imports
and distributes a range of its parent companys products that are not manufactured
in Egypt. In addition, GSK Egypt manufactures a range of products under license
from other pharmaceuticals manufacturers.
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EUR 29.31 billion in global sales, up by 6.3% y-o-y. Markets other than those in
Europe and the US accounted for around 26.7% of the companys total sales.
Pfizer
Pfizer, the world's largest pharmaceuticals company, operates in Egypt through its
100% owned subsidiary Pfizer Egypt. The company was established in 1961 and was
one of the first foreign-owned companies to commence operations in Egypt. It now
employs around 800 people. The company specializes in manufacturing and
distributing chemicals, pharmaceuticals and animal health products. Its main
pharmaceuticals product areas are antibiotics, cardiovascular preparations, antiallergy treatments and anti-infectives. Pfizer recently acquired compatriot Wyeth,
which also has operations in Egypt. The company deals in prescription and consumer
health products.
Novartis
Novartis operates in Egypt through its subsidiary Novartis Pharma, established in
1962. It is based in Cairo and manufactures, markets and sells patented
pharmaceuticals, OTCs, generics and animal healthcare products. Leading product
areas are analgesics, cardiovascular treatments and ear, nose and throat
preparations. Novartis employs approximately 1,120 individuals.
In 2009, Novartis posted USD 44.3 billion in global net sales, up from USD 41.5 billion
achieved in the previous year. Sales of Voltaren (excluding OTC sales) reached USD
797 million, up by 1% y-o-y in local currency, driven by solid performance in
emerging markets, including those in Africa. In 2009, net sales in
Asia/Africa/Australasia rose to USD 8.09 billion, thus representing 18% of the total,
up from 17% in the previous year (or USD 7.14 billion).