In November, the US Food and Drug Administration (FDA) greenlit the sale of fruquintinib in the US at a price over 20 times higher than that in China. This disparity underscores the robust financial capacity of the American pharmaceutical market. Conversely, since BeiGene secured FDA approval for zanubrutinib (Brukinsa) in 2021, only six new Chinese drugs have successfully navigated the FDA approval process to enter the US market.
Penetrating the US market is a common challenge for pharmaceutical companies, prompting a shift in focus toward secondary markets. Notably, Indian pharmaceutical firms initiated the establishment of factories in the Middle East and North Africa (MENA) market several years ago. The ongoing pandemic has intensified the commitment of governments in this region to pharmaceutical developments, emphasizing self-sufficiency and control over the pharmaceutical industry.
The Gulf Cooperation Council (GCC), comprising Saudi Arabia, the UAE, Qatar, Kuwait, Oman, and Bahrain, has enacted various policies encouraging the transfer of biopharmaceutical technology, investments, and local manufacturing. As Chinese pharmaceutical companies expand globally, mature markets like Europe and the US prove to be highly competitive, while MENA presents substantial unmet demand, making it a promising alternative.
Abundant money, scarce medication
Pharmaceutical demand in MENA is far from being met in spite of the region’s financial strength. The recent World Cup in Qatar showcased the immense wealth of the Middle East with a staggering investment of USD 220 billion, five times the cumulative investment of the previous seven editions of the tournament. While Qatar’s GDP ranks only seventh in the Middle East, the overall region’s high GDP levels and substantial customer base elevate its market standing for multinational corporations.
According to data from the World Bank, MENA’s current population is nearly 500 million and steadily growing. Although per capita GDP places the region at middle-income levels, the GCC countries boast one of the highest per capita incomes globally. In particular, the region has witnessed significant growth in the healthcare market due to increased spending on healthcare services and the burden of chronic diseases, fueled by population growth in the Middle East.
According to the International Diabetes Federation (IDF), diabetes prevalence in the MENA region stands at 16.2%, projected to rank second globally with 136 million cases by 2045. The region grapples with a severe obesity problem, comprising 18 of the top 50 countries with high obesity rates worldwide.
Economic disparities in MENA translate into substantial variations in drug demand. For instance, Saudi Arabia, rich in oil resources, exhibits high per capita GDP, resulting in stronger spending power. The affluent typically seeks medical treatment in Europe and the US, showing a preference for original and patented drugs. In contrast, Egypt relies heavily on generic drugs despite the presence of domestic pharmaceutical companies. The Egyptian pharmaceutical industry heavily depends on imported active pharmaceutical ingredients (APIs) due to the absence of a comprehensive chemical industry and supply chain.
In September, Egypt hosted the Pharmaconex Exhibition, focusing on pharmaceutical raw materials, machinery, packaging materials, and laboratory equipment. This exhibition featured 208 participating companies, with nearly 40% being Chinese firms. As a major global producer of APIs, China’s Northeast Pharmaceutical Group (NEPG) announced an agreement with Muscat Changming Investments in September to collaboratively build a factory in Oman, localizing production and sales for the MENA market.
According to IQVIA, the global pharmaceutical market will grow at a compound annual growth rate (CAGR) of 3–6%, reaching approximately USD 19 trillion by 2027. The MENA region is expected to witness an expenditure growth of 35–55% in the next five years, positioning it as a potential blue ocean market for pharmaceutical companies.
Enhancing local pharmaceutical capabilities
To nurture the development of the pharmaceutical industry, several MENA countries have implemented measures such as fast-tracked approvals, registrations, and pricing incentives to encourage localization. Substantial incentives are offered when multinational pharmaceutical companies collaborate with local manufacturers to establish joint ventures, facilitating the swift entry of innovative drugs into the regional market.
For example, Pfizer has established a production base in King Abdullah Economic City, one of Saudi Arabia’s four major economic zones. The company also obtained a trade and investment license from the Saudi Arabian General Investment Authority, attaining 100% ownership of its operations in Saudi Arabia. This enables the direct supply of high-quality innovative drugs to the Saudi market.
Pfizer has committed to progressively produce around 16 of its best-selling drugs at the new base, addressing Saudi Arabia’s medication needs in various therapeutic areas. In addition, Pfizer plans to transfer technology and expertise to the local market, creating employment opportunities and cultivating professional talent.
AstraZeneca has signed a cooperation agreement with the Saudi Pharmaceutical Industries and Medical Appliances Corporation (SPIMACO) to provide services for the local production of its products. This collaboration facilitates the local production of high-demand drugs that target cardiovascular, diabetes-related, and gastrointestinal diseases, enabling AstraZeneca to reach up to millions of patients.
Beyond Saudi Arabia, other MENA countries are actively attracting multinational pharmaceutical companies. The UAE, as one of the most developed markets in the Middle East, exhibits significant demand, ranking high in per capita pharmaceutical spending. For example, GlaxoSmithKline has partnered with Neopharma, an Abu Dhabi-based pharmaceutical company, to establish a manufacturing plant. Through this partnership, Neopharma acts as a third-party manufacturer for GlaxoSmithKline, handling the secondary packaging process of six prescription drugs in the UAE. Neopharma has also collaborated with Merck to localize the production of the latter’s diabetes drugs.
With government support, multinational pharmaceutical companies have been increasingly active in the Middle East over the past two years. In July 2023, Sanofi collaborated with local biopharmaceutical companies Lifera and Arabio in Saudi Arabia to promote local vaccine production and share expertise in manufacturing seven critical vaccines. This aligns with Saudi Arabia’s goal to strengthen its biopharmaceutical capabilities through technology transfer and labor force development.
In June, Abu Dhabi’s Ministry of Health initiated cooperation with Eli Lilly and Company as well as AbbVie, laying the foundation for clinical research and healthcare technology development in Abu Dhabi. AstraZeneca and diagnostics company Virax Biolabs also set up operations in the Dubai Science Park this year.
In 2022, the Saudi Investment Ministry reached an agreement with Novartis to collaborate on cell and gene therapy, conducting technology transfer and facilitating clinical research investment to enhance the country’s biopharmaceutical capabilities and alleviate medical budget pressures. In the same year, the ministry also reached an agreement with GlaxoSmithKline to further strengthen Saudi’s capabilities in healthcare and life sciences.
For economically robust Middle Eastern countries, collaborating with major pharmaceutical companies is but a starting point. Localizing production is a short-term goal to meet immediate demand. The ultimate aim is to transfer technology and expertise, adhere to global production standards and efficient control methods, and invest in biotechnology as a future key industry.
As collaborations continue to unfold, the MENA pharmaceutical market is expected to continue growing rapidly, with drugs like insulin, efalizumab, recombinant erythropoietin, and febuxostat leading sales rankings.
Pharmaceutical companies, driven by commercial interests, lean toward exporting finished products, offering limited support for technology transfer, local production, and industrial upgrading of the regional industry. Consequently, countries like Saudi Arabia seek more partners, including pharmaceutical companies from India and South Korea. Chinese pharmaceutical companies, equally adept in innovation and product pipeline development in biopharmaceuticals, are also attractive targets.
The MENA market presents numerous untapped opportunities, with over 160 healthcare projects valued north of USD 50 billion in the GCC alone. Notably, several areas exhibit high growth potential in the region.
Firstly, genomics is gaining prominence due to the growing prevalence of genetic diseases. Saudi Arabia’s Saudi Human Genome Program expedites genetic disease diagnosis and expands genetic databases, enhancing understanding of genetic diseases. The Qatar Genome Project focuses on genomics and genetics, emphasizing precision medicine and research capacity building. The UAE launched the National Genome Strategy in March this year to establish a legal framework supporting genome projects for improved public health and personalized healthcare.
Consequently, there has been an increase in demand for sequencing technology in the region. Companies are addressing this demand by introducing new technologies and expanding their operations in the Middle East. Gene technology company Malaysian Genomics entered the Middle East in April. In June, Centogene collaborated with Lifera, a biopharmaceutical company owned by the Saudi Public Investment Fund (PIF), to establish a joint venture. It is aiming to strengthen the utilization of data-driven multiomic testing, having received a USD 30 million investment. Meanwhile, Illumina initiated related business operations in Dubai.
In September, BGI Genomics’ Saudi Arabia subsidiary established Genalive, an independent clinical laboratory, in partnership with Saudi company Tibbiyah Holding. “By combining the strengths of BGI Genomics and Tibbiyah, we can develop more potential for genetic testing, providing tools needed for medical professionals in Saudi Arabia to offer personalized care. In the future, BGI Genomics will bring more Chinese technology to the Middle East through Genalive,” said Yin Ye, CEO of BGI Group.
Furthermore, Berry Genomics signed a cooperation agreement with Ajlan & Bros Medical Company in Saudi Arabia, establishing a joint venture to introduce non-invasive prenatal testing (NIPT) and other genetic testing products to the Saudi and Middle Eastern markets. The collaboration will include projects such as establishing genetic testing laboratories locally.
Secondly, precision medicine is gathering momentum. Abu Dhabi initiated the region’s first personalized tumor precision medicine program last year, using genomics to transform diagnostics, drug treatment, and preventive methods. As early as 2020, Dubai established an advanced genomics center at Al Jalila Children’s Hospital, providing genetic testing and counseling. Dubai is set to host the inaugural Middle East Precision Medicine Exhibition and Summit in 2024, aiming to showcase the region’s determination to advance precision medicine developments.
For Chinese companies with sufficient expertise and scale, entering the Middle East is more manageable. They can enter the regional market through technology localization or transfer, thereafter establishing businesses, cultivating local talent, and pursuing local financing, presenting a viable growth path.
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Lastly, research on anti-aging is another focus area. As part of Saudi Vision 2030, Saudi Arabia aims to increase the average life expectancy of its populace from 74 to 80. To achieve this, the country established the Hevolution Foundation, with an annual budget exceeding USD 1 billion, and dedicated it to funding universities and startups engaged in anti-aging drug R&D. In September this year, the Mubadala Investment Company participated in the financing of Swiss biotechnology company Rejuveron Life Sciences AG, which focuses on developing drugs that prevent or cure aging-related diseases. The company will establish an office in Abu Dhabi and has begun collaborating with local universities and hospitals to promote aging-related research in the Middle East.
With the right expertise and aspirations, entering the Middle East could serve as a breakthrough for Chinese pharmaceutical companies venturing abroad.
This article was adapted based on a feature originally written by Yao Jing and published on VC Beat (WeChat ID: vcbeat). KrASIA is authorized to translate, adapt, and publish its contents.